In Wisconsin Bell, Inc. v. United States ex rel. Heath, the Supreme Court clarified the definition of “claim” under the FCA. The case resolves a split between the Fifth and Seventh Circuits on whether a request for reimbursement under the E-Rate subsidies program meets the statutory definition of a “claim.”

The Court answered that question “yes” on the narrow ground that because the government directly contributed some funds to the program, a request to the program is a “claim” within the meaning of the FCA—which says that a request for money qualifies as a claim if the government “provides or has provided any portion of the money . . . requested.” §3729(b)(2)(A)(ii)(I). “Follow the money,” Justice Kagan said in her unanimous opinion.

E-Rate Program Background

The case centered around allegations that Wisconsin Bell had defrauded the E-Rate program by overcharging schools for internet and telecommunications services. The E-Rate program, a federal program established under the Telecommunications Act of 1996, subsidizes internet and telecommunications services for schools and libraries across the United States.

The program is funded by private telecommunications carriers, who are required to contribute to a Universal Service Fund. The Universal Service Administrative Company, a private not-for-profit corporation, administers the fund and distributes the money to beneficiaries under regulations prescribed by the FCC.

Relator Alleges Claims Submitted to E-Rate Program Are Sufficient Under the FCA

Relator Todd Heath, an auditor of telecommunications bills, believed that Wisconsin Bell had defrauded the E-Rate program by overcharging schools for services. He sued Wisconsin Bell under the FCA, arguing that the company’s overcharges led to inflated reimbursement requests, which qualify as “claims” under the FCA.

Wisconsin Bell moved to dismiss Heath’s suit, arguing that an E-Rate reimbursement request cannot qualify as a “claim” under the FCA because the money comes from private carriers, not the government. The district court and Seventh Circuit rejected that argument, and the Supreme Court agreed to hear the case.

The Supreme Court Clarifies the Definition of a Claim in Co-Funded Programs

The Supreme Court held that an E-Rate reimbursement request can qualify as a “claim” under the FCA. Under the statute, first, the money requested must be “spent or used on the Government’s behalf or to advance a Government program or interest.” §3729(b)(2)(A)(ii). And second, the government must “provide[] or ha[ve] provided any portion of the money” requested. §3729(b)(2)(A)(ii)(I).

The parties agreed that the program satisfied the first part of the definition. On the second, the Court reasoned that the FCA’s definition of “claim” includes requests for money where the government provided (at a minimum) a portion of the money applied for. In this case, the Court found that the government had transferred more than $100 million from the Treasury into the pool of funds used to pay E-Rate subsidies.

That these sums were largely collected from delinquent contributors or civil judgments did not make the funds any less “monies received by the United States.” For those funds collected, the government “was not a passive throughway,” but rather, the government used its power to extract money from private carriers and prosecuted wrongdoing to obtain settlements and restitution awards to add to the fund. The Court concluded that “[w]ithout the agencies’ dunning,” the money the government collected would have come later “or might never have arrived.” The fact that the E-Rate program is also funded by private carriers does not prevent reimbursement requests under the program from qualifying as “claims” under the FCA.

Thomas and Kavanaugh Opine on the Purported Reach of the FCA

Justice Thomas filed a concurring opinion, suggesting that if the Court were to adopt the government’s broader theory that the FCA applies because the government requires private parties to fund the E-Rate program, the FCA could be expanded to include payments between private parties—and a parade of horribles would follow.

Justice Thomas posited that if the FCA is held to reach private funds merely regulated by the government, the FCA would seem to reach a wide range of conduct, including false or fraudulent claims of child support payments, the enforcement of civil judgments, or fraudulent claims to private health insurance companies for policies purchased due to the individual mandate of the ACA. Justice Kavanaugh, joined by Justice Thomas, also filed a concurrence in which he again questioned whether the qui tam provisions are constitutional under Article II.

Impact of the Decision

The Supreme Court’s decision in Wisconsin Bell is a victory for the government and relators. The decision clarifies the definition of “claim” under the FCA and makes it easier for the government and relators to pursue funds that were fraudulently paid through co-funded government programs.

While the decision may serve as an expansion of the types of claims that might result in violations of the FCA, the decision rests substantially on the specific facts of the E-Rates program and does not address open questions about whether the FCA could reach privately managed funds otherwise controlled or regulated by the government.

For more information about the False Claims Act, please contact the author or subscribe to this blog. Please also be on the lookout for our forthcoming Healthcare Fraud & Abuse Annual Review, a comprehensive overview of last year’s key developments in healthcare fraud compliance and enforcement.