The False Claims Act: A Novel Tool for Enforcing Federal Animal Welfare Laws

Introduction

Although there are several federal laws intended to ensure the humane treatment of animals, including the Animal Welfare Act (AWA)¹ and the Humane Methods of Slaughter Act (HMSA)², the enforcement of these laws by government agencies and law enforcement officers is often inconsistent or ineffective.³  This has led private animal welfare organizations to seek ways to enforce these laws without relying on the government to initiate investigations and proceedings. One potentially powerful (but often overlooked) tool that allows private citizens to initiate legal proceedings for violations of animal protection laws against the myriad companies that do business with the government is the False Claims Act (FCA).⁴

As will be discussed in this article, the FCA allows private citizens, under certain circumstances, to bring civil lawsuits on behalf of the government for damages resulting from a contractor’s failure to comply with federal laws and regulations,⁵ including those relating to the humane treatment of animals. If the lawsuit is successful, the defendant is liable for up to three times the actual damages incurred by the government, plus penalties, and the private litigant is entitled to a share of the recovery and reimbursement of their attorneys’ fees and costs.⁶  Given that the government is extensively involved in contracting concerning federal programs that involve animals—ranging from research grants to universities to food procurement for schools and the military—and that these government contracts often involve the express or implied certification of compliance with laws and regulations regarding the humane treatment of animals, there may be significant opportunities to use this statute to promote animal welfare.

Indeed, although there are only a few reported instances of the FCA being used in this manner, the results of these civil actions have been encouraging, and suggest that further exploration of the use of FCA actions to enforce animal protections may be warranted.

Government Contracting Involving Animals

The federal government enters into contracts with private companies to procure billions of dollars of goods and services every year. A sizable percentage of these contracts involves animals—principally relating to the procurement of food for school lunch programs, the military, and other government agencies, but also including federal grants concerning medical and scientific research involving laboratory animals. For example, the total the federal government spent on meat, poultry, and fish in fiscal year 2020 was approximately $1.6 billion, with an additional total of about $900 million spent on dairy foods and eggs.⁷  The total amount spent by the federal government on research involving live animals is more difficult to ascertain, but is also clearly substantial.

All government contracts are governed by an extensive array of laws and regulations, and claims submitted by a contractor to the government for payment pursuant to these contracts often expressly or impliedly certify that the contractor has complied with applicable laws and regulations. In the context of federal food programs, government contractors must comply with a substantial number of laws and regulations that include those requiring humane treatment of animals, such as the HMSA. Likewise, there is a significant body of laws and regulations regarding the proper treatment of animals used for research and testing, including the AWA and the Public Health Service Policy on Humane Care and Use of Laboratory Animals.⁸

The False Claims Act

The FCA, which was enacted in 1863,⁹ was originally aimed at curbing the rampant fraud perpetrated by suppliers of goods to the Union Army during the Civil War but has been repeatedly amended and expanded to address an array of fraudulent activity, false statements, and false claims for payment by companies that enter into contracts with the federal government.¹⁰ The FCA is now the government’s primary weapon to combat fraud, waste, and abuse. Under the current version of the FCA, any person or entity who knowingly submits false or fraudulent claims to the government for payment is liable for up to three times the actual damages incurred by the government, plus penalties ranging from $11,665 to $23,331 for each false claim for payment submitted to the government.¹¹  Knowledge of falsity is defined as (1) actual knowledge, (2) deliberate ignorance of the truth or falsity of the information, or (3) reckless disregard of the truth or falsity of the information.¹²

Potential liability under the FCA is not limited to the submission of claims to the government that contain express false statements. A person or entity who submits a claim for payment to the government may also be liable under the FCA for violating a statute or regulation relating to their performance of the contract if the contractor expressly or impliedly certified compliance with those laws and regulations when it sought payment from the government. To succeed on an “implied certification” theory of liability—that although the contractor did not expressly certify compliance, it impliedly did so by seeking payment under the contract—the plaintiff generally must show that the claim submitted to the government for payment made specific representations about the goods or services provided, and that the defendant’s failure to disclose its noncompliance with statutory, regulatory, or contractual requirements made those representations misleading.¹³  However, the violation of the regulatory provision must meet the requirement of “materiality,” i.e., it must be of sufficient importance that the violation would matter to the government when it decides whether to pay the contractor for its goods or services.¹⁴

