In a reminder that sweeping legislative reforms need to pass Constitutional as well as Congressional muster, a federal district court in Ohio has just set aside certain recent amendments to the False Claims Act (“FCA”). The case, U.S. ex rel. Sanders v. Allison Engine Co. (decided 10/27/09), holds that the retroactive application of these amendments under the Fraud Enforcement and Recovery Act of 2009 (“FERA”) violated the Ex Post Facto clause of the Constitution.
FERA was enacted on May 20 of this year as part of the new administration’s push to protect massive stimulus funds from abuse. FERA significantly expands the scope of liability under the FCA not only for persons who directly or indirectly receive stimulus dollars, but also for other persons who submit false claims to the government or who use false records to get a claim paid by the government. An earlier U.S. Supreme Court decision in the Allison Engine case had ruled that the words “to get” in the FCA meant that “a person must have the purpose of getting a false or fraudulent claim ‘paid or approved by the Government’ in order to be liable,” and that the government must rely on the statement “as a condition of payment.” FERA removed the “to get” language from the applicable provision in the FCA, so that the FCA now applies to false statements made to almost any recipient of government funds regardless of whether the person making the false statement expected or intended the government to pay the claim based on those statement.
With FERA, Congress not only reversed the Supreme Court decision in Allison Engine but also attempted to completely erase the effects of that decision by applying its change in the law retroactive to June 7, 2008, two days prior to the Supreme Court’s Allison Engine decision. The Ohio district court, in a continuation of the Allison Engine case after it was remanded by the Supreme Court, ruled that Congress acted improperly when it attempted to apply FERA to claims and cases arising between the date of the Supreme Court’s decision and the enactment of FERA. The district court concluded that retroactive application of this amendment would punish behavior that was not illegal prior to the enactment of FERA, in violation of the Ex Post Facto clause. The retroactive application of FERA threatened to resurrect lawsuits decided in that interim period; the new Allison Engine decision should assist in avoiding that result.