In May, Jones Day distributed a Commentary titled "Georgia's New False Claims Act: It's Not Just For Health Care Anymore," describing a sweeping new Georgia statute: the Georgia Taxpayer Protection False Claims Act (the "Georgia FCA"). That statute went into effect on July 1, and it exposes almost every sector of commerce in Georgia to potential liability.
The Georgia FCA empowers the state and qui tam relators (whistleblowers) to pursue causes of action against businesses that present false claims to not only the state but also its political subdivisions, such as community health centers, schools, transportation and housing authorities, and MARTA. Moreover, the Georgia FCA applies to false claims made to recipients of government funds if those funds are used in part to pay such claims.
The Georgia FCA affects activity beyond the obvious submission of overstated bills by government contractors. Indeed, Georgia FCA liability may extend to:
- Withholding of overpayments, rebates, royalties, or commissions;
- Repeat billing for payments already made;
- Presenting claims for payment when the contractor is otherwise in breach of contract;
- "Reverse false claims," i.e., submitting a false document or statement to avoid paying an obligation to the government;
- Delivering nonconforming goods or services;
- Overstating qualifications in order to obtain a contract; and
- Submitting a false invoice for payment to a government contractor or other entity that has received government funds.
Most significantly, the Georgia FCA generally does not require that the business submitting the erroneous claim have any specific intent to defraud the government.
Given case law in other jurisdictions with false claims acts, we expect to see litigation in Georgia involving activities not commonly thought of in the context of false claims. The following are examples of how wide-ranging liability for false claims can be:
- An appeals court allowed a complaint against a school bus company to proceed where the alleged false claim was that the school bus company requested payment under its contract with the school district when the bus company was otherwise in breach of certain safety and pollution control requirements of the contract. San Francisco Unified School District ex rel. Contreras v. Laidlaw Transit, Inc., 182 Cal. App. 4th 438, 442, 106 Cal. Rptr. 3d 84, 87 (Ct. App. 2010) (noting that "a vendor impliedly certifies compliance with its express contractual requirements when it bills a public agency for providing goods or services").
- A business that overstated its qualifications to engage in a particular project had to refund three times the entire amount it received under the contract even though the project was successfully completed and the statements in the invoices were true. United States ex rel. Longhi v. United States, 575 F.3d 458 (5th Cir. 2009).
- A claim against a landscaping company for underperformance of services allowed to go forward even though the landscaping company's contract was with a private real estate firm, but the real estate firm had a government tenant. United States ex rel. Elliott v. Brickman Group Ltd., No. 1:10-cv-392, 2012 BL 9129 (S.D. Ohio Jan. 12, 2012).
Damages under the Georgia FCA can be staggering. Businesses may be held liable for three times the amount of actual damages, as well as civil penalties ranging from $5,500 to $11,000 for each erroneous claim. For example, if a single invoice included a $100 per unit overcharge for 100 units of product, the total amount overbilled would be only $10,000, and the business would face "treble" damages of only $30,000. Because each overbilling is considered a separate claim, however, civil penalties for the single invoice could range from $550,000 to $1.1 million.
The statute contains a "safe harbor" provision encouraging businesses to self-report erroneous claims within 30 days of discovering the error (and before the commencement of a government investigation). The "safe harbor" provision does not protect a business from being subject to a lawsuit under the Georgia FCA, however. Rather, it merely limits the damages to no more than double actual damages. Self-reporting may also stifle a whistleblower/qui tam action.
In light of this new statute, businesses operating in Georgia should develop or strengthen internal controls to ensure that contracting practices, pricing, payment, delivery, and performance do not run afoul of the Georgia FCA. Given the staggering penalties and damages that are available under the Georgia FCA, businesses should tread carefully and, when in doubt, seek legal advice.
Jones Day will continue to monitor these developments.
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