March 14, 2025 • 18 mins
On February 21, 2025, the U.S. Supreme Court issued their 9-0 opinion in Wisconsin Bell, Inc. v. United States, ex rel. Todd Heath. Because the government “provided” (at a minimum) a “portion” of the money applied for by transferring more than $100 million from the Treasury into the fund, the E-Rate reimbursement requests in this case are "claims" under the False Claims Act.
Please join us in discussing the decision and its future implications.
Featuring:
John Masslon, Counsel, Keller Postman LLC
Please join us in discussing the decision and its future implications.
Featuring:
John Masslon, Counsel, Keller Postman LLC
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Welcome to scot Discast, a project of the Federalist Society
for Law and Public Policy Studies. Our contributors join us
from around the country to bring you expert commentary on
US Supreme Court cases as they are argued and the
decisions are issued. The Federalist Society takes no position on
particular legal or public policy issues. All expressions are those
(00:23):
of the speaker. Hello, and welcome to scot Discast. I'm
your host, Kyle hammernis On, behalf of the Faculty division
of the Federalist Society. We are here today to discuss
Wisconsin Bellincorporated versus United States ex Rel Heath, which was
decided by the Court in a nine zero decision on
(00:43):
February twenty first, twenty twenty five. It is my honor
to introduce our guests today, John Maslon. John is a
council at Keller Postman, LLC, where he works on a
broad range of disputes, including products liability and consumer protection suits.
And with that, I'll hand things over to John to
discuss how the case got to the Supreme Court.
Speaker 2 (01:02):
Thanks so much, it's great to be here today. This
case has a bit of an interesting history in that
the plaintiff Todd Heath has a very odd view of
the lowest corresponding price regulation under the E Rate Program.
And the E Rate Program is a program that allows
(01:26):
schools to receive reduced price telecommunications services. For the past
fifteen years, Eith has been arguing that companies like Wisconsin
Bell have been misinterpreting this lowest price requirement that's in
(01:47):
the Code of Federal Regulations implementing the statute and has
been pushing government regulators to adopt his interpretation. Unable to
do so, he filed this Keytham suit, which means he
sued was constin Bell on behalf of the United States,
(02:09):
arguing that they are violating the False Claims Act with
how they are charging schools. And then the Seventh Circuit
said that his case could go forward because the United
States provided some of the money for the E Rate Program.
(02:32):
This apparently split from the Fifth Circuit decision years before,
and so the Supreme Court granted cercirari to resolve that circuit.
Speaker 1 (02:45):
Right, And I guess, now, since we've kind of gotten
the background of how it got to the court, can
you take us just a quick minute or two of
the oral arguments kind of what the arguments were for
both sides.
Speaker 2 (03:00):
Sure, so, the main argument that the petitioner, wisconsin Bell
made was that the purpose of the False Claims Act
is to prevent the United States from losing money, to
prevent the Federal Fisk from being the victim of fraud.
And here all the wisconsin Bell argued, at least all
(03:23):
the funds were provided by private parties. So the private
telecommunications carriers were paying a private corporation called use Act,
the Universal Service Administration Corporation, And so they said it
was private companies giving money to private companies, no Federal
(03:46):
Fisk involvement, and so therefore it didn't fall under the
ambient of the False Claims Act. The petitioners the respondents
had three arguments and response. We first argued that because
federal law requires the telecommunications providers to pay the Administrative
(04:08):
Corporation a certain percentage of their revenue each year, that
that was sufficient because the government was forcing this transfer
to happen, that that satisfied the providing language within the
False Claims Act. The second argument was that the Treasury
actually provided some funds to the Universal Service Administration Corporation,
(04:35):
and so therefore that was the second way that funds
were provided. And finally, the respondents argued that even if
that wasn't the case, that USAK was an agent of
the United States, so any claims presented to USAK could
fall under the ambience of the False Claims Act.
Speaker 1 (04:55):
Right, and so, as I mentioned in the intro, the
case ended up being a nine zero decision, with Justice
Kagan writing the opinion for the court. Can you take
us through her opinion?
