United States ex rel. Heath v. Wisconsin Bell, Inc.
111 F. Supp. 3d 923
E.D. Wis.2015Background
- Wisconsin Bell, a common carrier, received E-Rate subsidies from the Universal Service Fund (Fund) for telecommunications services to schools and libraries; relator Todd Heath alleges false certifications that Wisconsin Bell charged the lowest corresponding price (LCP) and thus obtained subsidies fraudulently under the False Claims Act (FCA).
- The Fund is financed by mandatory carrier contributions required by the FCC and administered by the Universal Service Administrative Company (USAC) under FCC oversight.
- Relator brings a qui tam action; the United States has not intervened but filed a statement of interest opposing dismissal; the Chamber of Commerce submitted an amicus brief supporting dismissal.
- Wisconsin Bell moved to dismiss under Rule 12(b)(6); relator moved for leave to file a second amended complaint to add detail, including post-2009 allegations.
- Central legal questions: whether payments from the Fund count as money “provided” by the federal government for FCA purposes (pre-2009 statute) and whether requests for payment to USAC qualify as claims presented to a federal “agent” (post-2009 statute).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Fund payments are "provided" by the government under the pre-2009 FCA | Heath: Government made Fund money available (mandatory contributions, budget treatment), so false claims to Fund are FCA claims | Wisconsin Bell: Fund payments are not government-provided because money does not come from Treasury / government did not "provide" funds | Court: "Provide" should be read broadly; mandatory contributions, FCC control, budget/treasury treatment create sufficiently close nexus — government provided the money; claim survives dismissal |
| Whether requests to USAC are claims presented to a government "agent" post-2009 | Heath: USAC acts as FCC/US government agent in administering the Fund, so requests to USAC are claims to a government agent | Wisconsin Bell: USAC is private; payments through USAC do not make claims to the government | Court: Allegations sufficiently plead agency — FCC authorizes and controls USAC operations — so relator may proceed on post-2009 theory |
| Pleading standard — whether relator stated a plausible FCA claim under Twombly/Iqbal | Heath: Complaint (and proposed amendment) alleges falsified LCP certifications and post-2009 conduct | Wisconsin Bell: Allegations insufficient legal conclusion; challenges nexus to federal funds and agency status | Court: Accepting factual allegations as true, complaint plausibly alleges both that government provided funds and that USAC is an agent; dismissal denied |
| Motion for leave to amend | Heath: Amendment adds details, particularly post-2009 examples, and responds to intervening case law; not prejudicial | Wisconsin Bell: Amendment is delayed, prejudicial, possibly futile | Court: Leave granted — no undue delay or bad faith; amendment not futile and not prejudicial |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard governs Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (courts accept factual allegations but not legal conclusions on motion to dismiss)
- Rainwater v. United States, 356 U.S. 590 (FCA’s purpose is to protect government funds from fraudulent claims)
- King v. Burwell, 576 U.S. 473 (respect legislative intent when interpreting statutes)
- United States v. Neifert-White Co., 390 U.S. 228 (FCA claim requires potential to cause government financial loss)
- United States ex rel. Yesudian v. Howard Univ., 153 F.3d 731 (claims submitted to private recipients of federal funds can qualify under the FCA given close nexus)
- United States ex rel. Shupe v. Cisco Sys., Inc., 759 F.3d 379 (discusses nexus/financial loss requirement for "provided" under FCA)
- United States ex rel. Sanders v. Am.-Amicable Life Ins. Co. of Tex., 545 F.3d 256 (analyzing whether government "furnished or made money available" for FCA purposes)