6th Circuit joins 2nd & 7th: In FERA § 4(f)(1), “claims” means “cases”

by Kurt Schulzke

Words mean things, don’t they? The next sentence is a real mouthful, so take a deep breath before proceeding. Yesterday, in United States ex. rel. Sanders v. Allison Engine Co., Nos. 10-3818/10-3821, the 6th Circuit Court of Appeals held that the word “claims” — in the phrase “all claims under the False Claims Act,” in § 4(f)(1) of the Fraud Enforcement and Recovery Act of 2009 (“FERA”) — really means “cases.” With this thought — very well supported and articulated, in a case that has dragged on, up, down and all around the federal court system for 17 years — the 6th Circuit has joined a new battle in the False Claims Act war of words that must be settled, if at all, by the U.S. Supreme Court.

In the abstract, the practical impact of the 6th Circuit’s Allison Engine opinion will depend on two factors: (a) the federal judicial circuit that has jurisdiction over the case; and (b) how long it takes the Supreme Court to jump (back) into the Allison Engine fray. For now, FERA’s “presentment clause” changes to 31 U.S.C. § 3729(a)(2), recodified by FERA to § 3729(a)(1)(B), are binding on False Claims Act defendants and relators with FCA cases pending in the 6th federal circuit on or after June 7, 2008.

Outside the 6th Circuit, prior decisions in the 2nd and 7th Circuits side with the 6th. Thus, in big-picture terms, in the 2nd, 6th and 7th federal circuits, fewer FCA defendants should escape liability. The opposite is true in the 9th and 11th Circuits, where the courts have (inexplicably and nonsensically, in my view) held that “claims” means claims for payment, not cases.  The law in the 5th Circuit is confused. Other circuits have not yet addressed the claims vs. case question. Because opinions among the federal circuits are divided, it is likely that the Supreme Court will be called upon to knit them back together in jurisprudential harmony. Meanwhile, excerpts from the 6th Circuit’s opinion (click on the graphic for full text) follow, with internal citations omitted and emphasis added:

In May 2009, Congress passed the Fraud Enforcement and Recovery Act of 2009 (“FERA”), which amended several anti-fraud statutes, including the FCA. Congress specifically amended the liability standards then set forth in § 3729(a)(2) of the FCA in order to remove the presentment requirement imposed by the Supreme Court’s decision. It also included specific retroactivity language in § 4(f)(1) of FERA indicating that the changes to § 3729(a)(2), now codified at § 3729(a)(1)(B), “shall take effect as if enacted on June 7, 2008, and apply to all claims under the False Claims Act . . . that are pending on or after that date.” Fraud Enforcement and Recovery Act of 2009, Pub. L. No. 111-21, §4(f)(1), 123 Stat. 1617, 1625 (emphasis added). After FERA was passed, the defendants in this case filed a motion to preclude retroactive application of the amended provisions in § 3729, which the district court granted, finding that the retroactive language in FERA did not apply to this action, because no claim [for payment associated with this case] was pending in June 2008 and further that retroactive application of the amendments was prohibited under the Ex Post Facto Clause . . .

We must determine whether the new § 3729(a)(1)(B) applies to all civil actions under the FCA that were pending on June 7, 2008, including this case. If “claim” in § 4(f)(1) means a request or demand for payment, then § 3729(a)(1)(B) would not apply retroactively to this case because there were no claims pending in 2008 because the claims relevant to the generator sets were made and paid in the 1980s and 1990s. However, if “claim” means a civil action or case, then § 3729(a)(2) would apply because this case was pending in June 2008 . . .

Thus far, the courts to address the issue directly are almost evenly split into those that conclude that “claims” refers to a claim for payment (this is referred to as the “majority view” by district courts in some opinions because somewhat more district courts have adopted this interpretation) 8 and those that conclude “claims” refers to cases. The Second and Seventh Circuits have found that § 4(f)(1) makes the amendments to the former § 3729(a)(2) retroactive to FCA civil actions pending on June 7, 2008. In contrast, the Ninth and Eleventh Circuits have found that “claim” in § 4(f)(1) of FERA means a demand for payment. The Fifth Circuit appears to have taken both positions. Unfortunately, the decisions resolve the issue without extended analysis. As a result, the available authority is of limited aid to our interpretation of the retroactivity language.

The opinion, which includes extended, thoroughly reasoned analysis, concludes that when Congress wrote “claims” it invested “claims” with a meaning equivalent to “cases”.

In the second part of the opinion, the court explored whether retroactive application of § 3729(a)(1)(B)’s liability standard to cases pending on June 7, 2008, violates the U.S. Constitution’s Ex Post Facto Clause, U.S. Const. art. I, § 9, cl. 3, concluding that it does not. The rationale supporting this conclusion may be helpful in resolving other FCA controversies — such as whether an FCA claim survives the death of the original relator — which rest on the whether the False Claims Act is punitive or remedial in nature.


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