Insights

On July 25, 2025, the Eleventh Circuit Court of Appeals issued its decision in United States ex. rel. Sedona Partners LLC v. Able Moving & Storage Inc. et al., holding that a district court cannot ignore new factual allegations included in an amended complaint filed by a False Claims Act qui tam relator based on the fact that those additional facts were learned in discovery, even while a motion to dismiss for failure to comply with the heightened pleading standard under Federal Rule of Civil Procedure 9(b) is pending.  Under Rule 9(b), allegations of fraud typically must include factual support showing the who, what, where, why, and how of the fraud to survive a defendant’s motion to dismiss.  And while that standard has not changed, Sedona gives room for a relator to file first and seek out discovery in order to amend an otherwise deficient complaint and survive a motion to dismiss, at least in the Eleventh Circuit.  Importantly, however, the Eleventh Circuit clarified that a district court retains the discretion to dismiss a relator’s complaint before or after discovery has begun, meaning that district courts are not required to permit discovery at the pleading stage.  Nevertheless, the Sedona decision is an about-face from precedent in the Eleventh Circuit, and many other circuits, where, historically, facts learned during discovery could not be used to circumvent Rule 9(b) by bolstering a relator’s factual allegations while a motion to dismiss was pending.  While the long-term effects of the decision remain to be seen, in the short term the decision may encourage relators to engage in early discovery in hopes of learning facts that they can use to survive otherwise meritorious motions to dismiss.

FY 2024 saw continued growth in False Claims Act enforcement, with a record year for new qui tam and government-initiated actions, and the highest total recovery in three years. Enforcement of pandemic-related fraud and cybersecurity noncompliance increased, and health care, procurement, and small business fraud violations were again priority areas. A groundbreaking opinion from the District Court for the Middle District of Florida may have teed up a potentially landscape-shifting decision about the viability of the qui tam mechanism in the not too distant future. And a landmark administrative law decision at the U.S. Supreme Court may impact many FCA cases to come. Significant decisions regarding retaliation, excessive fines, the first-to-file rule, and the public disclosure bar were also handed down by courts of appeals. Crowell attorneys discuss these highlights and others in a “Feature Comment” published in The Government Contractor.

Judge Kathryn Kimball Mizelle of the District Court for the Middle District of Florida recently declared the False Claims Act qui tam provisions unconstitutional in U.S. ex rel. Zafirov v. Fla. Med. Assocs., LLC, -- F.Supp.3d --, 2024 WL 4349242 (M.D. Fla. Sept. 30, 2024), turning up the heat on a simmering constitutional fight that is increasingly likely to reach the Supreme Court in the next few years. Judge Mizelle's decision was the first to strike down the FCA qui tam provisions, but not the first to consider the issue. Arguments challenging the constitutionality of the qui tam provisions proliferated after Justice Thomas indicated some doubt about the qui tam device in his dissent in U.S. ex rel. Polansky v. Exec. Health Res., 599 U.S. 419 (2023). But every other judge to consider the issue has upheld the constitutionality of the qui tam provisions.

In a novel False Claims Act (FCA) ruling, on September 30, 2024, Judge Kathryn Kimball Mizelle of the District Court for the Middle District of Florida upended decades of FCA jurisprudence in declaring the qui tam provisions of the FCA unconstitutional in U.S. ex rel. Zafirov v. Florida Medical Associates, LLC, 2024 WL 4349242 (M.D. Fla. Sept. 30, 2024). This decision follows Justice Thomas’ dissent in the recent Supreme Court decision, U.S. ex rel. Polansky v. Executive Health Resources, Inc., 599 U.S. 419 (2023), where he posited, “[t]here are substantial arguments that the qui tam device is inconsistent with Article II and that private relators may not represent the interests of the United States in litigation.” While Justice Thomas’ implicit constitutional challenge was not entirely new to FCA practitioners, including it in his Polansky dissent, with Justices Kavanaugh and Barrett in a concurring opinion noting their agreement that the Court should consider the constitutional questions in an appropriate case, swung wide open a door of opportunity for defendants and their counsel to attempt to dismiss FCA qui tam suits on constitutional grounds. Judge Mizelle’s decision in Zafirov is the first of its kind to actually dismiss a qui tam suit on constitutional grounds, and will likely lead to an avalanche of similar motions in nearly every non-intervened lawsuit brought by a relator.

