This morning, the Senate Judiciary Committee voted 15-7 to favorably report the False Claims Amendments Act of 2021 to the Senate. The legislation now poised for full Senate consideration has two substantial changes from the amendments introduced by Senator Grassley (R-Iowa) this summer (which we covered in July and August). Gone is the legislation's controversial retroactive application; instead, if passed, the amendments will apply only to "any case . . . that is filed on or after the date of enactment of this act." (emphasis added). Second, as we reported on October 27th, Senator Grassley ditched the proposed legislation's prior "burden shifting" materiality provision for a requirement that defendants prove that no "other reasons exist" for the government's decision "to forego a refund or pay a claim despite actual knowledge of fraud or falsity."
Few senators proffered substantive comments during the hearing, with Senator Grassley's impassioned speech-supported by charts and a FCA treatise-about the history and purpose of the FCA dominating most of the discussion. Senator Grassley decried "healthcare lobbyists" opposed to the pending legislation and dismissed colleagues' concerns that the amendments could have unintended consequences such as increased healthcare costs. Echoing his comments in last week's Judiciary Committee executive meeting, Senator Grassley again emphasized that the amendments are intended to correct the "misinterpretations" of the law "created by the Escobar court." Senator Grassley argued the proposed amendments are "clarifying what should already be common sense . . . the government's continued payment of a claim despite knowledge of fraud is only probative of materiality when no other reasons can be articulated by the government for continued payment." Senator Grassley downplayed the substantive changes that would be made by the amendments, painting the legislation as no more than "tuning up a very well-oiled machine."
Only two of the seven Republicans that voted against reporting the legislation to the Senate spoke during the hearing. Senator Tom Cotton (R-Arkansas) noted his concerns about "unintended consequences" of the legislation's proposed changes. He then introduced an amendment that would strike all provisions except for a requirement that the GAO conduct a study on the effectiveness of the FCA. Senator Cotton's amendment was soundly rejected by the Committee, although Senator Grassley initially voted to support it in a moment of confusion (and providing some rare levity in what is typically one of the Senate's most acrimonious committees).
Senator Thom Tillis (R-North Carolina) offered the most robust opposition, expressing concerns that in its current form, the False Claims Amendments Act of 2021 is a "massive giveaway for the plaintiffs' bar" that will hurt businesses and consumers by encouraging "frivolous litigation" and "fishing expeditions." Senator Tillis was particularly critical of the legislation's proposed cost-shifting provision-echoing our comments that it penalizes defendants for obtaining evidence that they need from the government-and argued that the legislation's increased burden for (c)(2)(a) dismissals of meritless cases "suggests this bill is not about protecting against fraud and abuse, but rather about advantaging plaintiffs' attorneys." He also noted the fundamental unfairness of the amendments' (now-removed) retroactivity and burden shifting provisions.
Senator Tillis then outlined eight "potential amendments" to improve the bill, including:
- Introducing a Brady-esque requirement that would require the government to disclose exculpatory evidence to the defendant;
- Expanding the amendments' proposed discovery cost-shifting provision so that it applied to all parties, in all instances of excessive requests for discovery;
- Rewarding businesses with robust compliance programs by reducing damages (Senator Tillis did not elaborate on how this provision would work); and
- Limiting liability for "generic, catch-all" language on forms unrelated to the payment at issue.
Ultimately, Senator Tillis seemed to recognize that the deck was already stacked against him, and he declined to formally introduce any of his amendments. He stated his disappointment that the amendments were rejected in committee staff discussions, expressing his hope that the bill would improve as it moved forward in the full Senate.
The Committee ultimately voted 15-7 to refer the bill to the Senate (for interested readers, we've provided a vote breakdown at the bottom of this post). Although this Committee vote is a critical step in the process, it seems likely that the legislation will be subject to considerable debate by the full Senate and that the outcome of a final vote on the legislation is far from certain. We will keep you updated.
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