United States Ex Rel. Sanders v. Allison Engine Co.
471 F.3d 610 (2006)
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Rule of Law:
Subsections 31 U.S.C. § 3729(a)(2) and (a)(3) of the False Claims Act do not require a plaintiff to prove that a false claim was presented directly to the U.S. government. Liability attaches if a defendant makes or uses a false record or statement to get a fraudulent claim paid with government funds, even if the request for payment is submitted only to an intermediary, such as a prime contractor.
Facts:
- The U.S. Navy contracted with prime contractors Bath Iron Works and Ingalls Shipbuilding to construct destroyers.
- The prime contractors subcontracted with Allison Engine Company to build generator sets ('Gen-Sets') for the ships.
- Allison subcontracted the assembly of the Gen-Sets to General Tool Company (GTC), which in turn subcontracted part of its work to Southern Ohio Fabricators (SOFCO).
- Relators Roger L. Sanders and Roger L. Thacker, former employees of GTC, alleged that Allison, GTC, and SOFCO knew of numerous defects in the Gen-Sets that rendered them non-compliant with contract specifications and Navy regulations.
- Despite knowing of these defects, the subcontractors submitted invoices for payment for the non-conforming Gen-Sets to their respective contracting parties (e.g., GTC submitted invoices to Allison, Allison submitted invoices to the prime contractors).
- All payments made to the subcontractors for these invoices were ultimately paid using U.S. government funds, which flowed from the Navy to the prime contractors and down the subcontracting chain.
Procedural Posture:
- Roger L. Sanders and Roger L. Thacker ('relators') filed a qui tam action under the False Claims Act in the U.S. District Court against Allison Engine Company and other subcontractors.
- The United States government declined to intervene in the case.
- The case was tried before a jury.
- At the close of the relators' case-in-chief, the defendants moved for judgment as a matter of law pursuant to Fed. R. Civ. P. 50(a).
- The district court (trial court) granted the defendants' motion, holding that the FCA required proof that a false claim was presented directly to the government, which the relators had failed to show.
- The relators, as appellants, appealed the district court's judgment to the United States Court of Appeals for the Sixth Circuit.
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Issue:
Do subsections 31 U.S.C. § 3729(a)(2) and (a)(3) of the False Claims Act require a plaintiff to prove that a false or fraudulent claim was presented directly to the U.S. government for payment?
Opinions:
Majority - Judge Gibbons
No, subsections 31 U.S.C. § 3729(a)(2) and (a)(3) of the False Claims Act do not require proof that a false claim was presented directly to the U.S. government. The plain language of the statute supports this conclusion, as only subsection (a)(1) contains an express presentment requirement ('knowingly presents, or causes to be presented, to an officer or employee of the United States Government'). Subsections (a)(2) and (a)(3) omit this language, and under the principles of statutory construction, this omission is presumed to be intentional. Reading a presentment requirement into these subsections would render subsection (a)(1) largely superfluous. The legislative history of the 1986 amendments to the FCA confirms Congress's intent to broaden the Act's reach to cover fraudulent claims submitted by subcontractors that result in a loss to the government, regardless of whether the claim was made to the government directly. It is sufficient to show the claim was paid with government funds. The court explicitly rejects the D.C. Circuit's contrary holding in United States ex rel. Totten v. Bombardier Corp., finding its reasoning flawed for improperly importing the presentment requirement of (a)(1) into (a)(2).
Concurring - Judge Batchelder
I concur in part and dissent in part. The False Claims Act implicitly requires presentment to the government because the statutory language 'paid or approved by the Government' in § 3729(a)(2) creates a causal connection that presupposes the government received and acted upon the claim. The phrase 'by the Government' connotes direct action by the government in response to a claim, which is distinct from a payment merely being made 'with government funds.' For liability to attach, the defendant's false statement must induce the government to act by paying the claim. Without proof of presentment, there is no causal link between the subcontractor's fraud and the government's expenditure. Payment by a prime contractor who has been bankrolled by the government is not payment 'by the Government' because the government did not act in response to the specific fraudulent claim.
Analysis:
This decision created a significant circuit split with the D.C. Circuit's decision in Totten, which held that the False Claims Act always requires presentment to the government. By eliminating the presentment requirement for claims under § 3729(a)(2) and (a)(3), the Sixth Circuit broadened the scope of FCA liability for subcontractors and government grantees. This holding made it substantially easier for whistleblowers to pursue claims against lower-tier contractors who defraud the government indirectly, as they no longer face the difficult evidentiary burden of tracing a specific false invoice up the chain to a direct submission to a government agency. The split created by this case was ultimately resolved by the Supreme Court, and subsequent congressional amendments largely adopted this broader view of liability.
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