The Supreme Court’s decision in Wisconsin Bell v. United States ex rel. Todd Heath clarifies what constitutes a “claim” under the federal False Claims Act (FCA). At issue in Wisconsin Bell was whether reimbursement requests submitted to the FCC’s “E-Rate Program” are considered “claims” under the FCA. The U.S. Supreme Court agreed that they were, finding that the plaintiff’s liability theory could move forward.

While the issues presented in Wisconsin Bell occurred in the context of the FCC, the implications of the Court’s decision appear to extend far beyond—reaching industries frequently targeted for FCA enforcement, such as health care, aerospace, defense, energy and others involving government contracts (like cybersecurity). As in years past, SCOTUS’s docket and Wisconsin Bell reflects the continued significance of FCA litigation and its importance to the government’s recovery of funds. Therefore, all companies that receive federal funds, particularly in highly regulated industries such as health care, should be interested in understanding this ruling and its impact.

Wisconsin Bell had argued that it could not be exposed to FCA liability because the E-rate program, congressionally mandated to help certain schools and libraries afford internet and telecommunications, is administered by a private nonprofit organization and funded by government-mandated payments from private telecommunications carriers into the Universal Service Fund (USF). But the Court ruled narrowly that, because the U.S. Treasury itself had provided $100 million to the USF, through its collection of delinquent debts to the USF and related penalties and interest, as well as other settlements and criminal restitution payments, the federal government did “provide” a portion of the funds at issue, so the whistleblower’s allegations are thus covered under the FCA.

One thing of interest is seen in the concurrence from Justice Kavanaugh (with Thomas concurring) who renewed their questions about the constitutionality of the FCA’s qui tam provisions (and thereby invited future challenges), writing in Wisconsin Bell that “the [False Claims] Act’s qui tam provisions raise substantial constitutional questions under Article II. … [I]n an appropriate case, the Court should consider the competing arguments on the Article II issue.” Ultimately though, it was a unanimous decision, where the Supreme Court found that that E-Rate reimbursement requests were “claims” under the FCA.

Another interesting aspect is that the Court’s decision was notably narrow, relying on the U.S. Treasury’s supply of a $100 million ancillary sliver of overall USF funding, which totals nearly $10 billion annually. Justice Thomas’s concurrence (with Justice Kavanaugh concurring, and Justice Alito concurring in part) highlights the limits of this approach, observing that, “the Government paid scant attention to the fact that courts historically have not applied the FCA to cover fraud on nongovernment entities unless the Government itself will face a financial loss.” And, the Court’s opinion itself forewarns that issues of, “whether (and, if so, how) the amount of money the Government deposited should limit the damages Heath can recover” are likely to emerge if Heath ultimately prevails.

The narrow holding was necessary because, as the Court explained, larger questions as to the constitutionality of the USF under the nondelegation doctrine are looming in a separate case, Consumers’ Research v FCC, Docket Nos. 24-354, 24-422 (set for oral argument on March 26, 2025). Notably, Justice Thomas’s concurrence sends a warning shot for the Government in that case, questioning the implications of its other two arguments – either that the entire USF constitutes government funds, or that the private, non-profit USF administrator is an agent of the United States – for those constitutional questions, and for compliance with a separate statute, the Government Corporation Control Act. Those answers are likely to affect Heath’s potential for eventual recovery. (The fact that Justice Kavanaugh – seen as a potential swing vote in Consumers’ Research – joined this concurrence may also be an ominous portent for the future of the USF as currently constituted. See our recent Client Alert for more details about the issues presented in the Consumers’ Research case.)

In another recent and important FCA decision, United States v. Regeneron Pharmaceuticals Inc., the First Circuit joined some other courts of appeal in holding that the “but-for” causation standard applies when purported Anti-Kickback Statute (AKS) violations result in FCA violations. This is a commonly used theory because it allows plaintiffs to allege that when a relationship becomes tainted by kickbacks then all reimbursement claims to a federal payor that follow are tainted and fraudulent, triggering FCA liability.

In Regeneron Pharmaceuticals Inc., the First Circuit had to evaluate competing arguments from the government and defendant about whether the 2010 amendments to the AKS effectively changed the proof requirements under this theory. As the court explained,

Regeneron argued that, under the 2010 amendment, the government “b[ore] the burden of proving that an AKS violation ... actually caused [a] physician to provide different medical treatment (and thus caused the false claims).” United States v. Regeneron Pharms., Inc., No. 20-11217, 2023 WL 6296393, at *10 (D. Mass. Sept. 27, 2023). In other words, Regeneron asserted that the phrase “resulting from” in the 2010 amendment imposed a “ ‘but-for’ causation standard.” Id. The government disagreed, and it urged the district court to adopt the Third Circuit’s view that “all that is required to prove a causal link [under the 2010 amendment] is that ‘a particular patient is exposed to an illegal recommendation or referral and a provider submits a claim for reimbursement pertaining to that patient.’ ” Id. (quoting United States ex rel. Greenfield v. Medco Health Sols., Inc.,
880 F.3d 89, 100 (3d Cir. 2018)).

After evaluating various textual arguments asserted by the government, the First Circuit found that was no good reason “to deviate from the default presumption that the phrase ‘resulting from’ as used in the 2010 amendment imposes a but-for causation standard” and that “to demonstrate falsity under the 2010 amendment, the government must show that an illicit kickback was the but-for cause of a submitted claim.”

Since there is a clear circuit court split on this issue, it is ripe for certiorari by the Supreme Court.

Since False Claims Act plaintiffs are motivated by the potential of obtaining significant bounties by suing companies and individuals that do business with government agencies and affiliates, these and other recent decisions underscore the continued importance for companies that receive federal funds to have robust compliance plans and take appropriate steps to avoid becoming embroiled in these bet-the-company cases.