Sen. Chuck Grassley (R-Iowa) recently criticized “activist judges” for rewriting the text of the False Claims Act to achieve their own policy goals, revealing plans to reintroduce legislation that would correct “unduly restrictive” interpretations of the statute and expand liability for defendants.
Grassley — who delivered his remarks in a pre-recorded keynote speech at the Federal Bar Association’s annual Qui Tam Conference last week — took particular issue with two recent decisions from the Seventh Circuit that address what level of intent is needed to satisfy the FCA. These decisions state that defendants do not violate the FCA if they made “objectively reasonable” interpretations of otherwise ambiguous policies. According to Grassley, this decision is the “perfect example of activist judges performing mental gymnastics” to get the results they want.
“Such an absurd reading is a complete departure from both the text of the False Claims Act and over a hundred years of common-law fraud precedent,” he said. “It also ignores the importance of subjective intent, which every first-year law student is taught.”
Although Grassley remains hopeful the United States Supreme Court will “set the record straight” when it considers these cases later this year, he indicated a willingness to address the scienter standard via statute if the Supreme Court ultimately upholds the Seventh Circuit’s objective reasonableness standard.
Grassley is no stranger to introducing legislation that would sharpen the FCA’s bite. He introduced the False Claims Amendments Act in 2021, but he failed to get the bill to the Senate floor for a vote. This bill sought to clarify “confusion and misinterpretation” caused by the Supreme Court’s landmark decision in Universal Health Services v. United States ex rel. Escobar, which held that actionable false claims must have been “material” to the government’s decision to pay the claims. Grassley now intends to reintroduce this bill in the current Congressional session, and he is seeking legislative input from all stakeholders affected by the FCA, including whistleblowers.
“Don’t be bashful,” Grassley said. “Without you whistleblowers, the False Claims Act simply would not work.”
Grassley, known as the father of the modern-day False Claims Act, is perhaps the most notable leader behind the 1986 amendments to the statute, which allowed the government to seek treble damages and strengthened incentives for whistleblowers to file FCA claims. Since these amendments, more than $72 billion has been collected under the FCA, Grassley said.
“The penalties of the False Claims Act serve to deter fraud, and there is not one person who can say with a straight face that it hasn’t worked to deter fraud.”