Speaker 2 (05:09):
Sure, it's a pretty straightforward opinion. As I mentioned, the
respondents argued that Wisconsin Bell's activities were covered by the
False Claims Act for three reasons. Justice Kagan decided that well,
instead of reaching the two harder questions, that she would
(05:30):
go straight to the second argument that the respondents made,
and that was that the United States Treasury had paid
into the Universal Services Administration Corporation. So over the course
of time, I think that it was about ten billion
dollars that you sat collected, and of that, one hundred
(05:52):
million was from the United States Treasury. And the way
the Treasury received those funds were typically is a telecommunications
provider would not comply with the law and would not
pay their fee that they were that they owed the USAC,
and so DOJ would sue them recover the money, and
(06:17):
then once you know, a judgment is entered ordering you
to pay the United States government sum certain that money
is then deposited into the treasury, and then from the
treasury the money was transferred to USAC. And what Justice
Kegan said was this is still providing, and that even
if the original source of the money was the private
(06:42):
telecommunications companies, that the United States federal government provided it
to USACK. And she used the example of an exam
blue book. She said, there, the proctor of an exam
is providing students with the blue books when she hands
(07:03):
them out. Even if the school or somebody else actually
had the money and paid for the blue books, it
was still the proctor also provided the books. And so
she just looked at the dictionary definition of provided, what
the ordinary meaning of the word was, and determined that, yes,
(07:27):
the United States is providing of this. This United States's
transfer of this hundred million dollars constituted providing. And because
under the False Claims Act, the United States doesn't have
to provide the entire amount, it only is required to
provide a portion that was sufficient, she said to mean
(07:50):
that these activities were covered by the False Claims Act. Now,
she was very careful to say that in one issue
at or argument was, well, if the United States only
provided let's say one percent of the money for USAC
during this time period, what damages would be available to
(08:12):
the plaintiff and in action like this, And she said
that's a question for a different day. We're not going
to address that. We are going to just say that
at least because the government provided some of the money,
it's covered by the False Claims Act, and litigation regarding
potential recovery could happen if Wisconsin Bell was found liable
(08:36):
under the False Claims Act, and that it.
Speaker 1 (08:42):
Does seem quite straightforward. But there are two concurring opinions,
one written by Justice Thomas and then one written by
Justice Kavanaugh. If I'm not mistaken, can you take us
through Justice Thomas's concurrence, because I know he highlights he
doesn't talk about the question that that Justice Kagan talked about,
but he talks about the implications of the government's arguments
(09:04):
if they were accepted.
Speaker 2 (09:06):
Yeah, So, like I said, there were again, the respondents
in the government kind of had three arguments, and Justice
Kagan hopped on the second one and said because of
that the funds were provided. Justice Thomas instead looks at
the first and third arguments, and he says, he kind
of explains what the flaws in those arguments that he sees.
(09:28):
So let's start with the first argument, which is saying
that because the government required private corporations to transfer money
to another private corporation, that therefore that suffices under the
False Claims Act. Well, Justice Thomas used the analogy of
a simple lawsuit, and so say, you know, two private
(09:51):
parties are suing each other, and a United States District
court enters judgment for one of those parts and says,
go lose, defend it. You have to pay the plaintiff
ten million dollars. Well, under the government's theory, Justice Thomas
says that transfer of ten million dollars, because the federal
(10:14):
court is requiring that transfer, could be seen as you know,
providing money. That the United States is providing money to
the plaintiff. And he says that raises serious issues both
under the text of the statute and under the Constitution.
(10:35):
He then moves on to the third argument that the
respondent and the government made, which was that USAK was
an agent of the United States, and he says this
would run into statutory problems because there's a federal statute
that bars the United States United States agencies from creating
(10:59):
corporations without express Congressional approval. So for example, actually when
USAK was created, there was the FCC tried to create
a private corporation that was a subsidiary of the FCC,
and in the end Congress said, you can't do that
(11:22):
because it violates the Government Corporate Control Act, and therefore
you must have this as an independent corporation. And that's
kind of how USAK is now situated.
Speaker 1 (11:38):
Great and then Justice Kavanaugh had maybe one of the
shortest concurrences I've ever seen. It was, you know, maybe
ten lines, if that can you just quickly quickly talk
about that.
