The US Supreme Court’s refusal to tackle whether False Claims Act liability requires a claim to be objectively false leaves a significant circuit split and may drive an uptick in FCA settlements as defendants consider the costs of extended litigation.
For FCA defendants in circuits that have either rejected or have yet to squarely address the objective falsity standard, the continued potential for liability to hinge on differences of opinion will be a prominent factor in how they design their litigation strategy, said Matthew Wright, a partner at McCarter & English LLP. Companies and other defendants could end up settling disputes early and for potentially larger amounts than they would have previously, for the sake of certainty.
“Obviously … individual defendants [decide] how they weigh exposure and risk,” he said. “But the hanging question of whether or not an objectively false statement is a necessary element [of liability], if that’s not resolved cleanly, definitely weights risk, or tilts risk, against the defendant.”
Another important factor in deciding whether to defend or settle an FCA case, particularly with the prospect of a judgment on the merits, is the hefty maximum for potential penalties: triple the government’s damages and more than $23,000 per invoice in civil penalties.
“The consequences that flow from a False Claims Act suit, whether brought by a relator or joined by the government — you’re talking about massive penalties, treble damages, really significant exposures for any federal contractor,” Wright said.