Collective Corporate Knowledge and the Federal False Claims Act

70 Pages Posted: 4 Sep 2016

See all articles by Sam Halabi

Sam Halabi

University of Missouri School of Law

Date Written: September 2, 2016

Abstract

While recent U.S. Supreme Court decisions have drawn focus to whether what corporations “say” is protected by the First Amendment or what they “believe” is protected by the federal Religious Freedom Restoration Act, the more relevant inquiry for a wide range of statutory and regulatory regimes is what corporations “know.” At the core of that question is what guides information relevant for legal compliance (including product safety, employee welfare, and material risks considered by investors) from its source to any given point in the firm, including decision-makers. This Article analyzes the federal False Claims Act as an underexploited resource in developing answers to how and why corporations “know” or fail to “know” relevant information. That law provides for monetary sanctions against an individual or firm that “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” by the U.S. federal government. In the context of business entities, attribution of “knowledge” has generated disagreement between federal courts. Some courts reason that liability only attaches if a single individual, no matter how large the enterprise, knew the claim to be false. Others have determined that firms are responsible for the entire universe of knowledge obtained by employees and agents in the course and scope of their employment or agency. Finally, others have created a system of rebuttable presumptions about what firms are deemed to know or not know for purposes of the law. This article concludes that the False Claims Act’s design and legislative history strongly suggest that it was intended to hold firms accountable for the collective knowledge agents and employees possess about compliance with government payment programs, even where it appears that information channels between employees, agents and decision-makers are disaggregated and violations of payment program terms cannot be traced to a single individual. The article explains the significance of this conclusion both in the context of federal health programs, where the application of a “collective corporate knowledge” doctrine will play a vital role in ensuring the financial viability of Medicare, Medicaid and the Affordable Care Act as well as in the broader literature on organizational behavior approached by economists, psychologists, and sociologists.

Suggested Citation

Halabi, Sam, Collective Corporate Knowledge and the Federal False Claims Act (September 2, 2016). Baylor Law Review, Vol. 68, No. 2, 2016. Available at SSRN: https://ssrn.com/abstract=2834030

Sam Halabi (Contact Author)

University of Missouri School of Law ( email )

332 Cornell Hall
Columbia, MO Columbia 65211
United States

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