District Court Blesses Retroactive Application of FCA’s False Statement Provision

Posted by Ellyce R. Cooper and Patrick E. Kennell III

In U.S. ex rel. De’von Cannon v. Rescare, Inc., No. 09-3068 (E.D. Pa. Sept. 16, 2014) (Dkt. No. ___) (“Slip Op.”), Judge Diamond of the Eastern District of Pennsylvania ruled that in its third try the Relator pled facts sufficient to survive a motion to dismiss. This time the Relator argued the applicability of the amended (2009) version of § 3729(a)(1) rather than the pre-2009 version. Judge Diamond’s ruling follows the majority of courts around the country that have found that the 2009 amendment can be applied retroactively because it is civil and not punitive in nature.

In dismissing the first two versions of Relator’s complaint, Judge Diamond applied the pre-2009 version of § 3729(a)(1), and found that the Relator did not meet the intent requirement found in Allison Engine, Co., Inc. v. United States ex rel. Sanders, 553 U.S. 662, 668-69 (2008) (“[A] person must have the purpose of getting a false or fraudulent claim ‘paid or approved by the Government’ in order to be liable under § 3729(a)(2).”). (Slip Op. at 4-5). However, in his Second Amended Complaint, Relator alleged for the first time that he was proceeding under the post-2009 Amendments to § 3729(a)(l) (specifically, Section 3729(a)(l)(B)) (“Any person who…knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim . . . is liable to the United States Government for a civil penalty.).

The amendments to the FCA took effect in May of 2009, and Relator’s allegations dealt with acts that took place “from November 2008 to March 2009.” (Slip Op. at 7). The Court noted that “Congress singled out subsection [3729(a)(1)(B)] to apply retroactively to all ‘claims made under the FCA that are pending on or after’ June 7, 2008.” (Slip Op. at 6). Judge Diamond ruled that the retroactive application of the Amendment would not violate the Ex Post Facto Clause because the FCA is civil in nature, the monetary penalties of the FCA were not punitive in nature, and the “FCA’s penalty provision is . . . not excessive, given its remedial purposes: encouraging would-be qui tam relators and compensating the Government for investigative costs and the fraud itself.” (Slip Op. at 7-9, 12).