In Wisconsin Bell, Inc. v. United States, ex rel. Todd Heath, another case testing the limits of the False Claims Act (FCA), the question presented is whether requests for money from the FCC’s E-rate program are “claims” under the False Claims Act (FCA).
The E-rate program was created in 1996 to help schools and libraries afford telecommunications services. The E-rate program requires service providers (including Wisconsin Bell) to charge schools and libraries the “lowest corresponding price”—the lowest price a provider charges for similar services to a non-residential customer that is “similarly situated” to the school or library in terms of geography, traffic volume, contract length, and other cost factors. Relator Heath filed a qui tam action in 2008, alleging that Wisconsin Bell violated the FCA by falsely certifying that it was providing telecommunications services at the “lowest corresponding price.”
The district court granted Wisconsin Bell summary judgment. The Seventh Circuit reversed, finding that Heath had identified enough evidence of discriminatory pricing to allow a reasonable jury to find that Wisconsin Bell charged specific schools and libraries more than it charged similarly situated customers. After Wisconsin Bell sought rehearing en banc, the Seventh Circuit concluded that reimbursement requests counted as FCA claims.
A company violates the FCA if it “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” that is material to the government’s decision to use federal funds, and a “claim” is a request made to an agent or contractor of the federal government.
Wisconsin Bell maintained that the FCA does not cover requests from the E-rate program because the money comes from private telecom companies’ contributions to a fund that is not administered by the government. Heath contended that the FCA encompasses requests from the E-Rate program because the telecom companies’ contributions are mandated by the government to be used for a government program controlled by the Universal Service Administrative Company (USAC), which the FCC created and appointed. It was undisputed that the government did collect, bank, and transfer approximately $100 million to the USAC during the relevant period through collecting untimely contributions, civil settlements, or restitution.
Much of the oral argument concerned whether the government “provided” the funds for the E-Rate program, an essential element of an FCA claim. Wisconsin Bell’s position was that the government did not “provide” the funds since they were private funds administered by a private company, so the public fisc was not at risk. Justice Jackson questioned that analysis, pointing out that the public fisc was not at risk whether the telecom companies’ mandatory contributions were paid to the government directly or paid to USAC. Justices Barrett and Jackson also suggested that the FCA’s purpose went beyond protecting the public fisc and included preventing non-monetary effects of fraud. Justice Kagan likewise suggested a broader definition of “provides,” noting that if she ordered chicken soup for a sick friend that an Uber driver delivered, she was the provider. Justices Kavanaugh and Sotomayor suggested that the government may have “provided” the $100 million that it collected versus the fund’s total receipts.
Oral argument also focused on Heath’s potential damages claim, probing whether Heath’s potential damages could be the entire fund, the $100 million that the government collected, or the differential between what Wisconsin Bell sought from USAF and what it should have charged, subject to the FCA’s treble damages clause.
The case was argued on November 4, 2024. A decision is expected by the end of the term. Stay tuned for Dykema’s post discussing the Court’s opinion.
For more information, please contact Chantel Febus, James Azadian, Susan Feibus, or Monika Harris.