Government Contracts Lawyer & Attorney : Sheppard Mullin Law Firm : Bids, Licenses, Awards, Conflict of Interest.

With its recent decision in Allison Engine Co. v. U.S. ex rel. Sanders, the Supreme Court has resolved the conflict among the circuits over whether plaintiffs must show "presentment" of a false claim to establish liability under two False Claims Act (FCA) provisions, 31 USC §§3729(a)(2) and (a)(3).  Finding no requirement that a claim be directly presented to the government, the Court nevertheless limited the scope of FCA liability by requiring actions brought under §3729(a)(2) 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."  Similarly, an action based on an alleged conspiracy under §3729(a)(3) "must show that the conspirators agreed to make use of the false record or statement to achieve this end."  While settling a prominent issue of FCA jurisprudence, the Court's opinion raises other issues of particular relevance to government contractors at the subcontract level.  These issues are addressed following a summary of the Allison decision.

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On April 23, 2008, the U.S. House of Representatives passed H.R. 3033, "Contractors and Federal Spending Accountability Act," agreeing by voice vote that GSA would maintain a centralized database of government contractors.  The GSA database would collect information on contract defaults, suspensions, and debarments, as well as "any civil or criminal proceeding, or any administrative proceeding" for which a contractor paid at least $5,000 in restitution, that has been "concluded" by the federal or state governments.  If a contractor committed in a three-year period more than one offense for which it could be debarred, the contracting officer must affirmatively demonstrate the contractor's responsibility prior to award.

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On February 27, 2008, the Senate Judiciary Committee held hearings debating whether the civil False Claims Act, 31 U.S.C. §§ 3729-3733, should be expanded – potentially creating additional liability for companies receiving any government money, reducing the ability of any such company to defend itself against claims of fraud, and creating significant hurdles for companies in defending themselves against mere allegations of fraud by "whistleblowers" from the company and within the Government.  When the Department of Justice testified before the Committee, the DOJ indicated that it did not support the legislation as currently drafted, noting that there was "no pressing need" for changes to the FCA at this time despite the fact that the proposed legislation would provide greater opportunities for the DOJ to recover allegedly fraudulent payments to contractors.  The DOJ’s objections, however, which are outlined below, are limited in scope.

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For the second time in as many terms, the U.S. Supreme Court will consider a case testing the scope of the False Claims Act (FCA), 31 U.S.C. § 3729.  The High Court has agreed to review U.S. ex rel. Sanders, et al. v. Allison Engine Co., 471 F. 3d 610 (6^th Cir. 2006), cert. granted, 2007 WL 2374900 (Oct. 29, 2007), which held that the FCA applies to a contractor’s claim for payment, regardless of whether the claim was “presented” directly to the government.  The Court’s latest interpretive review of the FCA follows a decision last March clarifying the requirement that private FCA plaintiffs have direct and independent knowledge of their allegations in order to establish “original source” jurisdiction.  Rockwell Int'l Corp. v. U.S., 127 S. Ct. 1397 (2007).  Like Rockwell before it, Allison Engine merits close attention by companies doing business with the federal government.

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