As the primary civil enforcement statute for investigating and remedying fraud in connection with United States government programs, the False Claims Act (FCA) has resulted in more than $75 billion in recoveries of government funds since 1986. The FCA imposes liability on any person or entity that knowingly submits false claims or certifications to the government or improperly retains money owed to the U.S. government.

In Lockheed Martin Aeronautics Company, ASBCA No. 62209 (a C&M case), the Armed Services Board of Contract Appeals (Board) awarded $131,888,860 in damages plus applicable interest in connection with Lockheed Martin’s claim for the cumulative disruptive impacts it experienced in performing over and above work on the C-5 Reliability Enhancement and Re-Engining Program.  The underlying contract related to the modernization of a fleet of C-5 Galaxy Aircraft, which is the largest U.S. military transport plane and has provided heavy intercontinental strategic airlift capabilities since the 1970s.  The Board sustained the appeal after finding that Lockheed Martin had met its burden of proof on entitlement and quantum, using the measured-mile methodology, which compares an affected period of performance with an unaffected period.  This case is a prime example of marshalling fact and expert witness testimony, and documentary evidence, to demonstrate the impacts of cumulative disruption on performance to justify causation and damages.

2023 brought many important False Claims Act developments for companies with business involving government funds.  While overall recoveries remained down compared to pre-2022 levels, the total number of settlements and judgments exceeded any prior year.  Those settlements and judgments also highlight areas of particular focus for the Government, including cybersecurity compliance, pandemic fraud, and small business fraud, among others.  Of particular note, 2023 saw the U.S. Supreme Court issue decisions concerning the Government’s authority to dismiss qui tam actions and the critical element of scienter/knowledge that will have wide-reaching impact.  The courts of appeals also issued significant decisions on damages, materiality, and more.  Crowell attorneys discuss these highlights and others in a "Feature Comment" published in The Government Contractor.

On remand from the U.S. Court of Appeals for the Federal Circuit, in ECC International Constructors, LLC, ASBCA Nos. 59586, 59643, the Armed Services Board of Contract Appeals concluded that, by waiting until after a hearing on the merits and six years after the appeal was filed, the government forfeited its right to challenge the contractor’s satisfaction of the FAR’s sum-certain requirement for Contract Disputes Act claims.

In JE Dunn Construction Company, ASBCA No. 63183, the Armed Services Board of Contract Appeals (“ASBCA”) issued its first published decision applying the Federal Circuit’s recent holding that the FAR sum-certain requirement for Contract Disputes Act claims is not jurisdictional. The Board held that, because the government did not raise the issue until after a hearing on the merits, the government forfeited its right to challenge the contractor’s satisfaction of the sum-certain requirement.

On August 25, 2023, in ECC CENTCOM Constructors, LLC v. United States, COFC No. 21-1169, the U.S. Court of Federal Claims (“the Court” or “COFC”) barred ECC CENTCOM Constructors, LLC (“ECC”) from asserting claims that should have been asserted before the Armed Services Board of Contract Appeals (“ASBCA”) citing the doctrine of claim preclusion. 

When faced with a dissatisfying debriefing, a contractor may choose to respond to the agency to question or even rebut its evaluation.  However, the recent Government Accountability Office (GAO) decision in NikSoft Systems Corporation (NikSoft) serves as an important reminder that those communications can be interpreted as agency-level protests, with potential to render subsequent GAO protests untimely. 

On June 16, 2023, the U.S. Supreme Court, in United States ex rel. Polansky v. Executive Health Resources Inc., held that the Government may seek dismissal of a False Claims Act (“FCA”) qui tam suit over a relator’s objection so long as it intervenes in the litigation, either during the initial seal period or afterward.  The Court also held that, when handling such a motion, district courts should apply Federal Rule of Civil Procedure (“FRCP”) 41(a), the rule generally governing voluntary dismissal of suits.  And in a dissent that—in the long run—may end up being more impactful than the Court’s holding, Justice Thomas (joined in a concurring opinion by Justices Kavanaugh and Barrett) questioned the constitutionality of the qui tam provisions themselves.  