Speaker 2 (11:52):
I actually think this might end up being one of
the most important parts of the decision, and that's because
this is a rehash of his concurrence from Polanski, which
is another recent False Claims Act case where he raised
the same issue. And Justice Kavanaugh believes that the key
(12:13):
tam provisions of the False Claims Act might be unconstitutional,
so he raised that issue in Polanski. There he was
joined by Justice Barrett. Justice Barrett does not join his
concurrence here, which is very interesting, and don't know really
what to make of that, whether she's reconsidered her position
(12:35):
or she just decided she didn't need to join it
this time because she joined it in Polanski and then
Justice Thomas joined it as well. Here. He didn't join
in Polanski because he dissented in that case. But it
looks like there's at least two, possibly three votes to
grant cert on the question of whether the False Claims
(12:57):
Acts key TAM provision is constitutional, and we're seeing a
lot of litigation on that issue in the lower federal
courts right now. A lot of companies that are being
sued by relaters under the False Claims Act are raising
the constitutional question and are trying to get that case
up the Scotus as soon as possible.
Speaker 1 (13:18):
Can you explain a little bit more about the key
TAM provision that Justice Kavanaugh has raised in multiple opinions?
Speaker 2 (13:27):
Sure, so, the United States actually doesn't file most false
claims at cases. Instead, they rely on relaters who are
just ordinary citizens normally who will file suit and say, hey,
I know that this corporation is filing false claims with
the government, they're committing fraud and therefore United States you
(13:52):
should be able to recover some of the money that
they have been sealing from you. And what the key
TAM provision says is that once you file that suit,
the United States has a decision. They can either take
over the case and say, oh, yeah, we agree with you,
or you want to come in, or they could say that,
you know what, we don't have the resources to do so,
(14:14):
and so you can continue litigating that case. And then
if the relater and that's the person that sues on
behalf of the United States, wins, they get to keep
a sizeable percentage of any recovery from the defendant. So
there is a large bar now who kind of focuses
on these types of cases, who they will sue companies
(14:39):
who are committing fraud against the United States and then
recover damages for them. And the constitutional question is whether
this violates Article two because they are suing to enforce
public rights and they are not officers of the United States,
(15:03):
there is no oversight by the Attorney General wants. You know,
a relater sues and is permitted to proceed on their
own behalf. So some believe that this violates Article two
to allow relators to sue on behalf of the United States.
Speaker 1 (15:25):
Okay, so I guess let's quickly turn to some of
the consequences that come from this decision. I know you
mentioned how Justice Kavanaugh is kind of signaling that he
wants the constitutional question to come up, and you mentioned
that then it may come up. Do you see that
being the biggest consequence of a decision like this or
(15:48):
more so just in the in the actual statute and
how and how it's used.
Speaker 2 (15:55):
Well, I think there's a few potential consequences. One, I
do think that Justice Kavanaugh, can you continue pounding the
drum on the constitutional question? Means at some point in
the near future, the Court is going to have to
consider the question as far as the broader implications on
the statute. One thing to note is the Court has
(16:15):
another case this term called fccv. Consumers Research, which considers
whether this universal service fund set up is constitutional or
whether it violates the non delegation doctrine. And the overall
impact of this case will probably depend on the decision
(16:37):
in that case, because if the Court holds that this
whole structure is unconstitutional, then the impact of Wisconsin, mel
is going to be much smaller and the fact and
that's one reason that the court ruling here is so
limited and so narrow, is they kind of had that
(16:58):
in the back of their mind. And as far as
the other big potential impact is on damages and seeing
how narrow the court's decision is here to see whether
we defendants moving forward are going to argue for reduced
damages when the government doesn't provide one hundred percent of
(17:22):
the funding for program.
Speaker 1 (17:26):
Right, well, I think that that was a great overview
of the case from kind of beginning to end here.
Thank you so much for joining us, John, Thank you,
thank you for listening to this episode of SCO Discussed.
Go Discussed is the project of the Federalist Society, not
for profit educational organization of conservative and libertarian law students,
(17:47):
law professors, and lawyers. Founded upon the principles that the
state exists to preserve freedom, that the separation of governmental
power is essential to our constitution, and that it is
emphatically the province and duty of the judiciary to say
what the law is, not what it should be. Don't
forget to subscribe to our podcast series include scotscasts and
practice group podcasts on iTunes or Google Play. For an
(18:10):
archive of past podcasts, as well as audio and video
of past Federalist Society events, please visit our website at
fedsoc dot org slash multimedia. That's fe d s OC
dot org slash multimedia.
