United States v. Allison Engine 471 F.3d 610 (2006)
General Motors subcontracted
to Allison Engine to make parts for Navy ships. Allison then
subcontracted to General Tool who subcontracted to Ohio Fabricators.
The parts made by Ohio
Fabricators to be did not meet the required specs, but Ohio delivered
Some of General Tool's
employees filed a qui tam action
under the False Claim Act (31 U.S.C. §3729(a)) for damages.
The False Claims Act says that if someone blows the whistle on
fraud committed against the government, they can recover 3x the cost of
the goods from the company.
It requires that the
company, "§(a)(1) knowingly
presents, or causes to be presented, to an officer or
employee of the US Government a false or fraudulent claim for payment or
§(a)(2) Knowingly makes, uses, or causes to be made
or used, a false record or statement to get a false or fraudulent claim
paid or approved by the Government, or
§(a)(3) Conspires to defraud the Government by
getting a false or fraudulent claim allowed or paid.
The Trial Court granted a
judgment as a matter of law and dismissed the case. The General Tool
The Trial Court found that there
was no evidence that the subcontractors or the shipyards ever presented any false or fraudulent claim directly to the
United States or the Navy for payment.
The Navy paid General
Motors a lump sum upfront for the ships, and General Motors paid various
subcontractors, who paid various subcontractors. It was impossible to
directly link the bad parts made by General Tool with an invoice payable
by the Navy.
The Appellate Court reversed.
Alison Engine appealed.
The Appellate Court found
that while a claim must be presented
to have a claim on §(a)(1), there was no presentment
requirement to have a claim under §(a)(2) or §(a)(3).
The Court found that there
was meaningful variation between
the §(a)(1) (which requires the claim to be presented),
and the other subsections, which do not have such a requirement.
The Court looked to the legislative
history, which said that Congress
was explicitly trying to overturn the restrictive interpretation that
prior courts had given the Statute.
The Court looked to the rule
against surplusage and found that if
you put the presentment clause from the §(a)(1) into the §(a)(2), they would be pretty much the same. That
would make the §(a)(2) extraneous,
so Congress probably didn't mean to imply §(a)(2) required presentment.
The Court noted that
remedial Statutes should be interpreted broadly.
In a dissent, it was argued
that in order to have a claim under the False Claims Act the Federal government must pay
the company for the work. In this case, there was no evidence that the
Navy received the defective parts, so there is no violation.
In addition, the dissent
argued that there is an absurd result.
It makes anyone receiving government funds implicitly liable for a
Btw, this case was scheduled
to be heard by the US Supreme Court, after the semester ended, so this is
not a final decision.