FCA Now

This is the fifth post in the Dorsey FCANow Blog’s FCA Basics Series covering the fundamentals of the False Claims Act (“FCA”), outlining FCA procedure, and highlighting key facets of FCA practice. Today’s post covers the categories and scope of FCA liability. Theories of Liability There are three principal ways an FCA defendant can be found liable: factual falsity, legal falsity, and/or “reverse” false claims.  In addition, the criminal Anti-Kickback Statute often provides an independent basis for FCA liability in the healthcare sector. Factual Falsity. A claim to the federal government is factually false where some fact about the deliverable is false. A classic (and perhaps apocryphal) example traces back to the American Civil War where the Union Army was said to have received sawdust instead of gunpowder. As a more contemporary example, a claim for medical services that were not actually rendered—or that are different from those actually rendered—would be a factually false claim. Legal Falsity. A claim is legally false if it violates a legal condition of payment for the product or service being billed. For example, if a non-licensed individual provides healthcare services for a federal healthcare program beneficiary, those claims would be considered legally false for violating the condition of payment that the provider be qualified to provide the billed-for services. Reverse False Claims. The reverse false claims provisions of the FCA give the government a means to recover from someone who makes a material misrepresentation to avoid paying an obligation owed to the government. Unlike traditional false claims, reverse false claims involve preventing the government from collecting money it is owed, rather than making a false claim to receive money from the government. One classic example of a reverse false claim is if a provider knowingly retains an overpayment. Liability for retention of an overpayment arises where a party received from the government more money than it was due and knowingly fails to return the overpayment.  Another increasingly common example is when importers misrepresent the product being imported into the country or the product’s country of origin to avoid paying tariffs or other duties.  Notably, however, the FCA specifically excludes tax-related obligations. Anti-Kickback Statute. The Anti-Kickback Statute (“AKS”) is a criminal liability statute that prohibits rewarding or paying for referrals for services covered by federal health care programs (i.e., kickbacks). It was enacted to prevent kickbacks from influencing healthcare decisions and is designed to protect federal healthcare programs from overutilization, increased costs, and potential fraud. The AKS has numerous “safe harbor” provisions exempted certain conduct from liability, but claims submitted to the government that are “tainted” by an AKS violation are false claims under the FCA. Scope of Liability FCA damages and penalties are crucial components of FCA litigation as damages often drive the government’s or relator’s decision to litigate. The FCA imposes a rough form of justice upon those found liable for defrauding the government: the FCA applies treble (triple) damages in most circumstances, plus per-claim penalties. Public policy concerns, primarily deterrence, justify these steep penalties. However, recovery is not meant to be a windfall for the government, and FCA damages generally exclude consequential damages, pre-judgment interest, punitive damages, and investigation costs. In some FCA contexts, the government’s damages are the amount of money it paid minus the amount it would have paid had the claim not been false—multiplied by three. For example, if the government paid for $5 per widget for 100 widgets ($500) but only twenty widgets were delivered ($100), then the government’s actual damages are $400 and its trebled damages are $1,200.  In other FCA contexts, the damage to the government could be the entire amount paid without claims for offsets.   In reverse false claims, damages are the difference between the amount paid to the government and the amount the government should have been paid. If the government collects a duty of $2 on each microwave imported into the United States, and Acme imports 1,000 microwaves but only discloses and pays the duties on the first shipment of 100, then the actual damages are $1,800 and the trebled damages are $5,400. Trebled damages are accompanied by per-claim penalties, which are adjusted annually for inflation. Currently, the adjusted per-claim penalties range from $14,308 per claim to $28,618 per claim. As a result, what is considered a “claim” under the FCA can have significant impacts on potential exposure. The Eighth Amendment’s Excessive Fines Clause In an FCA action, civil penalties may dwarf the government’s actual damages. These situations may implicate the Excessive Fines Clause of the Eighth Amendment which prohibits punitive fines that are excessively disproportionate to an offense. Several courts have applied the Excessive Fines Clause to FCA cases as well as qui tam actions where the government has chosen not to intervene.