Speaker 2 (18:29):
This has been a FEDSOC audio production
Welcome to scot Discast, a project of the Federalist Society
for Law and Public Policy Studies. Our contributors join us
from around the country to bring you expert commentary on
US Supreme Court cases as they are argued and the
decisions are issued. The Federalist Society takes no position on
particular legal or public policy issues. All expressions are those
(00:23):
of the speaker. Hello, and welcome to scot Discast. I'm
your host, Kyle hammernis On, behalf of the Faculty division
of the Federalist Society. We are here today to discuss
Wisconsin Bellincorporated versus United States ex Rel Heath, which was
decided by the Court in a nine zero decision on
(00:43):
February twenty first, twenty twenty five. It is my honor
to introduce our guests today, John Maslon. John is a
council at Keller Postman, LLC, where he works on a
broad range of disputes, including products liability and consumer protection suits.
And with that, I'll hand things over to John to
discuss how the case got to the Supreme Court.
Speaker 2 (01:02):
Thanks so much, it's great to be here today. This
case has a bit of an interesting history in that
the plaintiff Todd Heath has a very odd view of
the lowest corresponding price regulation under the E Rate Program.
And the E Rate Program is a program that allows
(01:26):
schools to receive reduced price telecommunications services. For the past
fifteen years, Eith has been arguing that companies like Wisconsin
Bell have been misinterpreting this lowest price requirement that's in
(01:47):
the Code of Federal Regulations implementing the statute and has
been pushing government regulators to adopt his interpretation. Unable to
do so, he filed this Keytham suit, which means he
sued was constin Bell on behalf of the United States,
(02:09):
arguing that they are violating the False Claims Act with
how they are charging schools. And then the Seventh Circuit
said that his case could go forward because the United
States provided some of the money for the E Rate Program.
(02:32):
This apparently split from the Fifth Circuit decision years before,
and so the Supreme Court granted cercirari to resolve that circuit.
Speaker 1 (02:45):
Right, And I guess, now, since we've kind of gotten
the background of how it got to the court, can
you take us just a quick minute or two of
the oral arguments kind of what the arguments were for
both sides.
Speaker 2 (03:00):
Sure, so, the main argument that the petitioner, wisconsin Bell
made was that the purpose of the False Claims Act
is to prevent the United States from losing money, to
prevent the Federal Fisk from being the victim of fraud.
And here all the wisconsin Bell argued, at least all
(03:23):
the funds were provided by private parties. So the private
telecommunications carriers were paying a private corporation called use Act,
the Universal Service Administration Corporation, And so they said it
was private companies giving money to private companies, no Federal
(03:46):
Fisk involvement, and so therefore it didn't fall under the
ambient of the False Claims Act. The petitioners the respondents
had three arguments and response. We first argued that because
federal law requires the telecommunications providers to pay the Administrative
(04:08):
Corporation a certain percentage of their revenue each year, that
that was sufficient because the government was forcing this transfer
to happen, that that satisfied the providing language within the
False Claims Act. The second argument was that the Treasury
actually provided some funds to the Universal Service Administration Corporation,
(04:35):
and so therefore that was the second way that funds
were provided. And finally, the respondents argued that even if
that wasn't the case, that USAK was an agent of
the United States, so any claims presented to USAK could
fall under the ambience of the False Claims Act.
Speaker 1 (04:55):
Right, and so, as I mentioned in the intro, the
case ended up being a nine zero decision, with Justice
Kagan writing the opinion for the court. Can you take
us through her opinion?
