Supreme Court Mulls the Scope of FCA Liability for Potential “Claims” Submitted to Private Entities Funded by Private Entities
On November 4, 2024, the Supreme Court heard oral argument in United States ex rel. Heath v. Wisconsin Bell. The question presented is whether reimbursement requests submitted to the private corporation administering the E-rate program are FCA “claims.” Under the statute’s definition of “claim,” the answer hinges on whether the Government “provides” the requested money. All funding for the program, established by Congress, comes from private contributions. Yet where private contributors incur debts owed to the corporation, the United States Treasury collects those debts and transmits the funds to the corporation. The Court’s questioning suggests that the Court will conclude that the Government “provides” at least the money that it disburses to the corporation. The Court, however, appeared reluctant to make any determination as to whether the Government “provides” the other money paid to the corporation—all private contributions paid directly to the private corporation.
The defendant in Wisconsin Bell is a telecommunications company that participates in the E-rate program, which subsidizes certain services for schools and libraries. The program is administered by a private corporation that—per Congress—is funded solely by private contributions. The relator has argued that the defendant overcharged schools and libraries for its services, such that reimbursement requests submitted to the private corporation are false.
The Seventh Circuit determined that the Government “provides” the money within the FCA’s definition of “claim.” The court held that there was a “sufficiently close nexus” between the private corporation and the Government, “such that a loss to the former is effectively a loss to the latter,” because the Government established and oversees the E-rate program. Congress ordered the Federal Communications Commission to ensure that moneys were collected to fund the program. Further, within the period relevant to this case, the United States Treasury distributed directly to the corporation $100 million in delinquent debts owed by private contributors to the corporation.
The Court’s questioning focused largely on those $100 million. The defendant argued that the $100 million are no different from the contributions paid by private entities directly to the corporation: “they are owed to the administrative company. The United States just collects and returns those funds to their private owner.” The defendant appeared to suggest that even though the Government collected and disbursed the $100 million, that money was never the Government’s, such that the Government did not “provide” it.
The Justices were skeptical. Justice Kavanaugh suggested that the $100 million may be just like any other money that the Government collects—tax dollars, for example, come in, and then are distributed. Chief Justice Roberts noted that the Government itself characterized the $100 million as Government appropriations. Seven Justices asked questions apparently designed to pressure test a holding that would conclude that the Government “provided” the $100 million but would not address the other funds paid to the corporation.
Justice Barrett questioned the defendant’s apparent view that because private entities provide contributions to the corporation, the Government cannot be deemed to “provide” any of the money. Along these lines, Justice Kagan offered the example of an entity delivering soup that someone ordered for a sick friend. The soup was arguably “provided” by both the deliverer and the person who ordered it.
The relator argued that under the plain language of the statute, the Government “provided” funds to the administrative company: “The point is not exactly how did the money move through a bureaucracy . . . . The point is who is really making the money move, and it is the government.”
Justice Thomas appeared to wonder how the Government could “provide” money where, “no matter what happens here, the government’s not out of pocket.” He asked whether counsel for the United States, participating as amicus curiae, could recall a single FCA case similar to this one—where “we’re talking about what looks like private money going to a private organization and being distributed privately.” Similarly, Justice Kavanaugh noted that “the word ‘provides’ does not to me at least ordinarily fit when the government orders one private party to provide money to another private party.” Justice Gorsuch analogized this transfer of funds from one private entity to another to the distribution of funds from a defendant to a plaintiff according to a court order. Although the order to pay came from the court, Justice Gorsuch questioned whether one could say that the court, as opposed to the defendant, “provide[d]” the money.
A transcript of the oral argument may be found here.
This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.
