Weighing in on a thorny issue of statutory interpretation posed by amendments made to the False Claims Act as a result of Congress’s passage of the Fraud Enforcement and Recovery Act (“FERA”) in 2009, the United States Court of Appeals for the Sixth Circuit has held that the FERA amendments apply retroactively to pending civil actions filed under the False Claims Act. The court’s decision in Roger Sanders v. Allison Engine Company, Inc., et al. is the latest in a long line of Allison Engine litigation dating back to 1995, when whistleblowers Roger L. Sanders and Roger L. Thacker filed a complaint under the qui tam provisions of the False Claims Act. In their original complaint, Sanders and Thacker alleged that several defendant subcontractors committed fraud in connection with the construction of generator sets used in United States Navy Arleigh-Burke-class Guided Missile Destroyers. Specifically, the relators (i.e., whistleblowers) claimed that the defendants submitted claims for payment related to construction of the generator sets despite knowing that the sets failed to conform to the specifications of the contract and Navy regulations. At the conclusion of a jury trial, the defendants filed a motion for judgment as a matter of law. The District Court granted defendants’ motion for judgment in their favor notwithstanding the jury verdict, on the grounds that liability under the False Claims Act requires the presentment of a false claim for payment to the government, and that the relators had failed to prove the presentment element. Although that holding was reversed by the Sixth Circuit, the first Allison Engine case was appealed to the United States Supreme Court, which agreed with the District Court’s interpretation and reversed the Sixth Circuit

In response to the Supreme Court’s decision in Allison Engine, Congress amended the False Claims Act as part of FERA, a sweeping law that effected changes in many federal anti-fraud statutes. After FERA, liability under the False Claims Act attaches for “knowingly mak[ing]. . . a false record or statement material to a false or fraudulent claim,” thus removing the need for actual presentment of a false claim. In addition, Section 4(f)(1) of FERA contained a retroactivity provision. While there is a general presumption in the law that statutes do not apply retroactively, legislatures can overcome that presumption by including express provisions like 4(f)(1). Section 4(f)(1) makes the FERA amendments retroactive for “all claims under the False Claims Act that [were] pending on or after” June 7, 2008 (emphasis added). The relators were consequently able to return to federal district court and press their claims once again pursuant to the relevant changes in the law. Notwithstanding the clear congressional intent to make the FERA amendments applicable to the Allison Engine case and others like it, the district court held that the word “claims” as defined in Section 3729 of the statute means claims for payment from the government, not civil actions. Therefore, because there were no pending “claims” in regard to the contract at issue in Allison Engine on or after June 7, 2008, the trial court once again dismissed the relators’ claims. On appeal to the Sixth Circuit, the trial court’s decision was reversed on November 6th, 2012.  The Sixth Circuit found that despite the statutorily-defined meaning of the word “claims,” the usage of the word throughout the False Claims Act is not entirely consistent and, furthermore, an interpretation of the word to mean “civil actions” rather than “claims for payment” renders a more natural reading of the statute. False Claims Act relators thus scored an important victory in the Sixth Circuit, despite a split in other courts.

The False Claims Act is a statute dating back to 1863 that contains qui tam (whistleblower) provisions allowing relators to sue on behalf of the government for fraud. Relators stand to recover between 15% and 30% of any final judgment or settlement, and may proceed privately with their claims even if the U.S. government declines to exercise its right to intervene in the litigation. When a person or entity submits a false claim for payment from the government, or submits a false statement material to a claim, there is liability under the Act. The statute also recognizes so-called “reverse false claims,” whereby a party fails to return an overpayment from the government or submits a false statement to reduce an obligation to the government. The FERA amendments passed in 2009 also heightened the statute’s protections against employer retaliation. Qui tam suits brought under the False Claims Act have resulted in over $9 billion worth of recoveries for the federal government in the year 2012 alone.

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