On February 16, 2023, Senator Chuck Grassley (R) of Iowa criticized several recent False Claims Act (“FCA”) decisions and announced his plans to reintroduce legislation designed to address what he believes to be judicial misinterpretations of the statute.
Grassley announced his intentions in a pre-recorded speech at the Federal Bar Association’s annual Qui Tam Conference in Washington, D.C., during which he called the statute “the government’s most powerful tool in fighting and deterring fraud.”
Grassley has traditionally been a key figure in FCA legislation. He is one of the most outspoken supporters of the 1986 amendments that were intended to encourage more whistleblowers to come forward. In his speech, he attributed the FCA’s success in recent decades to these amendments, highlighting the $72 billion in recoveries since their introduction and their deterrence of billions of dollars more in potential fraud.
Despite its recent success in fighting and deterring fraud, Grassley stated that the FCA “is constantly under attack by activist judges, and defendants, who seek to rewrite the text of the statute to achieve some of their own policy goals.”
In particular, Grassley pointed out a pair of Seventh Circuit decisions that found that violations do not meet the FCA’s scienter requirement if defendants can prove that they had made an “objectively reasonable” interpretation of an ambiguous or confusing policy. He criticized these decisions arguing that defendants who defraud the government or intend to defraud the government can avoid liability if they can demonstrate some ambiguity in the rule or statute they breached.
In January, the U.S. Supreme Court agreed to grant both cases certiorari on a consolidated basis after the government and numerous other parties, including Grassley, urged the High Court to address the “objectively reasonable” issue. Grassley added that he remains hopeful that the justices will “set the record straight,” arguing that Congress and the Supreme court have traditionally intervened when lower courts have made “unduly restrictive” interpretations of the FCA.
The Seventh Circuit decisions are a more politically loaded issue than most other FCA cases reviewed by the Supreme Court. Therefore Grassley hinted that he might attempt to address the scienter issue in the statute if the justices decide to uphold the Seventh Circuit decision. Grassley indicated that this would involve reintroducing his 2021 False Claims Amendment Act, which failed to make it to the Senate floor during the previous Congress.
The 2021 bill was intended to address the alleged abuse of the U.S. Department of Justice’s authority to dismiss whistleblower-brought FCA cases. Grassley described this trend as the “confusion and misinterpretation” that arose after the high court’s 2016 decision in Universal Health Services v. Escobar. This DOJ dismissal issue is currently before the Supreme Court in another case. The Escobar ruling established that an alleged false claim must be “material” to the government’s decision to pay to establish liability. In support of the 2021 Bill, Grassley argued that the decision resulted in differing requirements to establish materiality, which created a loophole for fraudsters to defend blatant fraud as immaterial because the government continued payment.
Grassley urged stakeholders to weigh in and provide their opinions on what proposed legislation should include before reintroduction to Congress.
