Winners and Losers After Supreme Court's Decision in 'Allison Engine'

On June 9 the United States Supreme Court dealt a blow to the U.S. government, and those suing on its behalf, in Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. ___ (June 9, 2008), a case under the False Claims Act. The Court rejected an expansive interpretation of the statute that would have extended liability to almost any company in any industry. But the decision was not a complete victory for business. For the first time, the Supreme Court held that the FCA applies to subcontractors on government projects, a group that until now had escaped liability.

The FCA was enacted to combat fraud against the federal government. Until recently, relators — whistleblowers suing on behalf of the government — usually sued under subsection (1) of the statute, which imposes liability on any person who knowingly “presents, or causes to be presented” a false or fraudulent claim to the United States. But in recent years, many relators have attempted to broaden the reach of the act by bringing their claims under subsection (2), which imposes 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.”