Erroneous Interpretations Run Amuck: Misapplication of the Federal False Claims Act “to” State and Local Government Recipients and Subrecipients of Federal Grants
Open AccessSince the mid-1980’s, there has been a meteoric rise in the number and size of federal grants awarded to State and local governments. Coincidentally, there has also been a parallel rise since 1986 in federal False Claims Act (FCA) lawsuits brought “against” State and local government recipients and subrecipients of federal grants. However, a close examination of the ordinary and plain meaning of the FCA shows that Congress intended for its liability provisions to apply to claim presented primarily by government contractors to State and local government recipients and subrecipients of federal grants and not to claims presented by State and local government recipients and subrecipients of federal grants themselves. Moreover, the FCA’s statutory context and legislative history clearly show that Congress never intended for State and local government recipients and subrecipients of federal grants to be considered “persons” subject to FCA liability from neither qui tam relators nor the U.S. Department of Justice. Conversely, the purpose of the 1986 and 2009 FCA Amendments was to prevent fraud primarily by government contractors against and upon recipients and subrecipients (i.e., State and local governments) of federal grants.Furthermore, erroneous interpretations of two U.S. Supreme Court (Court) decisions which held that State and local government recipients and subrecipients of federal grants are “persons” subject to FCA liability have led to absurd results. Thus, this paper, applying principles of statutory interpretation, proposes legislative reforms to clarify Congress’s actual intent of the 1986 and 2009 FCA Amendments. Specifically, this paper recommends that Congress legislatively reverse those two erroneous Court misinterpretations and clarify that the FCA’s liability provisions do not apply to claims presented by State and local government recipients and subrecipients of federal grants.
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