Under the FCA, the defendant is liable for up to three times the actual damages to the government caused by the FCA violation. In cases in which the government receives goods or services that are of some value to the government despite the contractor’s FCA violation, courts have generally held that the actual damages are the difference between the value of the goods or services the government would have received if the defendant had complied with the FCA and the value of the goods or services that the government actually received. However, particularly in the context of federal grants in which there was never an expectation that the government would directly receive goods or services, courts have sometimes measured actual damages as the total amount paid by the government, with no setoff for value received—reasoning that if the government knew that the contractor was in violation, it would not have issued the grant or entered into the contract, and that goods or services from a legally ineligible contractor are of no value to the government.¹⁵ 

        Qui Tam Provisions

One unusual feature of the FCA is that it allows a private person to bring a lawsuit for damages on behalf of the government for violations of the statute and, if the lawsuit against the government contractor is successful, the private person who brought the suit shares in the recovery.¹⁶  A suit filed by a person on behalf of the government is called a “qui tam” action, and the person who brings the action is called the “relator.” ¹⁷

Once the relator files a complaint in court (which must be filed under seal), the government is required to investigate the relator’s allegations and decide whether to intervene and take over the action, or decline to do so, in which case the relator can proceed with the action on her own. If the government takes over the case, the relator is entitled to receive between 15 and 25 percent of the amount recovered by the government under most circumstances. The government intervenes in only a small percentage of qui tam cases, and its decision to intervene suggests that the case may have merit. If the government declines to intervene in the case and the relator prevails in the action, the relator’s share of the government’s recovery is increased to 25 to 30 percent. A successful relator can also receive compensation for its attorneys’ fees and costs, whether or not the government intervenes.¹⁸

In addition, in order to encourage FCA enforcement, the statute also protects whistleblowers who seek to expose or prevent an employer’s FCA violations from retaliation in their employment. An employee who is fired, harassed or discriminated against in the terms of her employment because of whistleblower activity that is protected under the FCA—such as activity intended to prevent the recurrence of FCA violations or investigate past FCA violations—is entitled to compensation.¹⁹

        Potential Defenses

There are several defenses that a defendant may seek to interpose to an FCA action. As noted above, an alleged violation of a statute or regulation is not actionable under the FCA if it is not material to the government’s decision whether to pay the claim. Moreover, to ensure that a relator is serving the useful purpose of bringing wrongdoing to the attention of the government, rather than opportunistically bringing a lawsuit based on information that the government would have been likely to learn without the relator’s help, a provision of the FCA bars qui tam actions based on information that has been disclosed to the public through means such as the media or government hearings unless the relator is the original source of the information.²⁰  Furthermore, the FCA’s “first to file” rule provides that, once a qui tam relator files an FCA action, another relator is barred from bringing an FCA action based on the facts underlying the pending action.²¹

The FCA is also subject to the usual procedural rules that apply to federal civil actions, such as the requirement that fraud must be pled with particularity.²²  Additionally, a qui tam action under the FCA must be brought within the applicable statute of limitations period:  within either six years after the violation occurred, or within three years after the “the official of the United States charged with responsibility to act in the circumstances” knew or should have known the relevant facts, but not more than ten years after the violation.²³

Finally, it is worth noting that a majority of states have their own versions of the FCA that apply to contracts entered into with state governments.²⁴

Animal Welfare Cases Brought Under the False Claims Act

A number of federal statutes, such as the AWA and the HMSA, require the humane treatment of animals, particularly in connection with scientific study or commercial food production. As explained above, the failure of an entity that contracts with or receives a grant from the government to comply with laws relating to the performance of its contract or grant can give rise to a claim for treble damages under the FCA.

Perhaps surprisingly, given the prospect that a relator can obtain a sizable percentage of a treble damage recovery, and the significant volume of relevant government contracts and grants, there are only a few reported instances of FCA lawsuits aimed at promoting the humane treatment of animals. Those cases, however, have been encouraging from the standpoint of enforcement of animal welfare laws.

