Allison Engine Co. v. United States ex rel. Sanders

• Decision Date: 09 June 2008
• Docket Number: No. 07–214.,07–214.
• Citation: 37 A.L.R. Fed. 2d 773,2008 Daily Journal D.A.R. 8335,553 U.S. 662,170 L.Ed.2d 1030,128 S.Ct. 2123,76 USLW 4367,21 Fla. L. Weekly Fed. S 300,08 Cal. Daily Op. Serv. 6919
• Parties: ALLISON ENGINE CO., INC., et al., Petitioners, v. UNITED STATES ex rel. Roger L. SANDERS and Roger L. Thacker.
• Court: U.S. Supreme Court

08 Cal. Daily Op. Serv. 6919

128 S.Ct. 2123

170 L.Ed.2d 1030

2008 Daily Journal D.A.R. 8335

21 Fla. L. Weekly Fed. S 300

37 A.L.R. Fed. 2d 773

553 U.S. 662

76 USLW 4367

ALLISON ENGINE CO., INC., et al., Petitioners,

v.UNITED STATES ex rel. Roger L. SANDERS and Roger L. Thacker.

No. 07–214.

Supreme Court of the United States

Argued Feb. 26, 2008.Decided June 9, 2008.

Syllabus^*

The Navy contracted with two shipyards to build destroyers, each of which needed generator sets (Gen–Sets) for electrical power. The shipyards subcontracted with petitioner Allison Engine Company, Inc. (Allison Engine), to build Gen–Sets, Allison Engine subcontracted with petitioner General Tool Company (GTC) to assemble them, and GTC subcontracted with petitioner Southern Ohio Fabricators, Inc. (SOFCO), to manufacture Gen–Set bases and enclosures. The subcontracts required that each Gen–Set be accompanied by a certificate of conformance (COC) certifying that the unit was manufactured according to Navy specifications. All of the funds paid under the contracts ultimately came from the U.S. Treasury.

Former GTC employees Sanders and Thacker (hereinafter respondents) brought this qui tam suit seeking to recover damages from petitioners under the False Claims Act (FCA), which, inter alia, imposes civil liability on any person who knowingly uses a “false ... statement to get a false or fraudulent claim paid or approved by the Government,” 31 U.S.C. § 3729(a)(2), or who “conspires to defraud the Government by getting a false or fraudulent claim allowed or paid,” § 3729(a)(3). At trial, respondents introduced evidence that petitioners had issued COCs falsely stating that their work was completed in compliance with Navy specifications and that they had presented invoices for payment to the shipyards. They did not, however, introduce the invoices the shipyards submitted to the Navy. The District Court granted petitioners judgment as a matter of law, concluding that, absent proof that false claims were presented to the Government, respondents' evidence was legally insufficient under the FCA. The Sixth Circuit reversed in relevant part, holding, among other things, that respondents' §§ 3729(a)(2) and (3) claims did not require proof of an intent to cause a false claim to be paid by the Government; proof of an intent to cause such a claim to be paid by a private entity using Government funds was sufficient.

Held:

1. It is insufficient for a plaintiff asserting a § 3729(a)(2) claim to show merely that the false statement's use resulted in payment or approval of the claim or that Government money was used to pay the false or fraudulent claim. Instead, such a plaintiff must prove that the defendant intended that the false statement be material to the Government's decision to pay or approve the false claim. Pp. 2128 – 2130.

(a) The Sixth Circuit's interpretation of § 3729(a)(2) impermissibly deviates from the statute's language, which requires the defendant to make a false statement “to get” a false or fraudulent claim “paid or approved by the Government.” Because “to get” denotes purpose, a person must have the purpose of getting a false or fraudulent claim “paid or approved by the Government” in order to be liable. Moreover, getting such a claim “paid ... by the Government” is not the same as getting it paid using “government funds.” Under § 3729(a)(2), a defendant must intend that the Government itself pay the claim. Eliminating this element of intent would expand the FCA well beyond its intended role of combating “fraud against the Government.” Rainwater v. United States, 356 U.S. 590, 592, 78 S.Ct. 946, 2 L.Ed.2d 996. Pp. 2128 – 2129.

(b) The Government's contention that “paid ... by the Government” does not mean literal Government payment is unpersuasive. The assertion that it is customary to say that the Government pays a bill when a recipient of Government funds uses those funds to pay involves a colloquial usage of the phrase “paid by” that is not customarily employed in statutory drafting, where precision is important and expected. Section 3729(c)'s definition of “claim” does not support the Government's argument. The definition allows a request to be a “claim” even if it is not made directly to the Government, but, under § 3729(a)(2), it is necessary that the defendant intend that a claim be “paid ... by the Government,” not by another entity. Pp. 2128 – 2129.

