Potential And Contingent Penalties Are Not Obligations Under The False Claims Act


On December 13, the U.S. Court of Appeals for the Fifth Circuit decided the case of United States of America, e ex rel. Jeffrey M. Simoneaux v. E. I. duPont de Nemours & Company. Reversing the district court, the Fifth Circuit held that “potential or contingent penalties” are not obligations under the federal False Claims Act (FCA) and they are not obligations under the FCA “even when a statute requires immediate action from a violator,[because] the Government must still choose whether to impose a penalty.”

The plaintiff and former du Pont employee, Jeffrey Simoneaux, brought a qui tam action against du Pont under the FCA, alleging that du Pont “violated the reverse-false-claims provision, 31 U.S.C. § 3729(a)(1)(G), by concealing an obligation to pay the United States a penalty arising from alleged violations of the Toxic Substance Control Act (“TSCA”).” It was alleged that du Pont failed to report to EPA leaks of SO2 and sulfur trioxide. By failing to make a report under Section 8(e) of TSCA, du Pont owed the United States a penalty and avoided that obligation.

In response, DuPont argued that it had no obligation to pay anything to the United States because the Environmental Protection Agency (EPA) had not assessed a penalty.

Section 2615(a) of TSCA gives EPA the discretion to determine whether a penalty should be assessed. The Fifth Circuit notes that the FCA has been amended recently, but these amendments, ostensibly liberalizing the relevant FCA requirements did not have the effect of nullifying applicable Fifth Circuit precedent. Accordingly, the reverse-FCA claim was reversed and remanded.

DuPont’s appeal of a companion wrongful termination case was dismissed for lack of appellate jurisdiction.