On February 21, 2025, the Supreme Court issued a unanimous ruling in Wisconsin Bell, Inc. v. United States ex rel. Heath, upholding the Seventh Circuit's holding that Wisconsin Bell could be sued under the False Claims Act (FCA) for allegedly causing fraudulent charges to be submitted to the Federal Communication Commission's (FCC) E-Rate program, which is privately administered and almost entirely privately funded. In doing so, the Supreme Court clarified what constitutes a "claim" under the FCA, while leaving significant unanswered questions about the scope of potential liability for private parties that participate in programs with government involvement. 

The FCA provides for civil liability for any person who knowingly presents a false or fraudulent claim to the government. 31 U.S.C. §§ 3729-3733. To qualify as a claim, a request for money must be made to a federal officer, employee, or agent, §3729(b)(2)(A)(i), or the plaintiff must show that one of two defined exceptions applies. Id. The first such exception, at issue in Heath, is when the government "provides or has provided any portion of the money... requested." §3729(b)(2)(A)(ii)(I).

Relator Todd Heath claimed that the defendant, an AT&T subsidiary, overcharged schools and libraries for services provided under the E-Rate connectivity fund, which is funded by government-mandated fees on telecom services and administered by a private entity, Universal Service Administrative Co. (USAC). In district court, and again on Heath's appeal of summary judgment, Wisconsin Bell argued that it had not caused "claims" to be submitted to the government under the FCA because the USAC-administered funds were typically provided and administered by private parties rather than the federal government. 

Heath and the government made three primary arguments: 

1. Because approximately $100 million of fund financing had come from the government through its power to collect delinquent debts and to obtain penalties against those who fail to pay into the fund, the funds as a whole were "provided" by the government.
2. The government's role in establishing and overseeing the fund meant that it effectively "provided" all the money to the fund. 
3. The private entity serving as fund administrator was acting as an "agent of the United States," and therefore any requests for payment from the fund fell within the statutory definition of a claim. 

All three arguments were accepted by the Seventh Circuit. See United States ex rel. Heath v. Wisconsin Bell, Inc., 92 F.4th 654, 669 (7th Cir 2024).

In her opinion for the Court, Justice Elena Kagan accepted the narrowest of these three arguments, finding that the government's limited provision of a portion of the money into the fund was sufficient to qualify claims against the fund for scrutiny under the FCA. She rejected Wisconsin Bell's argument that the government had only played an "intermediary role" in collecting and holding funds from carriers, explaining that even "a simple material can sometimes also 'provide' things to a recipient," and that the government's collection of funds qualified here. The opinion explained:

Those transfers, indeed, look like most Government spending—neither more nor less private, neither more nor less public. Money usually comes to the Government from private parties—through taxes, fines, or fees of all kinds. And then money usually goes out to the broader community, to fund any number of programs and activities. Between the time money comes in and the time money goes out, it sits—as the $100 million here did—in Treasury accounts. In this broad array of schemes, the funding received may be more or less earmarked, and it may be disbursed more or less quickly. But the 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.

Op. at 12-13. 

However, as Justice Clarence Thomas pointed out in his concurrence, the majority did not rule on the government's other two arguments, leaving undecided whether an FCA claim could arise from funds provided and administered wholly by private parties at the direction of the government. As Justice Thomas explained, the government's arguments would potentially extend the FCA to "a wide range of matters until now understood to be outside the scope of the statute," including child support payments, civil judgments, or even claims to private insurers by individuals mandated to purchase insurance under the Affordable Care Act (ACA). Concurrence at 8-9. The Supreme Court's decision did not address these possibilities. 

Finally, in an additional six sentence concurrence, Justice Thomas and Justice Brett Kavanaugh asserted again that the qui tam provisions of the FCA "raise substantial constitutional questions under Article II." As we reported previously, several courts have taken the justices' invitation to rule the qui tam provisions unconstitutional and more cases are likely. In her Senate confirmation hearing, Attorney General Pam Bondi said that the Department of Justice (DOJ) will continue to defend the constitutionality of those provisions. 

For more information, please contact:

Alex L. Sarria, asarria@milchev.com.com, 202-626-5822

Jason N. Workmaster, jworkmaster@milchev.com, 202-626-5893

Bradley E. Markano, bmarkano@milchev.com, 202-626-6061

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