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Supreme Court may reign in False Claims Act
Circuit court decisions may compel the high court to act, says qui tam expert
The Supreme Court is set to hear arguments next month on the issue of whether municipal entities are immune from False Claims Act (FCA) suits brought by qui tam relators. The outcome could have a significant impact on state and local hospitals.
While the court’s decision will directly affect local government and quasi-government entities, it also will be closely watched by private entities subject to FCA enforcement, including health care providers, which have been the primary focus of the act, says FCA expert John Boese.
According to Boese, of Fried Frank in Washington, DC, the Department of Justice (DOJ) maintains that the federal government is free to sue state and local governments under the FCA, even though a majority of the Supreme Court held in the Stevens case two years ago that states are not "persons" subject to such suits when they are filed by qui tam relators. He points out that two district courts have held that municipalities are not "persons" subject to liability under the act, even if it is the DOJ alone that initiates the suit.
In the first Department of Justice suit against a county defendant, Boese says the court deferred judgment on the matter until after the Supreme Court issued its ruling in the Stevens case. In Stevens, the court ruled that states and state entities are not "persons" subject to liability under the FCA.
In an unpublished opinion that now is awaiting decision in an appeal to the Sixth Circuit, Boese says the district court held that it lacked jurisdiction over the DOJ’s FCA claims, because the county is not a person subject to liability under the act.
Like the majority of courts considering qui tam cases against county entities, Boese says the court held that counties are immune from FCA liability because the act’s damages are essentially punitive, and municipalities are immune from punitive liability. He adds that most courts have dismissed qui tam cases on that basis.
While the DOJ has tried to limit the focus in the upcoming case to qui tam cases against county entities, Boese predicts that several other decisions may encourage the Supreme Court to take a broader look at the status of county entities as "persons," just as it did when deciding the status of states in the Stevens case just two years ago.