In one example, the Humane Society of the United States (HSUS) brought a qui tam action in 2008 against a meat processor called Westland/Hallmark Meat Company, alleging violations of the FCA in connection with the defendant’s contract with the government to provide meat for use in the National School Lunch Program and other federal programs.²⁵  HSUS had conducted an investigation of Westland/Hallmark and had uncovered numerous alleged violations of laws and regulations regarding the humane treatment of animals at slaughterhouses. According to HSUS, Westland/Hallmark had falsely certified compliance with these laws and regulations when it submitted claims to the government for payment under its contract to provide meat for federal programs. That made the claims for payment false and fraudulent, in violation of the FCA, HSUS alleged. ²⁶

Westland/Hallmark’s primary defense did not focus on disputing the factual allegations regarding the treatment of animals and violation of regulations, but instead argued that the government could not prove actual damages because, according to Westland/Hallmark, there was no evidence that the failure to humanely treat the animals resulted in the value of the meat delivered to the government being any less than it would have been if Westland/Hallmark had complied with those regulations.²⁷ The court rejected this argument. It held that the meat that the government received from animals who were not humanely treated in conformity with government regulations constituted nonconforming goods that were of no value to the government, and therefore the actual damages sustained by the government were equal to the total amount that the government paid, without any offsetting credit for the value of goods received.²⁸  After several years of litigation, judgment was entered against Westland/Hallmark for over $150 million. As a qui tam relator, HSUS was entitled to a substantial share of this recovery.²⁹         

In another example, a non-profit animal advocacy organization, Compassion Over Killing (COK) (now known as Animal Outlook), brought a qui tam action in 2017 against a lamb processor called Superior Farms, Inc. and its affiliates, alleging violations of the FCA in connection with Superior Farms’ contracts to provide lamb meat to the government.³⁰  The complaint alleged that the defendant violated the HMSA and related regulations involving the humane treatment of animals at slaughterhouses.³¹ It further alleged that compliance with these laws and regulations was an express or implied part of the defendant’s contracts with the government. Therefore, the suit alleged, the claims for payment that the lamb processor submitted under its contracts with the government were materially and knowingly false, in violation of the FCA, because they contained a false certification of compliance with applicable laws such as the HMSA, which was a material condition for payment under the contracts.³²

COK filed the action on behalf of the government as a qui tam relator, entitling it to a sizable share of any recovery. The government ultimately decided to partially intervene with respect to the allegations regarding humane treatment and slaughter of animals, essentially taking over that portion of the lawsuit on its own behalf. Shortly thereafter, the parties agreed to a settlement and a Consent Decree that involved oversight and reform of Superior Farms’ practices.³³

Although the case never proceeded to trial, the fact that the government was willing to partially intervene, coupled with the fact that the case resulted in a settlement and Consent Decree, are strong indicators that the complaint had substantial merit.

In addition to suits for damages for FCA violations, the provision of the FCA that protects whistleblowers has been used to safeguard employees who face retaliation for seeking to prevent violations of the FCA related to the treatment of animals. In Singletary v. Howard University,³⁴ a veterinarian working in the university’s animal laboratory alerted her superiors at the university, and later informed officials at the National Institutes of Health (NIH), that animals being studied at the laboratory in connection with a program funded by an NIH grant were not being treated in compliance with NIH regulations.³⁵  As a result of the veterinarian’s complaint to NIH, the agency instructed the university to remedy the problem—but soon after, the veterinarian was told that her contract would not be renewed, leading to her resignation.³⁶ She filed a lawsuit asserting that, because the university certified its compliance with NIH regulations when it sought payment under the NIH grant, the university’s violation of NIH regulations would make the university’s claims for payment false, in violation of the FCA—and therefore her objections regarding the university’s treatment of the animals constituted protected whistleblower activity under the FCA, entitling her to compensation for her retaliatory constructive termination.³⁷

In response, the university argued that it was not liable because the employee’s actions were not protected activity under the FCA. The court rejected the university’s defense. The court explained that the FCA protected not only an employee’s activities that are aimed at remedying past violations of the FCA through a qui tam action, but also activities aimed at stopping an FCA violation or preventing one from recurring.³⁸ The court reasoned that the veterinarian’s conduct was protected by the FCA whistleblower provision because she had an objectively reasonable belief that the university was or soon would be submitting a claim for payment that falsely certified compliance with animal welfare regulations.³⁹ The court also held that, because the veterinarian’s actions went beyond her assigned duties, the university was on notice when it decided not to renew the veterinarian’s contract that her activities were intended to address potential FCA violations, rather than merely conducting her normal job responsibilities.⁴⁰ Thus, the court concluded that the allegations, if proven, were sufficient to entitle the veterinarian to compensation for retaliatory conduct under the FCA.

