Dish Spectrum license fraud appeal has ‘very little precedent’

DishNetwork Corp. is expected to face a False Claims Act lawsuit accusing the company of using fake small businesses to win FCC communications licenses worth billions of dollars, whistleblower Vermont National Telephone Co. will plead in a Washington, DC appeals court on Thursday.

Vermont National said its lawsuit was wrongly dismissed under the FCA’s government action ban, which excludes lawsuits “based on allegations or transactions that are the subject of a civil suit or a civil administrative penalty proceeding in which the government is already a party”.

Vermont National told the U.S. Court of Appeals for the DC Circuit that its lawsuit against the FCA — filed days after an FCC challenge to the licensing — should not have been dismissed because the FCC process never resulted in a sanction.

There are “very few precedents” analyzing the defense against government action and its elements, particularly at the appellate level, said Andrew C. Bernasconi, who represents the FCA defendants. He is with Reed Smith LLP in Washington.

The decision’s potential significance is bolstered by the DC circuit’s stature in administrative law, he said.

Dish-affiliated entities waived licenses and made a “default payment” after FCC proceedings. But those actions were entirely voluntary under FCC rules, Vermont National said, meaning Dish never paid a wrongdoing penalty.

Dish said the dismissal of the FCA lawsuit was appropriate because what matters under the government’s action bar is whether the FCC had the power to impose sanctions, which it did. . And FCC regulations show default payments are actually penalties, Dish said.

Thursday’s argument is before Judges Judith W. Rogers, David S. Tatel and Cornelia TL Pillard.

Little used

The government action bar is rarely used by FCA defendants. In a Bloomberg Law opinion research, the government action ban is only mentioned twice by federal appeals courts — a 2017 Ninth Circuit opinion and a 2021 Fifth Circuit opinion.

Another FCA bar that excludes lawsuits based on publicly disclosed information, on the other hand, is mentioned 175 times.

The ban on government action exists to prevent whistleblowers from benefiting from a misconduct lawsuit the government is already aware of.

Layoffs below that bar have been rare and rightly so, said Colette G. Matzzie, who represents whistleblowers. She is with Phillips & Cohen LLP in Washington.

Congress had no intention of stopping meritorious whistleblower cases because of any administrative action involving the same transaction, she said.

“If that were the case, the administrative resolution of a bid challenge or contract adjustment or overpayment refund could on its own preclude a well-founded case alleging fraudulent inducement to contract or submission of false claims under a government contract,” she said.

“Crushed”

Vermont National says it was “crowded out” by Dish’s plan to win spectrum licenses at an FCC auction in 2014. Spectrum licenses allow companies to use specific frequencies to provide television, mobile phone and wireless Internet services.

The auction offered a 25% license discount to winning bidders with $15 million in revenue or less, Vermont National said.

Dish Network, which had $14.6 billion in adjusted revenue in fiscal 2014, conspired to create fake small businesses to get that discount and outbid legitimate small businesses, Vermont National said.

Two entities that were granted licenses, Northstar Wireless LLC and SNR Wireless License Co. LLC, did not disclose to the FCC that Dish Network controlled them and that Dish would receive those licenses going forward, Vermont National said.

business decision

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.

The FCC determined that Northstar and SNR were not eligible for auction credits, but it did not impose forfeiture penalties for misrepresentation, Vermont National said. Instead, Northstar and SNR made voluntary business decisions six weeks after the FCC’s decision not to honor the licenses.

FCC rules allow for “effective infringement” by allowing winning bidders to make default payments instead of taking spectrum licenses they no longer want, Vermont National said.

The federal district court found that this willful act was a sanction triggering the ban on government action. On appeal, Vermont National said the default payments had nothing to do with conduct at the auction or alleged fraud by the FCA.

Selective default appears to be the equivalent of an effective breach of contract or a decision to repay an overpayment, not a penalty, Matzzie said.

“Congress has been very specific about what precludes a qui tam in order to strike a balance that ensures adequate enforcement against knowingly alleged fraud,” she said.

Whether the payments were a penalty “really gets in the weeds of the FCC’s administrative and regulatory structure,” Bernasconi said.

But the bar for government action focuses on the existence of a civil administrative procedure over money, not on the imposition of a penalty, he said.

It does not matter that a sanction has been imposed, because if a procedure fails, a defendant should not be subjected to a second attempt on behalf of the government to sanction the same alleged conduct that the government has already prosecuted, he said. .

Wiley Rein LLP and MoloLamken LLP represent Vermont National. Hogan Lovells US LLP, Wilmer Cutler Pickering Hale & Dorr LLP and Covington & Burling LLP represent the defendants.

The case is that of the United States ex rel. Vt. Nat’l Tel. Co. c. Northstar Wireless LLC, DC Cir., pleading dated 03/03/22.

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