Justice nominee’s False Claims Act stance creates uncertainty

The Department of Justice recovered almost $2.9 billion from companies under the False Claims Act in fiscal year 2018, which was only a slight downturn from recent years, but there is uncertainty over how the new attorney general will address the law’s enforcement, says a law firm’s analysis.

Los Angeles-based Gibson Dunn Crutcher LLC said in its report that the 2018 total is “still one of the top ten totals of all time.”

The report said of the almost $2.9 billion in civil settlements and judgments under the FCA during the 2018 fiscal year, $2.1 billion came from whistleblower cases, which was the lowest number of recoveries from these cases since 2009.

The report also pointed to a November announcement by Deputy Attorney General Rod Rosenstein of a set of policy changes to “restore” discretion to DOJ attorneys. The announcement affects the FCA as well as Foreign Corrupt Practices Act cases.

There “has also seen speculation about what approach William Barr, President Trump’s nominee for Attorney General, would bring to FCA enforcement,” said the report.  “In the past, Barr has made comments calling the FCA unconstitutional and an abomination,” it said.

Among other trends discussed in the report, the law firm said lower courts “continued to deal with a wide range of thorny legal issues, including threshold jurisdictional issues, pleading requirements under the FCA, and standards of liability and proof under the Supreme Court’s seminal 2016 decision in Universal Health Services Inc. v. United States ex rel. Escobar.

The high court held in Escobar that government contractors could be liable for requesting payment when the good or service provided violated an applicable statutory, regulatory, or contractual requirement, but the government must also meet a demanding materiality test.

The law firm said in its 2017 report that the Trump administration was aggressively pursuing FCA cases and was expected to continue to do so.