Changes to False Claims Act Passes Senate Committee, but Faces Uncertain Pathway to Law
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Changes to False Claims Act Passes Senate Committee, but Faces Uncertain Pathway to Law

Brownstein Client Alert, November 9, 2021

Last July, Sen. Chuck Grassley (R-IA) spearheaded a bipartisan effort to update the government’s most effective tool for combating fraud, the False Claims Act (“FCA”). Prompted by an uptick of fraudulent activity perpetrated on the government during the pandemic, the initial version of the False Claims Amendments Act of 2021 contained aggressive amendments that inured almost exclusively to qui tam relators. Since then, some of the more relator-friendly provisions have been stricken from the bill, but the version debated in last month’s Senate Judiciary Committee markup still proposes meaningful changes to the FCA. The committee cleared the bill with a vote of 15-7, garnering some Republican support after making changes to the initial version of the bill. This article will explore the proposed amendments to the False Claims Act and offer insight into Sen. Grassley’s chances of successfully shepherding this bill into law.


The FCA famously dates back to the Civil War, enacted to combat fraud perpetrated by companies that sold supplies to the Union Army. Fundamentally, the FCA prohibits the submission of claims for payment to federal government programs that are false or fraudulent.

Exemplifying the law of unintended consequences, the court’s ruling in Escobar permitted fraudsters to successfully argue that their actions could not have been material because the government continued to pay them. Recognizing that there may be any number of reasons why the government may continue to pay false claims and that issue is not dispositive of the materiality element, the False Claims Amendments Act of 2021 seeks to blunt the force of the Supreme Court’s holding in Escobar by modifying the FCA’s materiality element.

Senate Judiciary Committee

On Thursday, Oct. 28, the Senate Judiciary Committee favorably reported the False Claims Act Amendments Act of 2021 out of the committee. The bill that passed through committee was significantly watered down from its original version in July 2021, incorporating changes on the materiality definition, discovery cost-shifting and retroactivity. These changes were made at the request of senior Republicans on the committee, including Sen. Cornyn of Texas, after weeks of discussions.

Sen. Grassley, the bill’s sponsor and the top-ranking Republican on the committee, argued that the court misinterpreted Congress’ intent in the Escobar decision and that this bill would bring the law back in line with its intent. The original version would have introduced a second and different burden of proof for just the intent element of an FCA claim. While the government and relators must prove the materiality element of an FCA claim by a preponderance of the evidence, the proposed amendment would have required defendants to “rebut an argument of materiality … by clear and convincing evidence.” See section 2(a) of False Claims Amendments Act of 2021. This proposal contradicted the very nature of a burden of proof—which is to set forth the single standard by which the plaintiff is required to prove its claim. It is black-letter law that the burden of proof always lies with the party taking the affirmative position in the pleading. See Burden of Proof, Black’s Law Dictionary (2nd ed. 2002). This section of the bill was removed due to concerns about the practicality of implementing this new standard and concerns that a defendant could lose a case if it fails to rebut materiality by clear and convincing evidence irrespective of whether the plaintiff first satisfies its burden of proof by a preponderance of the evidence.

Instead of the problematic proposal to shift the burden of proof, the bill specifically addresses the Escobar decision, stating that the government’s decision to forego a refund or pay a claim despite actual knowledge of fraud is not dispositive if other reasons exist for the government’s decision. In other words, it specifically rebuts the notion that the government’s payment of a claim, despite knowledge of violation of certain requirements, is evidence that the requirements are not “material.” Opponents have raised concerns that this language flouts the Supreme Court decision and, if enacted, would make it more difficult to dismiss meritless FCA cases because these changes would undermine the more stringent process set forth in Escobar.

Due to concerns from committee members, the revised bill also removes the discovery cost provisions in the original bill, which would have shifted the cost of discovery to the government in instances where the information the relator sought is “relevant, proportionate to the needs of the case, and not unduly burdensome on the Government.” The original bill also would have applied to FCA cases that were “pending” as of the date of enactment; this provision was also removed due to concerns about the fairness of changing FCA standards as a case is pending.

As noted previously, the federal government can intervene in a whistleblower’s FCA case or decline to do so, in which case the whistleblowers can generally still proceed at their own expense. The DOJ also has the authority to dismiss meritless or frivolous cases. The revised bill would require the DOJ to identify a valid government purpose and rational relation between dismissal and accomplishment of the purpose. Afterwards, the person initiating the action would have the burden of demonstrating that the dismissal is fraudulent, arbitrary and capricious, or illegal. Sen. Thom Tillis (R-SC) expressed concerns that this provision will lead to disputes regarding what are the valid reasons for the DOJ to decline a case and the potential erosion of the DOJ’s enforcement discretion.

Sens. Tom Cotton (R-AR) and Tillis raised concerns that the bill would encourage frivolous litigation, drive up health care costs and lead well-meaning doctors who make immaterial, unintentional mistakes to financial ruin. Sen. Cotton said the court made the right decision in the Escobar case, and that there are some instances where the government’s continued payment should be considered as dispositive that the requirements are not material. Sen. Cotton offered an amendment to strike everything in the bill, except for a Government Accountability Office study, which was defeated.


With clearance through the Senate Judiciary Committee, the bill has cleared one major hurdle to overall passage. Senate stalwarts Dick Durbin (D-IL) and Grassley will diligently press Democratic and Republican leadership to bring the bill to a vote on the Senate floor, though it is unlikely Senate Majority Leader Chuck Schumer (D-NY) will do so without a guarantee that it will garner the 60 votes needed to pass. In the coming weeks, the bill’s sponsors will work to persuade Democrats and Republicans to support the bill to meet that 60-vote threshold. In the lower chamber, the House Judiciary Committee has yet to consider similar legislation, indicating that the House is further behind in its process. It is expected that most Republicans will continue to raise concerns about the legislation, even after the newest changes, and supporters of the bill will depend on heavy Democratic support to be successful.

While the False Claims Amendments Act of 2021 attempts to strengthen the government’s ability to fight fraud and waste in health care, if passed, health care companies defending FCA cases will find them even more complex and expensive than they already are. Irrespective of whether this bill passes, health care fraud enforcement remains a top priority for the DOJ. As a result, health care companies are well advised to take this opportunity to update their policies and procedures; ensure that they have adequate fraud, waste and abuse reporting hotlines in place; provide mandatory refresher training to relevant staff; and enhance audit functions to address potential inadvertent fraudulent activity before such actions turn into a whistleblower scenario.

This document is intended to provide you with general information regarding The False Claims Amendments Act of 2021. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions.

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