This is the fourth post in the Dorsey FCANow Blog’s FCA Basics Series covering the fundamentals of the False Claims Act (“FCA”), outlining FCA procedure, and highlighting key facets of FCA practice.  Today’s post focuses on procedural requirements, including the FCA’s statute of limitations rules, statute of repose, first-to-file rule, and public disclosure bar. FCA Statute of Limitations The statute of limitations on an FCA claim is generous—either six years after a violation “is committed”, or within three years of the date when the government learned or should have learned the facts material to the false claim.  Accordingly, disputes related to the statute of limitations tend to center on two issues: (1) when a violation is “committed” under the FCA, and (2) how to determine the date of government knowledge. Courts have taken divergent approaches to identifying when an FCA violation is “committed,” but two general approaches have emerged.  First, courts hold that the limitations period begins on the date the false claim is “submitted” to the government.  Second, other courts have extended the limitations period by determining the violation is “committed” on the date the government pays the claim. In certain circumstances, the FCA’s statute of limitations may be extended beyond the ordinary six years.  The FCA allows for a separate three-year statute of limitations when the United States first becomes aware of facts material to a FCA claim.  The three-year extended FCA limitations period does not run until material facts are known (or should be known) by a government official with authority to act in the circumstances.  Courts generally engage in a two-pronged analysis  in assessing when and whether this extended limitations period applies, asking (1) whether the facts are material to an actionable FCA claim, and (2) if the facts where known—or should have been known—to a relevant government official.  Therefore, the three-year period has the possibility of exceeding the six-year period if the violation is concealed from the government. While the FCA provides for a generous statute of limitations, it also caps the term of liability with a ten-year statute of repose barring any lawsuit more than ten years after the alleged fraud occurred. Statute of Limitations in Qui Tam Lawsuits Until fairly recently, it remained an open question whether relators could rely on the extended limitations period based on the government’s knowledge (or lack thereof) in pursuing qui tam litigation.  The United States Supreme Court addressed this question in Cochise Consultancy, Inc. v. United States ex rel. Hunt, 587 U.S. 262 (2019). In Cochise, a relator initiated a qui tam action alleging two government contractors committed fraud on the government.  The relator filed their claim more than six years after the alleged fraud was “committed,” but within the ten-year statute of repose.  While the government declined to intervene, the government first became aware of the material facts of the alleged fraud through the relator’s suit and disclosure.  The Supreme Court held that the extended limitation period applied to the relator in the same way it would to the government.  The Court found that relators are afforded the extension based on the government’s knowledge, not their own, even when the government declines to intervene.  Somewhat counterintuitively, the result is that relators could have up to ten years to pursue claims under the False Claims Act when the government is unaware of the potential fraud.  This risk, of course, is that relators are not always privy to what information the government does or does not have related to a potential claim of fraud. Qui Tam Procedural Considerations Two other possible defenses to an FCA claim emerge in the context of timing for qui tam actions: the public disclosure bar and the first-to-file bar. The public disclosure bar prohibits relators from bringing a qui tam action based on fraud that is already publicly disclosed through judicial or administrative proceedings, government audits or investigations, or news media reporting.  The purpose of the bar is to discourage opportunistic relators bringing lawsuits that are misaligned with FCA’s whistleblower system.  Notably, there is an exception to the public disclosure bar when the person bringing the action is the original source of the information.  Under the FCA, an original source is an individual who either: (1) prior to a public disclosure, voluntarily disclosed to the government the information on which the allegations in a claim are based, or (2) has knowledge that is independent and materially adds to the publicly disclosed allegations and voluntarily provided that information to the government before filing an FCA action. The first-to-file bar prevents multiple relators from obtaining recoveries based on the same underlying facts. In effect, the result of the first-to-file bar is that the first relator in time to file a qui tam action tends to have priority when obtaining a relator’s share of the government’s recovery.  In multiple-relator disputes, relators will often seek to distinguish their claims from prior lawsuits or emphasize the unique value they contributed to the government’s recovery.  The mandate for qui tams to be filed under seal (and are frequently maintained under seal for months or years at a time) often makes it difficult for relator’s counsel to determine if they are in fact the first to file a suit.  In sum, the first-to-file bar provides an avenue for FCA defendants to avoid defending against multiple qui tam suits over the same conduct.