Conclusion

The FCA offers a unique—and underutilized—opportunity for private citizens and animal protection organizations to enforce laws and regulations involving the humane treatment of animals against the numerous companies that do millions of dollars of business with the government each year. Although this is a creative use of the FCA, it is not unprecedented, and has met with some success on the few reported occasions it has been used. Thus, organizations and individuals interested in animal welfare should consider the possibility of FCA qui tam litigation against government contractors under appropriate circumstances to remedy violations of federal law regarding the humane treatment of animals.   

About the Author

Dave Nadler is Senior Counsel at Blank Rome LLP in Washington, DC and the former Chairman of the firm’s Government Contracts Practice. He was previously a Trial Attorney with the Litigation Division of the Department of the Navy.

1. 7 U.S.C.A. § 2131-2159 (West).
2. 7 U.S.C.A. § 1901- 907 (West).
3. Laws That Protect Animals, Animal Legal Def. Fund, https://aldf.org/article/laws-that-protect-animals (last visited June 4, 2021).
4. 31 U.S.C.A. § 3729-3733 (West).
5. 31 U.S.C.A. § 3730(b)(1) (West).
6. 31 U.S.C.A. § 3729(a)(1)(G) (West).
7. See Federal Procurement Data System – Next Generation, https://www.fpds.gov/fpdsng_cms/index.php/en/.
8. Office of Laboratory Animal Welfare, National Institutes of Health, Public Health Service Policy on Humane Care and Use of Laboratory Animals (2015), https://grants.nih.gov/grants/olaw/references/phspolicylabanimals.pdf.
9. Act of March 2, 1863, ch. 67, 12 STAT.696 (1863).
10. Charles Doyle, Cong. Research Serv., R40785, Qui Tam: The False Claims Act and Related Federal Statutes, 6-10 (2021).
11. 31 U.S.C.A. § 3729(a)(1) (The statutory range is $5,500 to $11,000, The current range of penalties, adjusted for inflation is $11,665 to $23,331 for penalties assessed on or after June 19, 2020. 28 C.F.R. § 85.5.
12. 31 U.S.C.A. § 3729(b)(1).
13. Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989, 1999, 195 L. Ed. 2d 348 (2016).
14. Id. at 2003; 31 U.S.C.A. § 3729(b)(4).
15. See generally Joel M. Androphy, Federal False Claims Act and Qui Tam Litigation § 11.01 (2020) (“[D]amage calculations vary according to the type of fraud involved in a particular case. Because the goal of the FCA is to make the Government whole, different types of fraud require different remedies to ensure complete compensation.”).
16. 31 U.S.C.A. § 3730(b),(d).
17. Doyle, supra note 10, at 1.
18. 31 U.S.C.A. § 3730(d).
19. 31 U.S.C.A. § 3730(h) (West).
20. 31 U.S.C.A. § 3730(e) (West).
21. 31 U.S.C.A. § 3730(b)(5) (West).
22. Fed. R. Civ. P. 9(b).
23. 31 U.S.C.A. § 3731(b) (West).
24. See, e.g., Cal. Gov't Code § 12650-12656 (West).
25. See U.S. ex rel. Humane Soc. of U.S. v. Hallmark Meat Packing Co., No. EDCV 08-00221-VAP, 2013 WL 5753784 (C.D. Cal. Apr. 30, 2013).
26. Id. at 1.
27. Id. at 6.
28. Id. at 18.
29. Press Release, U.S. Dep’t of Justice, Former Suppliers of Beef to National School Lunch Program Settle Allegations of Improper Practices and Mistreating Cows (Nov. 27, 2013), https://www.justice.gov/opa/pr/former-suppliers-beef-national-school-lunch-program-settle-allegations-improper-practices-and.
30. Complaint of Plaintiff-Relator, United States ex rel. Compassion Over Killing v. Transhumance Holding Co., Inc., No. 2-17-cv-00210-MCE-CKD (E.D. Cal. 2017).
31. Id. at 3-4.
32. Id.at 5.
33. Consent Decree Between the United States Department of Agriculture, Food Safety and Inspection Service and Defendant Transhumance Holding Company, Inc. (May 14, 2019), https://www.publicjustice.net/wp-content/uploads/2019/05/Consent-Decree-Fully-Executed1.pdf.
34. Singletary v. Howard Univ., 939 F.3d 287 (D.C. Cir. 2019).
35. Id. at 294.
36. Id.
37. Id. at 297.
38. Id. at 295–296.
39. Id. at 300.
40. Id.