(c) This does not mean, however, that § 3729(a)(2) requires proof that a defendant's false statement was submitted to the Government. Because the section requires only that the defendant make the false statement for the purpose of getting “a false or fraudulent claim paid or approved by the Government,” a subcontractor violates § 3729(a)(2) if it submits a false statement to the prime contractor intending that contractor to use the statement to get the Government to pay its claim. However, if a subcontractor makes a false statement to a private entity but does not intend that the Government rely on the statement as a condition of payment, the direct link between the statement and the Government's decision to pay or approve a false claim is too attenuated to establish liability. The Court's reading gives effect to Congress' efforts to protect the Government from loss due to fraud but also ensures that “a defendant is not answerable for anything beyond the natural, ordinary and reasonable consequences of his conduct.” Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 470, 126 S.Ct. 1991, 164 L.Ed.2d 720. Pp. 2129 – 2131.

2. Similarly, it is not enough under § 3729(a)(3) for a plaintiff to show that the alleged conspirators agreed upon a fraud scheme that had the effect of causing a private entity to make payments using money obtained from the Government. Instead, it must be shown that they intended “to defraud the Government.” Where their alleged conduct involved the making of a false statement, it need not be shown that they intended the statement to be presented directly to the Government, but it must be established that they agreed that the statement would have a material effect on the Government's decision to pay the false or fraudulent claim. Pp. 2129 – 2131.

471 F.3d 610, vacated and remanded.

ALITO, J., delivered the opinion for a unanimous Court.

Theodore B. Olson, Washington, D.C., for Petitioners.

Malcolm L. Stewart, Washington, D.C., for the United States as amicus curiae, by special leave of the Court.

Glenn V. Whitaker, Victor A. Walton, Jr., Michael J. Bronson, Patrick M. Hagan, Vorys, Sater, Seymour & Pease LLP, Cincinnati, OH, Theodore B. Olson, Counsel of Record, Raymond B. Ludwiszewski, Matthew D. McGill, Amir C. Tayrani, Gibson, Dunn & Crutcher LLP, Washington, D.C., Lawrence R. Elleman, Dinsmore & Shohl, L.L.P., Cincinnati, OH, William A. Posey, W. Jeffrey Sefton, Keating, Muething & Klekamp, PLL, Cincinnati, OH, James J. Gallagher, Susan A. Mitchell, McKenna Long & Aldridge, L.L.P., Los Angeles, CA, David P. Kamp, White Getgey & Meyer, Cincinnati, OH, for Petitioners.Scott A. Powell, Don McKenna, Hare, Wynn, Newell & Newton, North Birmingham, AL, James B. Helmer, Jr., Counsel of Record, Paul B. Martins, Robert M. Rice, Helmer, Martins, Rice & Popham Co., L.P.A., Cincinnati, OH, for Respondents.Justice ALITO delivered the opinion of the Court.

The False Claims Act (FCA) imposes civil liability on any person who knowingly uses a “false record or statement to get a false or fraudulent claim paid or approved by the Government,” 31 U.S.C. § 3729(a) (2), and any person who “conspires to defraud the Government by getting a false or fraudulent claim allowed or paid,” § 3729(a)(3). We granted review in this case to decide what a plaintiff asserting a claim under these provisions must show regarding the relationship between the making of a “false record or statement” and the payment or approval of “a false or fraudulent claim ... by the Government.”

Contrary to the decision of the Court of Appeals below, we hold that it is insufficient for a plaintiff asserting a § 3729(a)(2) claim to show merely that “[t]he false statement's use ... result[ed] in obtaining or getting payment or approval of the claim,” 471 F.3d 610, 621 (C.A.6 2006), or that “government money was used to pay the false or fraudulent claim,” id., at 622. Instead, a plaintiff asserting a § 3729(a)(2) claim must prove that the defendant intended that the false record or statement be material to the Government's decision to pay or approve the false claim. Similarly, a plaintiff asserting a claim under § 3729(a)(3) must show that the conspirators agreed to make use of the false record or statement to achieve this end.

I

In 1985, the United States Navy entered into contracts with two shipbuilders, Bath Iron Works and Ingalls Shipbuilding (together the shipyards), to build a new fleet of Arleigh Burke class guided missile destroyers. Each destroyer required three generator sets (Gen–Sets) to supply all of the electrical power for the ship. The shipyards subcontracted with petitioner Allison Engine Company, Inc. (Allison Engine), formerly a division of General Motors, to build 90 Gen–Sets to be used in over 50 destroyers. Allison Engine in turn subcontracted with petitioner General Tool Company (GTC) to assemble the Gen–Sets, and GTC subcontracted with petitioner Southern Ohio Fabricators, Inc. (SOFCO), to manufacture bases and enclosures for the Gen–Sets. The Navy paid the shipyards an aggregate total of $1 billion for each new destroyer. Of that, Allison Engine was paid approximately $3 million per Gen–Set; GTC was paid approximately $800,000 per Gen–Set; and SOFCO was paid over $100,000 per Gen–Set. All of the funds used to pay petitioners ultimately came from the Federal Treasury.

The Navy's contract with the shipyards specified that every part of each destroyer be built in accordance with the Navy's baseline drawings and military standards. These requirements were incorporated into each of petiti...