Support of MWI Corporation by the National Association of Manufacturers:
The Center News: December 2015
A Publication of the National Association of Manufacturers
By Linda Kelly, Senior Vice President and General Counsel
Sometimes David really does beat Goliath. For 17 years, Deerfield, Florida pump manufacturer Moving Waters Industries (MWI) fought the federal government in a False Claims Act case. And recently they won—and scored a victory for all manufacturers. The Manufacturers’ Center for Legal Action was pleased to have provided amicus support in this case contributing to the positive and somewhat surprising outcome.
MWI is a small, family-owned manufacturer of water pumps used for irrigation and sanitation systems. Before this case began in 1998, MWI was a major exporter of pumps to developing countries. The particular sale at issue in the case involved sale of pumps to Nigeria. Financing documents in the transaction required the disclosure of any commissions that were not “regular.” There was not an existing regulatory definition or guidance about what the term “regular” meant, so MWI applied what it thought was a reasonable interpretation—that a normal, longstanding, market rate commission was regular. Based on a complaint initiated by a qui tam relator who asserted that the commission was in fact “irregular,” the government initiated first a Foreign Corrupt Practices Act investigation, which it dropped, then a criminal False Claims Act investigation, which it dropped, and finally a civil False Claims Act case, which it pursued. Following a federal trial, the jury found in favor of the government and awarded substantial damages. Subsequent litigation addressed the proper amount of damages to be paid when the loan was paid back to the government in full, with interest, and the government suffered no actual damages.
In a government-initiated appeal to the DC Circuit concerning the damages amount, MWI decided to file a “Hail Mary” cross-appeal, questioning the underlying liability determination. They challenged the jury’s finding of False Claims Act liability based on three issues: (1) the term at issue was ambiguous, (2) the government had never provided guidance on how it should be interpreted and (3) the company had made a reasonable interpretation of the term. In an opinion that will have far-reaching implications for all industries subject to potential False Claims Act claims, on November 24, the DC Circuit reversed the jury verdict, finding that the False Claims Act was not intended to impose liability for an innocent, good faith mistake about the meaning of an applicable regulation. This outcome is an important victory for due process, and highlighted the fundamental unfairness of subjecting parties to liability for violating a rule without first providing notice of what the rule requires.
Congratulations to the leadership and the legal team at MWI, who persisted through the years in fighting to vindicate their company’s good name. Their resolve has yielded a great benefit for everyone in clarifying the law and protecting due process. The MCLA was proud to play a role in advancing this just outcome. This is the very reason we come to work each day.
CIVIL FALSE CLAIMS ACT: Supreme Court Denial of Certiorari in U.S. ex rel. Purcell v. MWI Lets Stand D. C. Circuit Decision Limiting FCA Liability Based on Ambiguous Agency Regulation, Fried, Frank, Harris, Shriver & Jacobson LLP, January 10, 2017