DOJ’s Revised False Claims Act Policies: New Defense Arguments for Contractors and Employers

By: Lydia A. Pappas, Esq.

Summary:

  • Development: DOJ updated two internal FCA policies, making it clear that DOJ attorneys should not treat agency manuals, FAQs, policy statements, or similar guidance as creating legal duties unless the duty appears in a statute, regulation, or contract. The updates also direct DOJ attorneys to consider whether certain declined whistleblower/qui tam cases should be dismissed.
  • Why it matters: The revisions may give government contractors, employers, and other companies facing FCA claims stronger grounds to challenge allegations based on agency guidance rather than binding legal or contractual obligations.
  • Action point: Companies facing FCA scrutiny should identify the specific obligation at issue, separate binding requirements from agency guidance, preserve key compliance records. In whistleblower cases DOJ has not taken over, companies should consider an early presentation explaining why the case should not continue.

The Department of Justice (“DOJ”) has revised two internal Justice Manual False Claims Act (“FCA”) policies in ways that may strengthen defenses for government contractors and employers facing investigations or whistleblower suits. First, DOJ attorneys should not use nonbinding agency guidance to create legal duties that do not appear in a statute, regulation, or contract. Second, DOJ attorneys should more actively consider seeking dismissal of meritless qui tam actions after the Government declines to intervene. The changes do not limit the FCA itself, but they provide defendants with clearer grounds to challenge overbroad enforcement theories.

Agency Guidance Cannot Create New Obligations

Agency manuals, FAQs, policy statements, audit protocols, and similar materials may explain compliance expectations, but generally do not carry the force of law. Under the revised policy, DOJ may cite guidance as evidence that a company had notice of an existing obligation. However, it should not use that guidance as a substitute for proving that a binding requirement existed and was violated. For defense contractors, that distinction may matter in cases involving cybersecurity, domestic-preference rules, cost or pricing disclosures, small-business status, labor obligations, and other certifications. Employers receiving federal funds should likewise identify whether an allegation rests on an actual legal or contractual duty or merely an agency’s preferred practice.

Declined Qui Tam Cases May Face Greater Scrutiny 

A relator may continue litigating in the Government’s name even when DOJ declines to intervene. DOJ attorneys are now directed to assess whether dismissal under 31 U.S.C. § 3730(c)(2)(A) would protect the United States’ interests and to revisit that question as the case develops.

Still, defendants have a stronger reason to make an early, focused presentation to DOJ identifying legal or factual defects, burdensome discovery, interference with agency programs, duplicative proceedings, or costs that outweigh any likely Government recovery.

What Companies Facing FCA Enforcement Actions Should Do Now

  1. Identify the binding duty: Map each challenged representation to the exact statute, regulation, solicitation term, contract clause, or certification that allegedly created the obligation. Attack any claims based on guidance rather than a statute, regulation, or contract.
  2. Separate mandates from recommendations: Preserve the guidance in effect at the relevant time and document how the company reasonably interpreted any ambiguous requirement.
  3. Build the defense record early: Retain contracts, amendments, agency communications, compliance assessments, disclosures, and the support for certifications. These materials may be central to falsity, knowledge, and materiality.
  4. Evaluate a DOJ dismissal presentation: In a declined qui tam case, consider explaining promptly why continued litigation would burden the Government or conflict with agency objectives.
  5. Maintain compliance discipline: The policies do not excuse violations of binding requirements. Continue testing controls, reviewing subcontractors, investigating credible reports, and evaluating potential disclosures with counsel.

The takeaway is measured but meaningful. Contractors and employers facing FCA scrutiny should insist that the Government and relators tie their theories to genuinely binding obligations, while assessing whether DOJ dismissal is available when a declined case lacks merit or imposes unjustified burdens. Early review by counsel can preserve defenses, protect privilege, and shape communications with investigating agencies.

Leech Tishman has extensive experience advising clients on False Claims Act, qui tam, and government investigation matters. Our team is prepared to help clients evaluate FCA allegations and respond strategically to investigations and whistleblower claims. For assistance or additional information, please contact Lydia A. Pappas at lpappas@leechtishman.com, attorney in Leech Tishman’s Labor & Employment and Litigation Practice Groups.