This is the third post in the Dorsey FCANow Blog’s FCA Basics Series covering the fundamentals of the False Claims Act (“FCA”), outlining FCA procedure, and highlighting key facets of FCA practice. Today’s post introduces the qui tam provisions of the FCA. The FCA’s Qui Tam Device Under the qui tam provisions of the FCA, private citizens—called relators—bring FCA lawsuits on behalf of the United States.  Relators are incentivized to expose and prosecute fraudulent activity because the FCA allows relators to collect a portion of the government’s recovery, whether it was obtained via settlement or through final judgment.  The number of FCA lawsuits filed by relators has increased in recent years, and qui tam cases composes a majority of all filed FCA cases. Qui tam lawsuits are a major driver of FCA settlement and judgment recoveries. In fiscal year 2024, the Department of Justice obtained over $2.9 billion in FCA recoveries. Of that $2.9 billion, approximately $2.4 billion came from qui tam lawsuits. The Qui Tam Procedure To initiate a qui tam lawsuit, a relator files a lawsuit on behalf of the United States against an organization or person allegedly defrauding the government. The lawsuit is first filed under seal and served to the U.S. Attorney in the district, meaning initially only the relator and the government know about the lawsuit and the allegations. The complaint remains under seal for at least 60 days while the Department of Justice has an opportunity to evaluate and investigate the claim. But those investigations often take a year or more. After the government completes its investigation, it generally does one of three things: (1) intervenes and takes over the case from the relator; (2) declines to intervene, leaving the relator to prosecute the claim; or (3) move to dismiss the action. When the government intervenes, it directly controls and prosecutes the action. After intervening, government may file an amended complaint adding or removing defendants and pleading new claims, particularly any unavailable to the relator due to lack of standing. The FCA also allows the government to settle the case notwithstanding the objections of the relator, so long as the court determines the settlement is “fair, adequate, and reasonable under the circumstances.” The relator remains a party to the litigation. The government may partner with the relator and their counsel in the prosecution of the case or limit the relator’s role. Decline to intervene. The government may decide after its investigation that pursuit of the litigation is not worth the investment of resources, which may or may not reflect the strength of the relator’s case. If the government declines to intervene, relators continue to prosecute the action under the FCA’s qui tam provisions and may receive a larger share of any recovery. The government remains the real party in interest and can still later seek to enter the case. The relator(s) and defendant(s) still must seek government approval of agreements to resolve the litigation, and the relator’s share of any settlement is determined by the government within the statutory range. Move for dismissal. The government may seek dismissal of a qui tam action, at the end of its investigation or at later junctures in the litigation. Relators receive notice and an opportunity to be heard. Where the government declines to intervene because it believes the case to be meritless, there is no affirmative duty under the FCA to seek dismissal. Justice Department guidance, however, instructs government attorneys to exercise the dismissal power to curb meritless or duplicative actions. As recently as 2023, the Supreme Court affirmed in United States ex rel. Polansky v. Executive Health Res., Inc., 599 U.S. 419 (2023) that broad judicial deference should generally be given to the government’s decision to dismiss qui tam A Unique Form of Litigation The FCA’s qui tam device is unique and a bit unusual. There is peculiar co-plaintiff posture created by empowering relators to sue on behalf of the United States. The requirement that a qui tam action initially be filed under seal without notice to the defendant. The statutory mandate that the government investigate the allegations. The incentive structure created by the statutory relator’s share. The FCA’s qui tam device gives rise to numerous novel legal questions. Several constitutional principles are implicated by qui tam lawsuits. The case or controversy requirement of standing doctrine exists in some tension with the relator’s lack of a particularized injury in fact. See Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765 (2000). Separation of powers questions arise, too. Article II’s Vesting and Take Care Clauses empower and burden the President with execution of the laws of the United States. Through the qui tam device, Congress imbues relators with prosecutorial authority, but based on the powers vested in Article I.  Similarly, Article II’s Appointments Clause applies to “inferior” officers of the United States. See Lucia v. SEC, 585 U.S. 237 (2018).  In 2023, in dissenting and concurring opinions in Polansky v. Executive Health Res., Justices Thomas, Kavanaugh, and Barrett opined “there are substantial arguments that the qui tam device is inconsistent with Article II and that private relators may not represent the interest of the United States in litigation.” Since Polansky, one federal district court has held that the Appointments Clause required that an FCA qui tam relator be appointed by the President. This case, United States ex rel. Zafirov v. Florida Medical Associates, is now before a three-judge panel in the Eleventh Circuit Court of Appeals. The Eleventh Circuit heard arguments in Zafirov on December 12, 2025, and is now poised to possibly become the first court of appeal to strike down the FCA’s qui tam provisions on constitutional grounds. Qui tam lawsuits raise other unique questions. Issues arise when multiple relators file similar qui tam claims on behalf of the government. Legal and ethical questions emerge when a relator brings a qui tam suit over fraudulent conduct the relator initiated or contributed to. Additionally, the settlement process can be complicated by potentially conflicting interests between the government and relator. Special concerns animate all stages of qui tam litigation.  Dorsey’s FCA Basics Series will cover these and more features of FCA litigation in upcoming posts.

