New York partner Diane Krebs was quoted in a Law360's article, "SBA, As Receiver, Not "Gov't' In FCA Case, 3rd Circ. Says" published on Friday, May 19, 2017.
Krebs represented Gordon & Rees's client, a software company accused by a disgruntled former employee of avoiding its obligation to pay accrued dividends to a shareholder being run by the U.S. Small Business Administration (SBA), which was acting as a receiver for the private shareholder. The plaintiff, a former executive of the software company filed an appeal to the Third Circuit Court of Appeals requesting that it revive his False Claims Act suit against the firm's client, which had been dismissed with prejudice by the New Jersey district court.
Law360 contacted Krebs to comment on the decision, which, in an issue of first impression for the Court, held that the SBA when acting as a receiver did not qualify as the "government" for purposes of a FCA action, a necessary prerequisite for a FCA claim. The Court also held separately that the claim could not succeed because the purported “obligation,” another prerequisite, was too speculative to be the foundation of a claim. The Court held it was not possible to avoid an obligation to pay when that obligation did not exist at the time of any alleged misconduct.
Krebs commented: "Gordon & Rees is obviously very pleased with the decision. We are particularly gratified that the court took the time to decide issues of first or limited impression and adopted in total the rationales we argued. These rulings should be very helpful in cutting off FCA claims in the future."