Speaker 2 (05:09):
Sure, it's a pretty straightforward opinion. As I mentioned, the
respondents argued that Wisconsin Bell's activities were covered by the
False Claims Act for three reasons. Justice Kagan decided that well,
instead of reaching the two harder questions, that she would
(05:30):
go straight to the second argument that the respondents made,
and that was that the United States Treasury had paid
into the Universal Services Administration Corporation. So over the course
of time, I think that it was about ten billion
dollars that you sat collected, and of that, one hundred
(05:52):
million was from the United States Treasury. And the way
the Treasury received those funds were typically is a telecommunications
provider would not comply with the law and would not
pay their fee that they were that they owed the USAC,
and so DOJ would sue them recover the money, and
(06:17):
then once you know, a judgment is entered ordering you
to pay the United States government sum certain that money
is then deposited into the treasury, and then from the
treasury the money was transferred to USAC. And what Justice
Kegan said was this is still providing, and that even
if the original source of the money was the private
(06:42):
telecommunications companies, that the United States federal government provided it
to USACK. And she used the example of an exam
blue book. She said, there, the proctor of an exam
is providing students with the blue books when she hands
(07:03):
them out. Even if the school or somebody else actually
had the money and paid for the blue books, it
was still the proctor also provided the books. And so
she just looked at the dictionary definition of provided, what
the ordinary meaning of the word was, and determined that, yes,
(07:27):
the United States is providing of this. This United States's
transfer of this hundred million dollars constituted providing. And because
under the False Claims Act, the United States doesn't have
to provide the entire amount, it only is required to
provide a portion that was sufficient, she said to mean
(07:50):
that these activities were covered by the False Claims Act. Now,
she was very careful to say that in one issue
at or argument was, well, if the United States only
provided let's say one percent of the money for USAC
during this time period, what damages would be available to
(08:12):
the plaintiff and in action like this, And she said
that's a question for a different day. We're not going
to address that. We are going to just say that
at least because the government provided some of the money,
it's covered by the False Claims Act, and litigation regarding
potential recovery could happen if Wisconsin Bell was found liable
(08:36):
under the False Claims Act, and that it.
Speaker 1 (08:42):
Does seem quite straightforward. But there are two concurring opinions,
one written by Justice Thomas and then one written by
Justice Kavanaugh. If I'm not mistaken, can you take us
through Justice Thomas's concurrence, because I know he highlights he
doesn't talk about the question that that Justice Kagan talked about,
but he talks about the implications of the government's arguments
(09:04):
if they were accepted.
Speaker 2 (09:06):
Yeah, So, like I said, there were again, the respondents
in the government kind of had three arguments, and Justice
Kagan hopped on the second one and said because of
that the funds were provided. Justice Thomas instead looks at
the first and third arguments, and he says, he kind
of explains what the flaws in those arguments that he sees.
(09:28):
So let's start with the first argument, which is saying
that because the government required private corporations to transfer money
to another private corporation, that therefore that suffices under the
False Claims Act. Well, Justice Thomas used the analogy of
a simple lawsuit, and so say, you know, two private
(09:51):
parties are suing each other, and a United States District
court enters judgment for one of those parts and says,
go lose, defend it. You have to pay the plaintiff
ten million dollars. Well, under the government's theory, Justice Thomas
says that transfer of ten million dollars, because the federal
(10:14):
court is requiring that transfer, could be seen as you know,
providing money. That the United States is providing money to
the plaintiff. And he says that raises serious issues both
under the text of the statute and under the Constitution.
(10:35):
He then moves on to the third argument that the
respondent and the government made, which was that USAK was
an agent of the United States, and he says this
would run into statutory problems because there's a federal statute
that bars the United States United States agencies from creating
(10:59):
corporations without express Congressional approval. So for example, actually when
USAK was created, there was the FCC tried to create
a private corporation that was a subsidiary of the FCC,
and in the end Congress said, you can't do that
(11:22):
because it violates the Government Corporate Control Act, and therefore
you must have this as an independent corporation. And that's
kind of how USAK is now situated.
Speaker 1 (11:38):
Great and then Justice Kavanaugh had maybe one of the
shortest concurrences I've ever seen. It was, you know, maybe
ten lines, if that can you just quickly quickly talk
about that.
