False Claims that Don’t Violate the False Claims Act

The False Claims Act (FCA) establishes heavy liability (treble damages and penalties that can exceed over $20,000 per claim) for any person who knowingly presents a false claim for payment to the government.  It also provides a right of action for any employee fired for trying to stop violations of the act.

So if a university submitted false claims for NIH grants and then fired two researchers for complaining, it would be liable for the false claims and for firing the researchers, right?  Wrong.  What’s more, the question wasn’t even a close one, according to a January 17 opinion by a Kentucky federal court.

The explanation is that only a “person” can violate the FCA.  This university is a “state agency,” and according to a host of federal opinions, a state agency isn’t a “person” under the FCA.

That’s why the qui tam action filed by two former researchers against the University of Louisville and related parties couldn’t survive a motion to dismiss.  The court ruled that the university is a state agency and therefore not a “person” subject to FCA liability.  Therefore, even if the plaintiffs’ allegations were true—something the defendants deny—the allegations failed to state a cause of action for which relief could be granted.   Case dismissed.

The case is U.S. ex rel. Brinkley v. Univ. of Louisville, No. 3:15-cv-180-DJH (W.D.Ky., Jan. 17, 2017).

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