On October 27, 2009, the United States District Court for the Southern District of Ohio held that one of the recent amendments to the False Claims Act (FCA), 31 U.S.C. § 3729 et seq., violates the Ex Post Facto Clause of the United States Constitution. See U.S. ex rel. Sanders, et al. v. Allison Engine Co., Inc., et al., C. No. 1:95-cv-970 (S.D. Ohio).
Allison Engine, a storied qui tam case, involves allegations that defendants: (1) submitted claims for payment for generators used in the construction of naval guided missile destroyers, despite knowing that the generators did not conform to contract specifications or Navy regulations, and (2) withheld cost or pricing data during negotiations with the government, all in violation of the FCA, specifically 31 U.S.C.
With respect to the former allegations, which were tried to a jury, the district court granted the defendants' motion for judgment as a matter of law. The Sixth Circuit Court of Appeals reversed the district court, see U.S. ex rel. Sanders v. Allison Engine Co., Inc., 471 F.3d 610 (6th Cir. 2006), a decision that the Supreme Court famously vacated and remanded for further proceedings. See Allison Engine Co., Inc. v. U.S. ex rel. Sanders, 128 S.Ct. 2123 (June 9, 2008).
The Supreme Court specifically held that a plaintiff asserting a violation of 31 U.S.C. § 3729(a)(2) had to prove more than that "the false statement's use . . . result[ed] in obtaining or getting payment or approval of the claim," or that "government money was used to pay the false or fraudulent claim," but in fact had to prove that the defendant intended that the false record or statement be material to the Government's decision to pay or approve the false claim. See Id. at 2126.
The Fraud Enforcement and Recovery Act of 2009 Amends the FCA
On May 20, 2009, Congress enacted the Fraud Enforcement and Recovery Act of 2009 (FERA). FERA amended the FCA--specifically 31 U.S.C. § 3729(a)(2)--to eliminate the language upon which the Supreme Court relied in order to formulate its June 9, 2008, holding. Whereas § 3729(a)(2) had previously imposed liability on anyone who "knowingly makes, uses or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government," FERA amended the provision to impose liability on anyone who "knowingly makes, uses or causes to be made or used, a false record or statement material to a false or fraudulent claim."
In addition, FERA stated that the amendment to § 3729(a)(2) "shall take effect as if enacted on June 7, 2008, and apply to all claims under the [FCA] that are pending on or after that date." In other words, it appeared that Congress sought to amend the FCA retroactively in an overt attempt to eliminate any application of the Supreme Court's Allison Engine decision and reasoning pertaining to § 3729(a)(2)'s scienter requirement.
District Court's Analysis and Holdings
On remand, the defendants argued that FERA's retroactivity clause did not apply to their case because the clause itself applies not to cases pending on June 7, 2008, but rather to claims pending on that date; the defendants' claims--presented in the late 1980s and early 1990s--were no longer pending on June 7, 2008. The defendants also argued that the retroactivity clause violated the Ex Post Facto Clause and the Due Process Clause of the U.S. Constitution. The District Court agreed with the defendants' first two arguments and did not analyze whether the retroactivity clause violated the Due Process Clause.
Applies to Claims, Not Cases
The court found that a plain reading of the clause, the legislative history of the clause, and a comparison of the clause to another FERA provision (that explicitly makes other FCA amendments retroactive to pending cases) all supported the clause's application to pending "claims," not pending "cases." Because the defendants did not have any claims pending, the court determined that the amended version of 31 U.S.C.
§ 3729(a)(2) did not apply to them.
Violates the Ex Post Facto Clause
The court also found that FERA's retroactivity clause violated Article I, Section 9, Clause 3 of the U.S. Constitution, i.e., the Ex Post Facto Clause. The court determined that: (1) when Congress enacted the FCA and its amendments, it sought to impose punishment on FCA violators, and (2) the Supreme Court and numerous other courts have consistently recognized the FCA--particularly its treble damages provision--as a punitive statute. Accordingly, the court found that a retroactive application of FERA's amendments to § 3729(a)(2) would punish acts that were not punishable prior to enactment of the amendments, thus effectuating a threshold violation of the Ex Post Facto Clause. The court further stated that even if Congress did not intend to punish FCA violators, retroactive application of FERA's amendment to
§ 3729(a)(2) would violate the Ex Post Facto Clause because the FCA is punitive in purpose and effects.
Result and Analysis
With respect to the case at hand, the parties will now turn to whether the record should be reopened as to relators' allegations that claims for payment were submitted for generators that did not conform to contract specifications or Navy requirements. However, the court's opinion should have broader effect. Any individual or organization currently defending allegations that it violated 31 U.S.C. § 3729(a)(2) should find comfort in yet another judicial opinion determining either that the FERA amendments do not apply retroactively, see U.S. v. Aguillon, No. 08-789-SLR, 2009 WL 1789894 (D. Del. June 24, 2009), or that the retroactivity clause applies to pending claims , not cases. See, e.g., U.S. v. Science Applications International Corp., 2009 WL 2929250 (D.D.C. Sept. 14, 2009); but see U.S. ex rel. Walner v. Northshore Univ. Health System, et al., C. No. 08-C-2642 (N.D. Ill Sept. 18, 2009) at pg. 4, fn 3 (applying amended version of § 3729(a)(2) because relator's "claim" was pending on June 7, 2008). Moreover, the court's underlying rationale for finding a violation of the Ex Post Facto Clause--particularly that the FCA is not only intended to be a punitive statute but in fact has punitive purposes and effects--would appear to indicate that any attempt to retroactively apply any recent or future amendment to the FCA should be unconstitutional.
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