FCA Alert : Lawyers & Attorneys for Whistleblower, False Claims Act & Qui Tam Defense : Kelley Drye & Warren LLP

In United States ex rel. Davis v. Lockheed Martin Corp., the relator sued Lockheed Martin Corp. under the FCA, alleging that software Lockheed used in jet fighters built under a government contract had not been developed properly. The government declined to intervene, and Lockheed moved to dismiss under Rule 9(b). The court granted the motion, finding that  the complaint had failed to identify with specificity any false claims submitted to the government or any false statements made to the government in order to receive payment.

In reaching its decision, the court held that a provision of the FERA amendments that substantially revised section 3729(a)(2) (now section 3729(a)(1)(B)) of the FCA applies only to claims for payment that were pending after June 7, 2008. Previously, section 3729(a)(2) imposed liability on “any person who … knowingly makes, uses, or causes to be made or used a false record or statement to get a false or fraudulent claim paid or approved by the Government…” The Supreme Court in Allison Engine held that the language “to get” and “paid or approved by the Government” required plaintiffs to show that the defendant intended that its false statement would be relied upon by the federal government in determining whether to pay a false claim, and that simply showing that a defendant made false statements to a recipient of federal funds was not sufficient to establish liability. In an effort by Congress to overturn the Supreme Court’s decision in Allison Engine, the FERA amendments replaced section 3729(a)(2) with section 3729(a)(1)(B), which imposes liability on a person who “knowingly makes, uses, or causes to be made or used a false record or statement material to a false or fraudulent claim …” This change, along with other provisions of the FERA amendments, expands the scope of the FCA, potentially imposing FCA liability on a defendant who makes a false statement in relation to a claim for payment submitted to a recipient of federal funds, even if that statement is never passed on to or relied on by the federal government. 

FERA also provides that the new section 3729(a)(1)(B) “shall take effect as if enacted on June 7, 2008 [two days before  the Supreme Court’s decision in Allison Engine], and apply to all claims under the False Claims Act that are pending on or after that date…”   The relator and the United States, in an amicus brief, argued that this last provision meant that section 3729(a)(1)(B) applied to all of the relator’s case since the case had been pending on June 7, 2008. The court rejected this argument and instead concluded that the reference to “claim” in the provision meant that the amendment applied to claims for payment that were pending as of June 7, 2008, not FCA actions that were pending as of that date. The 11th Circuit, the District of D.C., the Southern District of Ohio, and the Northern District of Illinois have all reached the same conclusion and have declined to extend the new section 3729(a)(1)(B) to claims that were paid prior to June 7, 2008.