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On June 9, 2022, the NAM filed an amicus brief in the 9th Circuit arguing that, where a business acts in accordance with an objectively reasonable interpretation of an ambiguous government regulation, the business’s conduct does not fall within the ambit of the False Claims Act (FCA.) Originally enacted in 1863 in response to defense contractor fraud during the Civil War, the FCA is a federal statute used to combat fraud against the government. In this case, U.S. ex rel. Island Industries, Inc. v. Sigma Corp., a company brought a FCA suit against its competitor based on the purported failure to pay required antidumping duties. In a separate proceeding before the Court of International Trade, however, the court ruled that the antidumping duty order at issue was ambiguous and based upon the publicly available information, it was not clear whether the defendant’s product was subject to the duty. Further, the Department of Commerce thereafter agreed that the order was ambiguous, and as a result, held that no duties were owed. Nonetheless, a C.D. Cal. jury found the defendant liable for failing to pay the duties, returning an $8M verdict, before trebling.

The NAM filed a brief arguing that exposing companies to this type of draconian penalty for behaving in conformance with reasonable interpretations of legal requirements would create untold liability traps and unmoor the FCA from its narrow fraud-prevention purpose. Where, as here, a company takes an “objectively reasonable” position regarding a regulation or contract term that it was not warned away from by authoritative guidance, the FCA’s scienter—or knowledge—requirement simply is not satisfied. Further, a reasonable interpretation of an ambiguous regulation defeats any claim that there is an obligation to pay the government, or that the failure to adhere to a different reasonable interpretation is material to any payment to the government. Allowing the judgment to stand would transform the FCA into a blunt enforcement instrument and would impose unwarranted risks and uncertainties on manufacturers and other businesses that must navigate complex regulatory terrains.