Speaker 2 (11:52):
I actually think this might end up being one of
the most important parts of the decision, and that's because
this is a rehash of his concurrence from Polanski, which
is another recent False Claims Act case where he raised
the same issue. And Justice Kavanaugh believes that the key
(12:13):
tam provisions of the False Claims Act might be unconstitutional,
so he raised that issue in Polanski. There he was
joined by Justice Barrett. Justice Barrett does not join his
concurrence here, which is very interesting, and don't know really
what to make of that, whether she's reconsidered her position
(12:35):
or she just decided she didn't need to join it
this time because she joined it in Polanski and then
Justice Thomas joined it as well. Here. He didn't join
in Polanski because he dissented in that case. But it
looks like there's at least two, possibly three votes to
grant cert on the question of whether the False Claims
(12:57):
Acts key TAM provision is constitutional, and we're seeing a
lot of litigation on that issue in the lower federal
courts right now. A lot of companies that are being
sued by relaters under the False Claims Act are raising
the constitutional question and are trying to get that case
up the Scotus as soon as possible.
Speaker 1 (13:18):
Can you explain a little bit more about the key
TAM provision that Justice Kavanaugh has raised in multiple opinions?
Speaker 2 (13:27):
Sure, so, the United States actually doesn't file most false
claims at cases. Instead, they rely on relaters who are
just ordinary citizens normally who will file suit and say, hey,
I know that this corporation is filing false claims with
the government, they're committing fraud and therefore United States you
(13:52):
should be able to recover some of the money that
they have been sealing from you. And what the key
TAM provision says is that once you file that suit,
the United States has a decision. They can either take
over the case and say, oh, yeah, we agree with you,
or you want to come in, or they could say that,
you know what, we don't have the resources to do so,
(14:14):
and so you can continue litigating that case. And then
if the relater and that's the person that sues on
behalf of the United States, wins, they get to keep
a sizeable percentage of any recovery from the defendant. So
there is a large bar now who kind of focuses
on these types of cases, who they will sue companies
(14:39):
who are committing fraud against the United States and then
recover damages for them. And the constitutional question is whether
this violates Article two because they are suing to enforce
public rights and they are not officers of the United States,
(15:03):
there is no oversight by the Attorney General wants. You know,
a relater sues and is permitted to proceed on their
own behalf. So some believe that this violates Article two
to allow relators to sue on behalf of the United States.
Speaker 1 (15:25):
Okay, so I guess let's quickly turn to some of
the consequences that come from this decision. I know you
mentioned how Justice Kavanaugh is kind of signaling that he
wants the constitutional question to come up, and you mentioned
that then it may come up. Do you see that
being the biggest consequence of a decision like this or
(15:48):
more so just in the in the actual statute and
how and how it's used.
Speaker 2 (15:55):
Well, I think there's a few potential consequences. One, I
do think that Justice Kavanaugh, can you continue pounding the
drum on the constitutional question? Means at some point in
the near future, the Court is going to have to
consider the question as far as the broader implications on
the statute. One thing to note is the Court has
(16:15):
another case this term called fccv. Consumers Research, which considers
whether this universal service fund set up is constitutional or
whether it violates the non delegation doctrine. And the overall
impact of this case will probably depend on the decision
(16:37):
in that case, because if the Court holds that this
whole structure is unconstitutional, then the impact of Wisconsin, mel
is going to be much smaller and the fact and
that's one reason that the court ruling here is so
limited and so narrow, is they kind of had that
(16:58):
in the back of their mind. And as far as
the other big potential impact is on damages and seeing
how narrow the court's decision is here to see whether
we defendants moving forward are going to argue for reduced
damages when the government doesn't provide one hundred percent of
(17:22):
the funding for program.
Speaker 1 (17:26):
Right, well, I think that that was a great overview
of the case from kind of beginning to end here.
Thank you so much for joining us, John, Thank you,
thank you for listening to this episode of SCO Discussed.
Go Discussed is the project of the Federalist Society, not
for profit educational organization of conservative and libertarian law students,
(17:47):
law professors, and lawyers. Founded upon the principles that the
state exists to preserve freedom, that the separation of governmental
power is essential to our constitution, and that it is
emphatically the province and duty of the judiciary to say
what the law is, not what it should be. Don't
forget to subscribe to our podcast series include scotscasts and
practice group podcasts on iTunes or Google Play. For an
(18:10):
archive of past podcasts, as well as audio and video
of past Federalist Society events, please visit our website at
fedsoc dot org slash multimedia. That's fe d s OC
dot org slash multimedia.
Speaker 2 (18:29):
This has been a FEDSOC audio production
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