Small businesses here in Alabama are still financially recovering from the impact of the coronavirus. At a time when we needed help the most, we felt forgotten. For many, this meant closing up shop or struggling to stay afloat.
Even so, small businesses around here have continued to plow through. More than anything, we recognize that we can bet on ourselves to turn things around. Yet, instead of supporting communities like mine, Congress is looking to make it harder on small businesses to recover. Rather, Washington is putting forth legislation that makes it easier for trial lawyers and other bad actors to file frivolous lawsuits against small businesses that have government contracts.
Senators Chuck Grassley (R-IA) and Patrick Leahy (D-VT) introduced amendments that would drastically change the Federal Claims Act (FCA). This good law has been used by the federal government since the Civil War as the primary way of fighting contracting fraud. The Supreme Court unanimously strengthened this rule in 2016 when they ruled that the FCA should not be used to sanction “garden-variety” or “technical violations.” Instead, the FCA is meant to be used when there is meaningful and material fraud.
Now, Senators Grassley and Leahy are attempting to compromise the Supreme Court’s unanimous ruling by lowering the bar under which FCA lawsuits can be filed. These changes would allow companies to be sued over technical breaches of contract. It allows trial lawyers to strike it rich at the financial expense of small businesses that must now fight costly lawsuits.
The reality is that these changes are unnecessary and would disrupt a system that already works. The numbers don’t lie. The Department of Justice has collected over $11 billion in FCA cases and settlements over the past three years, showing that real fraud is still being successfully targeted by the government.
Moreover, the Grassley-Leahy amendments to the FCA would have far-reaching effects on the industries and businesses that have helped combat the COVID-19 pandemic. The government dedicated billions of dollars to health centers, hospitals, and other healthcare institutions to develop treatments for the virus. These FCA changes would open these organizations up to baseless, costly lawsuits at a time where they are trying to recover. It allows trial lawyers and other bad actors to take advantage of the system by filing lawsuits against any organization that commits a technical contract violation, something the FCA was never intended to do.
Small businesses across the country are still feeling the effects of the pandemic. Instead of helping our communities’ small businesses recover, Senator Grassley and Leahy are trying to open us up to needless liability. I hope Alabama’s Senators also recognize the harm of this bill and stand against it.