On February 21, 2025, the United States Supreme Court delivered a unanimous decision inWisconsin Bell, Inc. v. United States ex rel. Heath1, significantly broadening the scope of the False Claims Act (FCA)2. This landmark ruling establishes that FCA liability can extend to funds provided and substantially administered by private entities, provided that the federal government contributes any portion of the funding.
Background of the Case
The case centered on Wisconsin Bell's participation in the E-Rate program (short for education-rate), a federal initiative managed by the Federal Communications Commission (FCC) to subsidize telecommunications services for schools and libraries. Although the program is primarily funded through mandatory contributions from telecommunications carriers, the federal government also injects funds into the program. Wisconsin Bell, a subsidiary of AT&T, was accused of overcharging schools and libraries, thereby submitting inflated reimbursement claims to the program. Wisconsin Bell sought to have the case dismissed, contending that the reimbursement request did not qualify as a "claim" under the False Claims Act. It argued that the funds in question originated solely from private carriers contributing to the Fund and were administered by the USAC, a private organization rather than a governmental body. The district court rejected this argument and denied the motion to dismiss, a decision that was later affirmed by the Seventh Circuit.
Supreme Court's Decision
Justice Elena Kagan, writing for a unanimous Court, affirmed those courts rulings, rejecting Wisconsin Bell's argument. The Court held that the FCA's definition of a "claim" encompasses requests for money from programs where the federal government provides any portion of the funding, regardless of the program's administration by a private entity3. The Court concluded that, since such a request qualifies as a "claim" under the E-rate program, it may form the basis of a False Claims Act action if found to be false. The ruling emphasized that the origin of the funds is pivotal; if any part of the money is provided by the U.S. Treasury, entities involved are subject to FCA liability.
Implications of the Ruling
This decision has far-reaching consequences for entities engaged in federally funded programs, even those predominantly financed and managed by private organizations. Key takeaways include:
- Expanded FCA Liability: Companies participating in programs receiving any federal funding must recognize their exposure to FCA investigations and enforcement actions.
- Materiality Considerations: The Court's broad interpretation of "claim" may influence how materiality is assessed in FCA cases, potentially aligning with efforts to redefine what the government considers material to the receipt of federal funds.
- Potential Constitutional Challenges: Notably, Justices Clarence Thomas and Brett Kavanaugh expressed interest in revisiting the constitutionality of the FCA's qui tam provisions, which allow private individuals to sue on behalf of the government. This signals a possible future challenge to these provisions.
- Compliance: Companies must implement robust compliance programs to identify, prevent, and address fraudulent activity.
Conclusion
The Supreme Court's decision inWisconsin Bellunderscores the expansive reach of the False Claims Act, extending its applicability to entities involved with programs that receive any level of federal funding, irrespective of private administration. Organizations engaged in such programs must exercise heightened diligence to ensure compliance and mitigate the risk of FCA liability.
Footnotes
1 https://www.supremecourt.gov/opinions/24pdf/23-1127_k53l.pdf
2 31 U.S.C. § 3729
3 31 U.S.C. § 3729(b)(2)(A)(ii)(I).
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