Allison Engine Co. v. United States ex rel. Sanders

In Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662, 128 S.Ct. 2123, 170 L.Ed.2d 1030 (2008),, two shipyards contracted with the United States Navy to build destroyers in accordance with military standards. 128 S.Ct. at 2126. The shipyards then contracted with three subcontractors, including Allison Engine, to assemble and manufacture certain parts used in the destroyers. Id. at 2126-27. All of the money used to pay the subcontractors ultimately came from the United States Government. Id. at 2127. Two qui tam relators sued the subcontractors to recover damages under 31 U.S.C. 3729(a)(1), (a)(2), and (a)(3), alleging that they submitted false invoices to the shipyards and fraudulently sought payment for work that did not comply with the specified military standards. Id. The court of appeals held that the plaintiffs established liability merely by showing that "the false statement's use ... resulted in obtaining or getting payment or approval of the claim," United States ex rel. Sanders v. Allison Engine Co., 471 F.3d 610, 621 (6th Cir. 2006), or that "government money was used to pay the false or fraudulent claim." Id. at 622. The Supreme Court reversed and held that to establish liability under 3729(a)(2) and (a)(3), an FCA plaintiff must prove that the "defendant intended that the false record or statement be material to the Government's decision to pay or approve the false claim." Allison Engine, 128 S.Ct. at 2126. This is so, the Court explained, because the phrase "to get" in the statute "denotes purpose," and so "a person must have the purpose of getting a false or fraudulent claim `paid or approved by the Government.'" Id. at 2128 (quoting 31 U.S.C. 3729(a)(2)). "Therefore, a subcontractor violates 3729(a)(2) if the subcontractor submits a false statement to the prime contractor intending for the statement to be used by the prime contractor to get the Government to pay its claim." Id. at 2130. By contrast, "if a subcontractor or another defendant makes a false statement to a private entity and does not intend the Government to rely on that false statement as a condition of payment, the statement is not made with the purpose of inducing payment of a false claim `by the Government.'" Id. In the latter situation, the "direct link between the false statement and the Government's decision to pay or approve a false claim is too attenuated to establish liability." Id. In Allison Engine Co. v. United States, 553 U.S. 662, 128 S.Ct. 2123, 170 L.Ed.2d 1030 (2008), the Supreme Court "granted review ... to decide what a plaintiff asserting a claim under" two specific provisions of the FCA, i.e., 31 U.S.C. 3729(a)(2) and (3), "must show regarding the relationship between the making of a `false record or statement' and the payment or approval of `a false or fraudulent claim ... by the Government.'" 553 U.S. at 665, 128 S.Ct. 2123 (quoting 3729(a)(2)). Turning first to 3729(a)(2), the Court held that "a plaintiff asserting a ... claim thereunder must prove that the defendant intended that the false record or statement be material to the Government's decision to pay or approve the false claim." Id. In reaching this conclusion, the Court emphasized that "the intent requirement it discerned in 3729(a)(2) derived not from the term `knowingly,' but rather from the infinitive phrase `to get.'" Id. at 671 n. 2, 128 S.Ct. 2123. Relatedly, the Court also emphasized that while 3729(b)'s definition of "knowing" and "knowingly" "refers to specific intent with regard to the truth or falsity of the `information,'" its "holding referred to a defendant's purpose in making or using a false record or statement." Id. Moving on to 3729(a)(3), the Court held, in similar fashion, that "a plaintiff asserting a claim thereunder ... must show that the conspirators agreed to make use of the false record or statement" in order to get the government to pay or approve a false claim. Id. at 665, 128 S.Ct. 2123. In other words, the Court held, "it must be established that the conspirators agreed that the false record or statement would have a material effect on the Government's decision to pay the false or fraudulent claim." Id. at 673, 128 S.Ct. 2123. In Allison Engine, the Supreme Court emphasized that "the intent requirement ... derives not from the term `knowingly,' but rather from the infinitive phrase `to conceal, avoid, or decrease' in 3729(a)(7)." 553 U.S. at 671 n. 2, 128 S.Ct. 2123. In other words, Allison Engine effectively rejected the notion that the intent requirement incorporates 3729(a)(7)'s "knowingly" standard. And with good reason. As the plain language of 3729(a)(1) suggests, liability under subsection (a)(1) requires proof that the defendant actually presented or caused to be presented a false or fraudulent claim to the government. Allison Engine Co., Inc., 128 S.Ct. at 2129. Although subsection (a)(2) has no such requirement, it does require proof "that the defendant made a false record or statement for the purpose of getting `a false or fraudulent claim paid or approved by the government.'" Allison Engine Co., Inc., 128 S.Ct. at 2130. With respect to subsection (a)(3), where as here, "the conduct that the conspirators are alleged to have agreed upon involved the making of a false record or statement, it must be shown that the conspirators had the purpose of `getting' the false record or statement to bring about the government's payment of a false or fraudulent claim." Allison Engine Co., Inc., 128 S.Ct. at 2130. Moreover, under subsection (a)(3), "it must be established that they agreed that the false record or statement would have a material effect on the Government's decision to pay the false or fraudulent claim." Allison Engine Co., Inc., 128 S.Ct. at 2130-31.