Listen to this post

In a significant and unanimous ruling, the Supreme Court held that reimbursement requests submitted to the E-Rate program qualify as “claims” under the False Claims Act (FCA) if any portion of the funds involved originates from the U.S. Treasury. The decision in Wisconsin Bell, Inc. v. United States ex rel. Heath is poised to have far-reaching implications for entities that receive federal funds through intermediaries, heightening litigation and raising the stakes for FCA compliance.

As reported in our December 2024 edition, the E-Rate program, established to provide internet and phone services to schools and libraries, is administered by a company created by the Federal Communications Commission (FCC) and funded primarily through contributions from private telecommunications companies. The relator, Todd Heath, alleged that Wisconsin Bell violated the FCA by overcharging schools and libraries while falsely certifying compliance with the FCC’s “lowest corresponding price” rule. The issue before the Court was whether reimbursement requests to the E-rate program constitute “claims” under the FCA—a determination that hinged on whether federal funds were involved.

Writing for the unanimous Court, Justice Kagan focused on whether the federal government had “provided any portion of the money” for the E-Rate program, a crucial element under the FCA’s definition of a “claim.” The Court concluded that the FCA’s definition of a “claim” was satisfied because more than $100 million for the E-Rate program came from U.S. Treasury accounts, including delinquent contributions, interest, and penalties collected from carriers by the FCC and Treasury, and civil settlements and restitution payments obtained by DOJ.

“[T]he basic mechanism remains the same. Money enters and then exits the public fisc; the Government collects money and then furnishes it for some use. And so it was here, in the years relevant to Heath’s FCA suit.”

Justice Kagan reinforced that the government’s role as an intermediary does not undermine the FCA’s reach. Drawing from oral argument analogies, she noted that even if a proctor distributes blue books and pencils “provided” by another party, the proctor is still the provider. Justice Kagan, at oral argument, likened it to hiring an Uber driver to deliver chicken soup to a sick friend—the delivery mechanism does not change the fact that the provider facilitated the transaction.

Justice Thomas concurred (joined by Justice Kavanaugh in full and Justice Alito in part), emphasizing two unresolved questions that could further shape the FCA litigation: (1) whether the FCA applies to funds transferred between private parties when federal law mandates the transfer, and (2) whether the FCC-created entity administering the E-Rate program qualifies as an agent of the United States, which could independently trigger FCA liability under a separate definition of “claim.”

Justice Kavanaugh (joined by Justice Thomas) separately concurred to underscore lingering constitutional concerns about the FCA’s qui tam provisions, namely that allowing private individuals to bring FCA actions on behalf of the government may violate Article II of the Constitution, which reserves executive authority (including the power to control litigation) to officers appointed by the President, per the Appointments Clause of Article II.

Takeaways

This decision significantly expands the scope of FCA liability by confirming that reimbursement requests submitted to programs administered by private companies, so long as they involve even trace amounts of federal money, qualify as FCA “claims.”

Industries heavily reliant on public-private funding arrangements, including healthcare and telecommunications, face heightened exposure. For example:

  • Claims submitted to Medicare Advantage plans or state Medicaid programs administered by private insurers could now be subject to FCA liability.
  • FCA defendants may face greater challenges when arguing that claims involving mixed public-private funding sources fall outside the FCA’s scope.
  • The decision, however, does not eliminate potential defenses entirely. Defendants can still challenge liability on causation or materiality grounds—arguing, for example, that any alleged overcharging was not material to the government’s payment decision to the private intermediary or that the claim to the private intermediary did not cause the government to pay out any additional monies.

The Article II constitutional challenge to the FCA’s qui tam provisions remains active. With the Eleventh Circuit set to rule on a district court decision striking down the qui tam provisions and Justices Kavanaugh, Thomas, and Barrett signaling continued interest in the constitutional question, we may see the Supreme Court take up the Article II question in the next couple of years. If the Court ultimately finds the qui tam provisions unconstitutional, it could fundamentally alter the FCA enforcement landscape.

For more information, please contact Chantel Febus, James Azadian, Jonathan Feld, Andrew VanEgmond, Susan G. Feibus, or Monika Harris.