Dish Network must again face a whistleblower lawsuit (2)

DishNetwork Corp. Must Defend Again in a False Claims Act Lawsuit by a Whistleblower Alleging He Used Fake Small Businesses to Obtain Billions of FCC Communications Licenses dollars, the DC Circuit said Tuesday.

Vermont National Telephone Co. showed a district court erred in ruling that the FCA’s ‘bar of governmental action’ required the dismissal, U.S. Court of Appeals Judge David S. Tatel said. United States for the DC Circuit in its decision to cancel.

The bar excludes lawsuits “based on allegations or transactions that are the subject of a civil lawsuit or civil administrative monetary penalty proceeding in which the government is already a party.”

Vermont National argued that its complaint against the FCA — filed days after a licensing challenge by the Federal Communications Commission — should not have been dismissed because the agency’s proceeding never resulted in a sanction.

Because the FCC did not have the authority to impose civil monetary penalties during its licensing process, the licensing process was not an administrative monetary penalty proceeding, the court said.

Vermont National alleges that the conduct of companies controlled by Dish Network defrauded the government out of $3.3 billion.

Lawyers for the parties did not immediately respond to a request for comment.

“DC Circuit’s opinion is good news for whistleblowers. The court asserted that who tam actions are only prohibited by a limited set of administrative procedures for “civil monetary penalties” and not by all actions of government agencies in which penalties may be imposed such as, in this case, default payments made by defendants after the FCC’s licensing proceedings for spectrum licenses, said Colette G. Matzzie, who represents whistleblowers. She is with Phillips & Cohen LLP in Washington.

“This decision will encourage whistleblowers with knowledge of federal program fraud to come forward, confident that the qui tam case is unlikely to be dismissed due to agency actions that are not procedural to recover civil monetary penalties for the alleged fraudulent conduct,” she said. mentioned.

Selective by default

Dish argued that the FCC imposed penalties by subjecting the smaller companies — Northstar Wireless LLC and SNR Wireless License Co. — to default payments after they selectively defaulted on their winning bids.

But even assuming the default payments are penalties, they had no bearing on whether the FCC licensing process was a civil monetary penalty proceeding, the court said. Default payments were not assessed during the licensing process, the court said.

It “would make no sense” to conclude that the FCC’s ultimate imposition of default payments, triggered by an event that had not yet occurred at the time of the licensing process, retroactively transformed the licensing process. into civil monetary penalty proceedings, the court heard. .

The default payments did not stem directly from the FCC’s decision in the licensing process that Northstar and SNR were ineligible to bid, the court said.

Dish also argued that the FCC can impose forfeiture penalties for violating an FCC rule or regulation. But FCC regulations provide that the agency can only authorize forfeiture penalties as part of forfeiture proceedings, the court said.

The FCC had no authority to impose forfeiture penalties because it did not initiate forfeiture proceedings, the court said.

Spectrum Auctions

Vermont National alleged that Dish’s scheme prevented it from participating fairly in a 2014 FCC auction for spectrum licenses, which allowed companies to provide television, cell phone and Internet services without thread.

The auction offered discounts to winning bidders with less than $15 million in revenue. But Dish Network, which was not an eligible small business, conspired to set up shell businesses to get the discount and outbid legitimate small businesses, Vermont National said.

Northstar and SNR did not disclose to the FCC that Dish Network controlled them and that Dish would receive those licenses going forward, Vermont National claimed.

An affiliate of Vermont National and others filed a petition with the FCC challenging the licenses on May 11, 2015. Vermont National filed its FCA lawsuit two days later.

A district court dismissed the FCA’s lawsuit under the government’s action bar in March 2021. The lawsuit was filed days after an FCC hearing addressed the same allegations and transactions present in the Vermont National’s lawsuit, the district court found.

Materiality

The district court also said that Vermont National’s complaint did not meet the FCA’s materiality requirement because it did not show that Vermont Wireless had failed to demonstrate that disclosure of any secret agreement between Dish and the affiliates would have influenced government payment decisions.

The DC circuit reversed this conclusion.

The Vermont National alleged that Northstar and SNR knowingly failed to disclose all of their agreements with Dish, and they falsely certified that they had disclosed all of the agreements, the DC Circuit said.

The alleged false certifications and failure to disclose agreements could affect FCC eligibility determinations, the court said.

Any disputes over how the FCC reviews bid applications should be addressed at a later stage in the case, he said.

Judges Judith W. Rogers and Cornelia TL Pillard joined in the decision.

Wiley Rein LLP and MoloLamken LLP represented Vermont National. Hogan Lovells US LLP, Wilmer Cutler Pickering Hale & Dorr LLP and Covington & Burling LLP have represented the defendants on several occasions.

The case is that of the United States ex rel. Vt. Nat’l Tel. Co. c. Northstar Wireless LLC, DC Cir., No. 21-7039, 5/17/22.

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