“The False Claims Act’s purpose is to prevent fraud against the United States, not to pad the pockets of relators and plaintiffs’ lawyers.”
—John Masslon, WLF Senior Litigation Counsel

WASHINGTON, DC— The U.S. Supreme Court today agreed to review a decision of the U.S. Court of Appeals for the Seventh Circuit that permits False Claims Act suits in cases where the federal fisc is not at risk. The order was welcome news for WLF, which filed an amicus brief with the Court urging review.

The Court today also granted review in two other cases in which WLF filed in support of certiorari: NVIDIA Corp. v E. Ohman J:or Fonder AB and EMD Sales v. Carrera.

The case arises from Wisconsin Bell’s providing services under the federal E-rate program, which gives discounted telecommunications services to schools and libraries. The program is paid for with funds collected from telecommunications providers nationwide. A private company administers the program and disburses the money to schools, libraries, and telecommunications providers. The funds never touch the federal treasury. Still, the relator here sued Wisconsin Bell arguing that it was overcharging for E-rate services. The Seventh Circuit split from the Fifth Circuit by holding that the E-rate program is covered by the FCA.

WLF’s brief explained the case’s wide-ranging implications. First, the private company that administers the E-rate program also administers programs for telecommunications services to low-income individuals, rural health care clinics, and rural residents. Second, a different private company administers the program that hearing-impaired and speech-impaired individuals use to communicate over the phone. These four programs are covered by the FCA under the Seventh Circuit’s decision. Third, Fannie May and Freddie Mac may also be covered under the Seventh Circuit’s definition of agent of the United States, which could wreak havoc in the mortgage industry.

The brief also described how the Seventh Circuit’s holding conflicts with the FCA’s long history. The FCA was passed during the Civil War to help catch those who were bilking the government out of much-needed war funds. For the past 160 years, every amendment to the statute has sought to protect the federal fisc or avoid parasitic qui tam actions. The Seventh Circuit’s decision, however, does not protect the federal fisc and encourages parasitic suits.