This is the second post in the Dorsey FCANow Blog’s FCA Basics Series covering the fundamentals of the False Claims Act (“FCA”), outlining FCA procedure, and highlighting key facets of FCA practice. Today’s post introduces the elements of an FCA Claim. The Basic Elements of an FCA Claim There are several theories of liability under the FCA and the elements of each can vary based on the conduct targeted.  But five elements are generally applicable. First—presentment.  Generally, there must be a claim for payment submitted to the federal government or its agents. A claim can include invoices, requests for reimbursement, or any demand for government funds. An obligation could be royalties due on leases or an overpayment by the government which the contractor has retained. Second—falsity, a claim, a record, or a statement must be false or fraudulent, which can include claims for services not provided or even misrepresentations about compliance with applicable statutes, regulations, or contractual provisions. Third—scienter, the person or entity must have acted “knowingly.” Under the FCA, “knowingly” means actual knowledge, deliberate ignorance, or reckless disregard of the truth or falsity of the information. Fourth—materiality, the falsity must be “material,” meaning it has a natural tendency to influence, or is capable of influencing, the payment or approval of the claim.  Fifth, the government must have been damaged. Falsity, scienter, and materiality all deserve a closer look. Falsity—there are two basic kinds of falsity, factual and legal. A claim is factually false when it asserts incorrect information. For example, a claim for payment for five hundred sheets of metal when only five sheets were delivered is factually false. A claim is legally false where a required condition of payment under a statute, a regulation, or contract is not met. For example, a healthcare provider submits a claim for services that must be provided by a licensed professional, but the service was done by a non-licensed professional. Scienter—an individual must knowingly submit, or cause to be submitted, a claim that is false or misleading. The text of the FCA defines knowing and knowingly as “actual knowledge,” “deliberate ignorance,” or “reckless disregard,” and no specific intent to defraud is required. 31 U.S.C. § 3729. Actual knowledge is direct or explicit awareness of a particular fact or situation. Deliberate ignorance is purposeful avoidance of learning the truth despite a risk of falsity. And reckless disregard is acting despite knowing there is a substantial risk of falsity. In United States ex rel. Schutte v. SuperValu Inc., 598 U.S. 739 (2023), the United States Supreme Court recently explained that scienter under the FCA refers to an individual’s subjective beliefs—i.e. whether the defendant actually knew the claim was false—not what an objectively reasonable person should have known or believed. Materiality—a crucial component of liability, a false statement or claim must be “material” to the government’s decision to pay or approve a claim. The falsehood must have a natural tendency to influence, or be capable of influencing, the government’s payment decision.  In Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U.S. 176 (2016), the United States Supreme Court explained that materiality is a “rigorous” and “demanding” standard. Materiality cannot be found where noncompliance with federal requirements is minor or insubstantial. Moreover, the government cannot simply create materiality by making compliance with a requirement a condition of payment, especially if the government routinely pays a claim despite knowledge of violations. For example, if the government contracts for health services and adds a requirement that contractors buy American-made staplers, but routinely pays claims on the same contracts fulfilled by contractors using foreign staplers, in all likelihood noncompliance with the stapler provision is not material under the FCA. Elements of an FCA Conspiracy Claim A conspiracy to commit a violation of the FCA can also give rise to liability. Conspiracy requires an agreement between two or more persons to commit a violation of the FCA, such as agreeing to submit or cause the submission of false or fraudulent claims to the government. Moreover, the conspirators must have the intent to achieve the objective of the conspiracy, meaning they knowingly agreed to engage in conduct that would defraud the government. Courts diverge on whether damages are required to demonstrate an FCA conspiracy. Elements of an FCA Retaliation Claim The FCA creates a private right of action for whistleblowers who experience retaliation. Unlike other FCA claims, these retaliation claims attach directly to the whistleblower and are not brought on behalf of the United States. To qualify, the whistleblower must first engage in protected activity, such as investigating, reporting, or taking action in furtherance of a potential or actual FCA violation. Second, the whistleblower’s employer must know the whistleblower engaged in protected activity. Third, the whistleblower must suffer an adverse employment action, such as termination, demotion, harassment, or some other form of discrimination. Fourth, there must be a causal connection between the protected activity and the adverse action, meaning the adverse employment decision is taken because of the individual’s involvement in protected FCA-related conduct.