Shook, Hardy & Bacon Partners Phil Goldberg, Rob McCully and Cary Silverman filed an amicus brief in a False Claims Act case that the U.S. Supreme Court will consider in 2016, Universal Health Services, Inc., v. United States ex rel. Escobar.
The case involves the improper use of the False Claims Act to punish even minor regulatory violations under a novel legal theory called “implied false certifications.” In these cases, there is no allegation that a government contractor defrauded the government or improperly sought payment, such as by inaccurately or incorrectly describing goods or services provided. Rather, the theory is that the contractor simply fell out of compliance with one of a myriad of government regulations in providing the service or product. The government may have been perfectly happy with the purchase.
As the amicus brief explains, the purpose of the False Claims Act is to encourage people to identify, sue and stop companies from defrauding the government. It is not to leverage the heavy penalties of the False Claims Act when the only allegations are that someone may have fallen out of compliance with a statute, regulation, or contractual provision.
As the case demonstrates, the False Claims Act is subject to massive litigation abuse. The Act gives private individuals an incentive – up to 30 percent of the entire recovery – for blowing the whistle on fraud. This “bounty,” as it has become known, can generate life-changing wealth. As a result, there is a long history of people trying to shoe-horn any potential misstep by a government contractor into a False Claims Act case. Recent studies have shown that between 70 and 80 percent of all False Claims Act cases brought by private individuals fit into the category of litigation prospecting.
The amicus brief urges the Supreme Court to focus the False Claims Act on its intended mission: fighting fraudulent claims. Governing agencies should retain full control over whether and how to enforce their codes. Governments can put the public first by working with their contractors to help them better understand and comply with the regulations.
The brief was filed on behalf of the American Medical Association, National Association of Chain Drug Stores, National Association of Manufacturers, American Tort Reform Association, and NFIB Small Business Legal Center. Shook’s National Amicus Practice regularly files 20 to 30 amicus briefs each year in federal and state courts.
Shook’s National Amicus Practice publishes a State Supreme Court Watch bi-weekly, tracking cases decided and granted review in many state supreme courts around the country on a wide variety of business and liability related issues. To sign up to receive the State Supreme Court Watch, contact Phil Goldberg at pgoldberg shb.com.