False Claims Act (FCA)

Originally enacted during the Civil War to fight profiteering by suppliers to the Union Army, the False Claims Act has evolved into a sweeping statute covering nearly every company doing business with the federal government. The law imposes liability on persons who knowingly submit false claims seeking government funds or who knowingly seek to avoid paying amounts owed to the government. Although well-intentioned, the law has been transformed into a lucrative money machine for plaintiffs’ lawyers and their clients—while hurting American businesses and taxpayers. Read More...

While the need for an antifraud statute is clear, the False Claims Act’s broad language and overzealous enforcement have encouraged significant abuse—turning what should be simple contractual disagreements and paperwork errors into claims for fraud. In addition, many states have their own state-level False Claims Acts that also suffer many of the same problems as the current federal statute. 

The law allows the government to pursue any government contractor suspected of making “false claims” about their goods or services to the government. It also allows third-party whistleblowers (called qui tam relators) to sue in the name of the government and to keep a large part of any award or settlement. The statute allows for treble damages (damages three times the amount of the alleged fraud) as well as other potentially excessive penalties. A successful False Claims Act case against a company or person can ultimately result in a prohibition against that company or person receiving future federal contracts or funds. Total monetary damages under the False Claims Act have risen from $272 million in 1992 to a record $3.7 billion in FY 2017.

Since the law was expanded in 1986, plaintiffs’ lawyers have built a cottage industry around qui tam lawsuits—netting tens of millions for whistleblowers and themselves instead of for taxpayers. In fact, the current application of the law is so unbalanced that some whistleblowers are receiving monetary awards for information on violations that they committed.

A number of reforms to the False Claims Act are needed to restore fairness and predictability and to prevent inappropriate payments. These include (among others):

  • Providing a safe harbor for companies with robust compliance programs
  • Creating reasonable whistleblower incentives to ensure that legitimate fraud is reported, while preventing outrageous awards to whistleblowers and their attorneys
  • Clarifying the use and meaning of “implied certifications”—the doctrine that says a simple, non-monetary error (such as incorrect paperwork by a government contractor) can be used as the basis for a False Claims Act lawsuit
  • Limiting the government’s power to bar ethical companies and individuals from federal contracts as a method to coerce massive settlements

 

Suggested Resources

Research

All Results for False Claims Act (FCA)

  1. In the News Today- January 15, 2019

    January 15, 2019 | News

    "Drop the Climate Lawsuit;" What To Make Of DOJ's 2018 False Claims Act Report"... Read More

  2. In the News Today - January 3, 2019

    January 03, 2019 | News

    "Manufacturers Face The Rise Of Global Class Actions;" "New Strategies to Help False Claims Act Health Care Defendants"... Read More

  3. WSJ Editorial Board: "False Claims Falsehoods"

    December 27, 2018 | News

    The Wall Street Journal Editorial Board called on judges to "sanction the false claimers" who were responsible for the 11 False Claim Act (FCA) lawsuits that the U.S. Department of Justice (DOJ) asked to dismiss last week.... Read More

  4. ILR's EVP Harold Kim Calls DOJ Motion a "Bombshell"

    December 26, 2018 | News

    In a report on the U.S. Department of Justice's (DOJ) move to seek dismissal of several qui tam False Claims Act (FCA) lawsuits, the Pink Sheet, a leading Pharmaceutical news outlet, says the use of the Granston memo should "be a morale booster" to those who have pointed to abuse of the whistleblower system.... Read More

  5. "DOJ: Company Wasted 1,500 Hours of Gov't Time Filing Meritless Suits"

    December 19, 2018 | News

    The U.S. Department of Justice (DOJ) announced it was looking to dismiss 11 False Claims Act lawsuits after learning a company used a cookie-cutter-style model and major plaintiffs' lawyers to file qui tam lawsuits that were "essentially cloned," Law360 reports.... Read More

  6. ILR Research Review - Fall 2018

    November 20, 2018 | Research

    ILR's Fall 2018 research cycle was about two things: spotting new, destructive legal trends before they become unstoppable, and highlighting concrete progress in addressing long-standing litigation challenges. The 2018 Fall Research Review reveals the exploding costs of the U.S. tort system, and examines developments in securities litigation, forum shopping, False Claims Act policy reform, and the European Commission's project to implement class actions.... Read More

  7. How Escobar Is Affecting False Claims Act Litigation

    November 01, 2018 | News

    Two years after the U.S. Supreme Court handed down its landmark Universal Health Services v. Escobar decision, Law360 looks at how courts across the country are interpreting and applying it to False Claims Act (FCA) litigation.... Read More

  8. In the News Today - October 1, 2018

    October 01, 2018 | News

    DOJ Official: Department and Business Should Be "Partners, Not Adversaries;" "Dismissing FCA Cases: The Granston Memo In Action;" DOJ Objects to Bankruptcy Trust Appointment; Find Out What's Trending at ILR's Summit XX: Law, Policy, Politics... Read More

  9. In the News Today - September 20, 2018

    September 20, 2018 | News

    "Third Circuit Clarifies Public Disclosure Bar in False Claims Act"... Read More

  10. In the News Today - September 6, 2018

    September 06, 2018 | News

    "Why Escobar Materiality Rule Applies To California FCA"... Read More