Update: On June 26, 2023 Governor Lamont signed this Act into law. 

The Connecticut State Legislature has passed a public act, which, if signed by Governor Lamont, will significantly expand the scope of the Connecticut False Claims Act.

On June 6, 2023, the Connecticut State Legislature passed Public Act No. 23-129, an Act Concerning Liability for False and Fraudulent Claims, which aims to remove the limitation in the current Connecticut False Claims Act that makes it only apply to state-administered health and human services programs. As passed by the legislature, the public act would permit the State Attorney General to initiate a civil action seeking damages and penalties for alleged false claims in almost any context involving state funds, including construction claims.

The Connecticut False Claims Act

The Connecticut False Claims Act was originally passed as a compliment to the Federal False Claims Act. Under the federal law, the Attorney General has the authority to initiate a civil action to recover federal funds, which were paid based on allegedly false claims made to the federal government. Individuals or entities found to have violated the law are liable for significant penalties, including a penalty of three times the damages sustained by the federal government due to the false claim. Additionally, private citizens with evidence of a False Claims Act violation are entitled to bring an action on behalf of the federal government. Private citizens who bring a False Claims Act action on behalf of the government are entitled to between 15 and 30% of any judgment or settlement reached in the case.

The Connecticut False Claims Act largely mirrors the Federal False Claims Act. Under the current version of the law, individuals and entities are prohibited from, among other things, knowingly presenting a false request or demand for money or property from any officer, employee, or agent of the state. The Act also prohibits making false claims to any other claim recipient if the money or property requested will be spent or used on the state’s behalf or to advance a state program or interest. Individuals or entities who violate the Connecticut False Claims Act risk incurring significant damages and penalties. Penalties for violations of the law include (1) a penalty of not less than $5,500 or more than $11,000, (2) three times the amount of damages sustained by the State due to the false claim, and (3) the costs incurred by the State to investigate and prosecute the violation. As with the Federal False Claims Act, private citizens may enforce the law on behalf of the State by bringing a civil action in the name of the State. Individuals who bring a civil action to enforce the law on behalf of the State are entitled to receive between 15 and 30% of any settlement or judgment paid by the defendant.

Critically, however, under the current version of the law, an individual or entity only violates the law if he or she makes a false claim in the context of a state-administered health or human services program. Public Act No. 23-129 aims to remove this restriction and expand the law to any claim that is made to the State or to any representative acting on behalf of the State.

Additionally, one important provision of Public Act No. 23-129 prohibits the State from bringing a counterclaim under the False Claims Act against a claimant in litigation or arbitration.  This attempts to mitigate concerns that the State could assert violations of the False Claims Act as leverage in litigation or arbitration.

Concerns from the Construction Industry

As amended by Public Act No. 23-129, and if signed by the Governor, the Connecticut False Claims Act would apply to almost any circumstance involving state funds. This is of particular concern to the State’s public contracting industry. Industry and trade organizations oppose the proposed bill.  The Connecticut Attorney General initially proposed the expansion of the Connecticut False Claims Act, which became the bill that passed the legislature.

Public contracting disputes often involve subjective interpretations of contract documents, specifications, and drawings. Good faith disagreements over the extent of a contractor’s scope of work can lead to payment disputes where one party may believe that it possess a legitimate claim while the other may subjectively view that claim as false. Under an expanded False Claims Act, public contractors who make good faith claims for payment could risk incurring damages and penalties for making a false claim if they fail to prove their claim. In addition, contractors could face significant costs to defend against alleged False Claims Act violations, particularly in light of the fact that private citizens may bring suit on behalf of the government to enforce the False Claims Act.

The Future of the Connecticut False Claims Act

Public Act No. 23-129 expanding the Connecticut False Claims Act will now head to Governor Lamont’s desk for signature. It is unclear at this time whether or when Governor Lamont will sign the public act into law. We will provide updates on the status of this bill as they emerge.