Subcontractor Must Intend That Government Pay False Claim Submitted To Prime, Supreme Court Rules

The Supreme Court's unanimous decision this week in Allison Engine Co. v. United States ex rel. Sanders (June 9, 2008, http://www.supremecourtus.gov/opinions/07pdf/07-214.pdf), interprets section 3729(a)(2) of the federal civil False Claims Act (imposing treble damages and penalties on anyone who "knowingly makes [or] uses … a false record or statement to get a false or fraudulent claim paid by the Government") in a way likely to increase the difficulty of pursuing FCA allegations against government subcontractors such as those in this case, who allegedly submitted false certificates of conformance to the primes and higher-tier subs under Navy shipbuilding contracts. The Court stated, (1) that 3729(a)(2) includes an intent requirement, i.e., the plaintiff must prove that the subcontractor defendant intended that the government pay a false claim in reliance on the sub's false statements to the prime, and (2) that although section (a)(2), unlike section (a)(1), does not require proof that the defendant "presented" a false claim to the government, (3) it still is not sufficient under (a)(2) simply to prove that a sub's false statement "resulted in the use of Government funds to pay a false or fraudulent claim," because if that were so, "almost boundless" FCA liability could attach to any fraud against a private party as long as the victim had received some federal funds.