August 21, 2023

Sen. Grassley Introduces Bipartisan False Claims Amendments Act of 2023

Holland & Knight Alert
Andrew Solinger | Zach Boulden

Continuing his long and storied history of pushing for stronger enforcement of the False Claims Act (FCA), Sen. Chuck Grassley (R-Iowa) recently led a bipartisan group of senators in introducing the False Claims Amendments Act of 2023 (Act). In a July 25, 2023, press release explaining the intent of the Act, Grassley criticized "flawed court interpretations [that] have created loopholes for [defendants] to avoid accountability" and claimed that the "bipartisan bill clarifies our original intent to hold those accountable when they bilk the taxpayer."

His dig at judicial interpretation of the FCA was aimed squarely at a seminal U.S. Supreme Court decision on the FCA from 2016. That case delineated the test federal courts must apply to determine whether a given regulatory violation was material to the government's payment decision and, thus, actionable under the FCA. Since 2016, courts across the country have tackled the murky confines of materiality as it relates to the FCA, creating what appear to be inconsistent tests for this central element of proving FCA liability. Not happy with the tone and tenor of these decisions, Grassley has sought a legislative redirection for the FCA's materiality standard.

As part of the test laid out by the Supreme Court, "if the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material." The Act would practically eliminate this element of the materiality test by dictating that "[i]n determining materiality, the decision of the Government to forego a refund or to pay a claim despite actual knowledge of fraud or falsity shall not be considered dispositive if other reasons exist for the decision of the Government with respect to such refund or payment." By lowering the bar for materiality, this "other reasons" language could make it significantly more difficult for defendants to prevail at the motion to dismiss or summary judgment stage.

Beyond altering the test for materiality and lowering the bar for proving materiality, the Act would also expand the scope of FCA retaliation claims to cover post-employment retaliation. At present, different circuit courts take diverging views of whether post-employment conduct is actionable under the FCA. The Act seeks to bring together these differing views.

In addition, the Act would obligate the U.S. Government Accountability Office to produce a report detailing the benefits and challenges of enforcement efforts under the FCA, as well as the amounts recovered under the FCA since its 1986 amendment. In sum, these proposed changes signal an intent to make it easier for the government and whistleblowers to bring successful FCA claims and, if they become law, FCA defendants could face greater difficulties and costs in challenging alleged liability.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.

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