On May 15, 2023, the Armed Services Board of Contract Appeals (“ASBCA” or “the Board”) in J&J Maintenance, Inc., d/b/a J&J Worldwide Services, ASBCA No. 63013 issued an instructive analysis of its jurisdiction to hear monetary and nonmonetary claims.  Partially granting a government motion to dismiss, the ASBCA explained that, if a contractor does not seek monetary relief in its claim to the contracting officer (“CO”), then the contractor cannot seek monetary relief on appeal to the Board.  Addressing the contractor’s claim for contract interpretation, however, the Board denied the government’s motion to dismiss and held that, where a contractor can reasonably articulate “significant consequences” of its claim other than the recovery of money, the fact that the claim may also have a financial impact on the parties does not strip the Board of jurisdiction. 

On April 6, 2023, the Civilian Board of Contract Appeals (CBCA), in BES Design/Build, LLC, CBCA 7585, dismissed a contractor’s appeal for lack of jurisdiction, finding the appeal untimely, and underscoring that a contractor cannot reset the 90-day appeal window by resubmitting its original claim.

On April 3, 2023, the U.S. Attorney’s Office for the District of New Jersey announced a settlement with a public relations firm to resolve allegations that the New Jersey company violated the False Claims Act (FCA) by receiving a $2 million second-draw loan from the Paycheck Protection Program (PPP) to which the company was not entitled.  The public relations firm had also sought and received forgiveness for the full amount of the loan.

Next Tuesday, April 18, 2023, the highest court in the land will hear arguments in what is poised to be the most influential False Claims Act (FCA) case since the landmark decision in Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016).  On January 13, 2023, the U.S. Supreme Court granted certiorari to hear two consolidated appeals from the U.S. Court of Appeals for the Seventh Circuit in United States ex rel. Schutte v. SuperValu Inc., 9 F.4th 455 (7th Cir. 2021) and United States ex rel. Proctor v. Safeway, Inc., 30 F.4th 649 (7th Cir. 2022).  The Court’s decision will likely have far-reaching ramifications for FCA cases involving ambiguous contractual or regulatory requirements and may also provide benchmarks for assessing the key element of scienter across all FCA cases.  

2022 was a busy year for the False Claims Act.  While recoveries were down, new cases reached a record mark, and settlements addressed multiple important and developing enforcement areas, from cybersecurity to small business fraud, bid rigging, Trade Agreements Act compliance, pandemic fraud, and more.  Of particular note, the U.S. Supreme Court held argument concerning the Government’s authority to dismiss qui tam actions, and it will soon hear consolidated cases as to the critical element of scienter.  And circuit courts issued key decisions involving pleading standards and merits issues.  These highlights and more are discussed by C&M attorneys in a “Feature Comment” published in The Government Contractor. 

In a prime example of the significant interplay between the Anti-Kickback Statute (“AKS”) and the False Claims Act (“FCA”), a federal jury has returned a verdict of more than $43 million in damages against Cameron-Ehlen Group, Inc., which does business as “Precision Lens,” and its owner.  The verdict in this long-running and closely watched fraud case out of the U.S. District Court for the District of Minnesota comes after a six-week trial, with the jury ultimately finding that the defendants paid kickbacks to ophthalmic surgeons to induce their use of defendants’ products in cataract surgeries reimbursed by Medicare, resulting in the submission of 64,575 false claims between 2006 and 2015.  While the jury calculated damages at the massive sum of $43 million, that number may grow exponentially after the court applies the FCA’s treble-damages calculation (increasing the liability to $129 million) and statutory penalties of between $5,500 and $11,000 for each of the 64,575 claims (resulting in additional penalties of $355 million to $710 million).  All told, the total FCA liability is expected to range between $485 million and $839 million.

On November 1, 2022, the Armed Services Board of Contract Appeals (ASBCA) published its FY 2022 Report of Transactions and Proceedings, which provides statistics regarding the adjudication of appeals between contractors and the Army, Navy, Air Force, Corps of Engineers, Central Intelligence Agency, National Aeronautics and Space Administration, Defense Logistics Agency, Defense Contract Management Agency, and other Defense agencies, Non-Appropriated Fund Instrumentalities, and the Washington Metropolitan Area Transit Authority.