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In Wisconsin Bell, Inc. v. United States, ex rel. Heath (No. 23-1127), the Supreme Court addressed whether the Government “provide[s]” money to a program that subsidizes telecommunications services for schools and libraries through a surcharge imposed on telecom carriers, meaning that a telecom company’s allegedly inflated claim for these subsidies is potentially subject to liability under the False Claims Act (“FCA”). Writing for a unanimous Court, Justice Kagan concluded that the particular program at issue in the case fell within the scope of the FCA because some of the funds used for the program came from settlements and restitution payments collected by the Government. But as several Justices emphasized, the Court’s reasoning was so narrow that the decision may not provide much guidance in future cases involving other programs not quite as directly funded by the Government.    

As part of the Telecommunications Act of 1996, Congress created the Education-Rate program (“E-Rate,” for short) to subsidize telecommunications and information services such as internet access for schools and libraries. To finance the program, federal law requires telecom carriers to pay a percentage of their revenues into a fund administered by the Universal Service Administrative Company, a private not-for-profit corporation appointed by the FCC. The Administrative Company is responsible for making distributions from the fund to subsidize a share of the services purchased by beneficiaries, either by reimbursing the beneficiary directly or by making up the difference to the carrier after the beneficiary pays a discounted price. Carriers are required to charge program beneficiaries a pre-discount sticker price that is the same as “similarly situated” customers. 

Auditor Todd Heath believed that carrier Wisconsin Bell had been defrauding the E-Rate program out of millions of dollars by charging schools more for telecom services than it charged similarly situated customers, which led to it receiving bigger subsidies from the Administrative Company than it should have received. Heath brought a qui tam lawsuit against Wisconsin Bell under the FCA. Wisconsin Bell moved to dismiss, arguing that the FCA did not apply to Heath’s claims because the Government had not “provided any portion of the money” paid to carriers, which the FCA requires in cases where the allegedly fraudulent “claim” is submitted to someone other than a federal agent or employee. The District Court rejected that argument, but it granted summary judgment to Wisconsin Bell on other grounds. But on appeal, the Seventh Circuit reversed the grant of summary judgment, in the process again rejecting Wisconsin Bell’s argument that the FCA did not apply. The Court granted cert to decide whether reimbursement requests submitted to the E-rate program are actionable “claims” under the FCA.  

In a unanimous decision by Justice Kagan, the Supreme Court rejected Wisconsin Bell’s argument, sending the case back to the District Court for trial. Kagan focused on the narrow issue of whether the Government had “provided any portion of the money” for the E-Rate program. (The Court did not consider the thornier question of whether the Administrative Company was acting as an agent of the Government, which would have independently supported liability under the FCA.) She concluded that the Government had indeed “provided” some of the money because during the relevant period the U.S. Treasury had deposited approximately $100 million into the Administrative Company fund from (1) delinquent contributions, interest, and penalties which the DOJ and FCC collected from carriers and (2) civil settlements or restitution payments the DOJ obtained from companies charged with defrauding the E-Rate program. Rejecting Wisconsin Bell’s argument that the Government was merely a passive throughway for the return of funds rightfully belonging to the Administrative Company, Kagan noted that the DOJ and FCC played an active and indispensable enforcement role in securing these contributions. But regardless, even a “simple intermediary” can “provide” things to a recipient, such as when a school exam proctor hands out blue books and pencils that belong to the school (a hypothetical Justice Kagan borrowed from Justice Barrett’s questioning at oral argument). Nor does it matter “whether or not the United States has title to the money”: As Justice Kavanaugh had observed at argument, all Government spending is in some sense a revolving door of funds that come in via taxes, fines, or fees, and then go back out to fund various programs and activities. So long as the money “sits” in Treasury accounts before it is furnished for use in a public program, the Government has “provided” that money for purposes of the FCA.  

Justice Thomas concurred. In a portion of the concurrence joined by Justices Kavanaugh and Alito, Thomas emphasized the limits of the Court’s holding: When the Government has indisputably deposited more than $100 million recovered from DOJ and FCC enforcement actions, it has “provided” at least a portion of the money later distributed by the Administrative Company. But that reasoning left unanswered what the result would be in a case where the Government was indeed merely a “passive throughway” for the program funds at issue.  

In the remainder of his concurrence, joined only by Justice Kavanaugh, Justice Thomas explained his concerns with the Government’s broader alternative position that the FCA applies so long as a statutory scheme requires one private party to make payments to another. As Thomas noted, courts have generally limited application of the FCA to cases where the Government itself faces a financial loss. Otherwise, the FCA might reach far-afield cases such as child support payments, civil judgments, and the Affordable Care Act individual mandate. Thomas also expressed concern with the Government’s argument that the Administrative Company is an agent of the United States for FCA purposes. As he pointed out, the FCC had previously sought congressional authorization to make the Administrative Company a Government corporation under the Government Corporation Control Act, but Congress denied that request, instead leaving the Administrative Company as an “independently functioning” entity. The Government would have to explain this inconvenient fact away if it were to take the position in future litigation that the Administrative Company is an authorized agent of the Government under the FCA.  

Justice Kavanaugh also wrote a single-paragraph concurrence, joined by Justice Thomas, flagging Article II concerns about the FCA qui tam provisions that Justice Thomas previously raised in United States, ex rel. Polansky v. Executive Health Resources, Inc. They continue to believe that there are “substantial constitutional questions” regarding the ability of a private citizen to represent the interests of the United States in litigation. But because those questions were not squarely presented by the parties in this case, Kavanaugh would save them for an “appropriate case” in the future.