FERA’s “Nexus Requirement”

avatar
  • LinkedIn

The District of Colorado recently addressed the 2009 Fraud Enforcement Recovery Act’s (FERA) amendments extending liability to false claims made to grantees or contractors receiving federal funds in its ruling in Todd v. Fidelity National Financial, Inc., No. 12-cv-00666 (D. Colo. Aug. 19, 2014). As the court explained,

Under the 2009 amendments, “claim” is defined as “any request or demand” that is “presented to an officer, employee, or agent of the United States,” or “is made to a contractor, grantee, or other recipient if the money is spent or used on the Government’s behalf or to advance a Government program or interest,” and if the government “provides or has provided any portion of the money requests,” or “will reimburse such contractor, grantee, or other recipient” for “any portion of the money” that is requested or demanded.” 31 U.S.C. § 3729(b)(2)(A)(i)-(ii).

But just because an entity receives money from the government does not necessarily mean that every false claim to the entity will result in liability under the False Claims Act. The court determined that the new definition under FERA has a “nexus requirement”–False Claims Act liability attaches only when the false claim to the grantee/contractor has a nexus to the federal funds it receives. (citing Garg v. Covanta Holding Corp., 478 Fed. Appx. 736 (3d Cir. 2012); Lyttle v. AT&T Corp., No. 2:10-1376, 2012 WL 6738242 (W.D. Pa. Nov. 15, 2012).) The language and purpose of the statute, of course, support such an interpretation.

In Todd, the district court determined that the alleged false claims–deficient title insurance policies–did not have a sufficient nexus to the government bailout funds received by Freddie Mac. (The court alternatively determined that the defendant never submitted any false claims in the first place because the title insurance policies were not legally defective.)