SCOTUS Unanimously Rules E-rate Payments Fall Under False Claims Act
The U.S. Supreme Court issued a unanimous but narrow opinion Friday that reimbursement requests submitted to the E-rate program, administered by the Universal Service Administrative Co., can be considered “claims” under the False Claims Act (FCA). The decision in Wisconsin Bell v. U.S. reaffirmed the ruling of the 7th Circuit Court of Appeals. Elena Kagan, one of three justices appointed by a Democratic president, wrote the opinion.
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The case has attracted relatively little attention, especially compared with another involving the USF, FCC v. Consumers' Research, which is scheduled to be heard March 26. That case could potentially unravel the USF program (see 2501100057). Industry experts said that had the court sided with Wisconsin Bell, it could have potentially limited the pool of possible FCA targets for whistleblowers and the government (see 2411040029).
“Those looking for tea leaves regarding the legality of the USF program overall will be disappointed,” said Boston College law professor Daniel Lyons in a post on X. The Wisconsin Bell ruling included a footnote stating that Friday's unanimous opinion isn't relevant "to any matter pertaining to the constitutionality of the universal-service programs."
University of Minnesota media law professor Christopher Terry said that language is telling. "I think USF fans should be nervous about the decision today ahead of the USF case later on," he said. "The court could have shored it up, but chose not to, and said so deliberately. That's not been a good sign with this court."
In a concurring opinion, conservative Justice Clarence Thomas said the decision leaves several questions about the lawfulness of the E-rate program unresolved.
Todd Heath sued AT&T subsidiary Wisconsin Bell under the FCA, arguing that the company charged schools and libraries impermissibly high prices under the E-rate program, which made each reimbursement request a false claim.
USTelecom and CTIA jointly filed in support of Wisconsin Bell. The 7th Circuit’s decision, “if affirmed, would put amici’s members across the country under the threat of novel -- and potentially ruinous -- liability,” the groups said in a brief last summer (see 2410070047).
Kagan emphasized that the decision resolves a split in the judicial circuits. The 11th Circuit Court of Appeals held that E-rate reimbursement requests fit the FCA’s definition of “claim.”
The 11th Circuit found “that the Government provided all the money in the program through its regulatory role in the ‘collection and distribution’ of contributions -- most notably, by initially requiring the carriers to pay into the Fund,” Kagan wrote. “Second and more narrowly, the court found that the Government provided some ‘portion’ of E-Rate funding by depositing into the Fund, in the relevant years, ‘more than $100 million directly from the U.S. Treasury.’”
The 5th Circuit, meanwhile, “held that E-Rate reimbursement requests do not so Qualify -- although that court considered only the ‘broad[er] view’ of how the Government ‘provides’ E-Rate funding,” Kagan wrote. “We need reach no further today than the narrower ($100 million) ground on which” the 7th Circuit ruled. “The requests at issue qualify as claims because, in the years they were submitted, the U.S. Treasury deposited money into the Fund for disbursement to those entitled to E-Rate subsidies.”
Wisconsin Bell “mischaracterizes the Government’s role in bringing the $100 million to the Fund,” the opinion said: “The Government was not a passive throughway for the transmission of E-rate moneys from one private party (the carrier) to another (the Administrative Company). Nor were the Government’s activities confined to ‘facilitating’ such transfers, as Wisconsin Bell would have it.”
The Schools, Health & Libraries Broadband Coalition applauded the decision. "The 9-0 decision in favor of Todd Heath sends a signal to the broadband industry that companies cannot overcharge schools and libraries for broadband and telecommunications services," it said in a statement.
Thomas was joined in his concurring opinion by fellow conservative Justices Brett Kavanaugh and, in part, Samuel Alito. Thomas agreed with the finding that for the purposes of the FCA, the federal government “provides” money to the E-rate program. But the decision leaves “two more difficult questions” unresolved, the concurrence said.
The case doesn’t resolve “whether the Government ‘provides’ the money that it requires private carriers to contribute to the E-Rate program” and “whether the E-Rate program’s administrator is an agent of the United States,” Thomas wrote: “I express no definitive views on those questions today. I write separately only to highlight that the Government’s positions on these questions might, if accepted, have significant implications for both the scope of the FCA and the lawfulness of the E-Rate program.”