The recent decision by the U.S. Supreme Court in Loper Bright Enterprises v. Raimondo has sparked significant discourse in legal circles, especially regarding its implication on the False Claims Act (FCA) defense strategies. Many attorneys have viewed the overruling of Chevron deference as a potential tool for challenging FCA claims. However, the impact of this development may not be as pivotal as hoped due to a solid line of judicial precedence that could nullify this strategy.
The historical backdrop here is critical, originating from the Supreme Court’s 1937 decision in US v. Kapp. The Court, in this case, determined that defendants could not assert the unconstitutionality of an underlying regulatory requirement as a defense against allegations of fraud. This decision established the Kapp rule, which has been reiterated in subsequent cases, including Dennis v. US and Bryson v. US. Both cases expanded the scope of the rule to dismiss defenses based on purported deficiencies in statutory requirements.
Applying the Kapp rule to FCA cases, courts have consistently dismissed arguments that attack the validity of underlying regulations. This judicial stance was evident in decisions like Cedars-Sinai Medical Center v. Shalala and the more recent case of US v. Walgreen Co.. Both rulings illustrate a firm legal perspective that invalid regulations do not excuse fraudulent claims.
Legal professionals focusing on defending FCA claims should be circumspect about the reliance on Loper Bright to circumvent established legal principles. As underscored in a detailed analysis by Alexander Owens, a partner at Pietragallo Gordon Alfano Bosick & Raspanti, attempting to negate fraud allegations based just on regulatory flaws remains a high-risk endeavor. Such efforts are particularly tenuous given the enduring standing of the Kapp rule, which continues to block avenues for broad regulatory challenges in the context of government fraud litigation. For more insights into these legal dynamics, the full article is available on Bloomberg Law.