Two more tragic deaths from brain injuries on the football field were reported in recent weeks. On November 11, Hopi (Arizona) High School football player Charles Youvella died from a traumatic brain injury suffered in a game the previous weekend. On November 14, Tipton (Missouri) High School football player Chad Stover died from a traumatic brain injury suffered in a game that took place two weeks earlier. The details of these two events, and any related legal issues, are unclear at this point. What is clear is that these tragedies are another two too many.
As discussed in previous Sports and Entertainment Law Insider posts, the viability of claims against teams, leagues, and equipment manufacturers for concussion and other sports-related injuries remains subject to determination by the courts based on the facts of each case. Many athletes who have suffered serious injuries on the field, court, ring, or ice may find no remedy at law where there is no liability or right that has been violated, consistent with the ancient legal maxim damnum absque injuria. As the U.S. Supreme Court has explained, “where, although there is damage, there is no violation of a right no action can be maintained” (Alabama Power Co. v. Ickes, 302 U.S. 464 [1938]).
A recent decision from the United States District Court for the Eastern District of Pennsylvania in an action brought against a sports equipment reconditioning company and its principals under the federal and state False Claims Acts demonstrates the potential for the converse: legal liability, and the possibility of significant monetary awards, where there is no injury, or at least no injury to a specific, individual plaintiff (see Dale v. Abeshaus, No. 06-cv-04747, 2013 U.S. Dist. LEXIS 138634 [E.D. Pa. Sept. 26, 2013]).
The federal False Claims Act was originally passed in 1863 as a means for the federal government to recover financial losses incurred when useless goods were sold to the Union Army during the Civil War. The current version of the False Claims Act, as amended in 1986 and further strengthened in 2009, far exceeds the scope originally contemplated by Congress when it enacted the statute known as “Lincoln’s Law.”
In its current form, the False Claims Act is a powerful, wide-ranging tool in the hands of the government and “whistleblower” plaintiffs (a.k.a., qui tam relators). Importantly, civil liability under the False Claims Act is not limited to “direct” false or fraudulent claims such as where payment is made by the federal government for goods or services that are not delivered, or where the government is billed for a higher-priced good or service than was actually provided. Civil liability under the False Claims Act may also be based, among other grounds, on a false certification theory — i.e., where a defendant “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim” (31 U.S.C. § 3729[a][1][B]).
Significantly, the False Claims Act provides a statutory penalty of “not less than $5,000 and not more than $10,000” for each violation plus “[three] times the amount of damages which the Government sustains because of the act of that person” plus costs and attorneys’ fees (see 31 U.S.C. § 3729[a][1]; 31 U.S.C. § 3730[d]). The damages may be reduced to “[two] times the amount of damages which the Government sustains because of the act of that person” if the defendant complies with the False Claims Act’s self-reporting provision (31 U.S.C. § 3729[a][2]).
Many states have enacted state versions of the act that are similar, but not necessarily identical to, the federal False Claims Act. For instance, a person found to violate the New York False Claims Act may be subject to a civil penalty between $6,000 and $12,000, plus “three times the amount of all damages” sustained by the government, including consequential damages, plus costs and attorneys’ fees (see N.Y. State Fin. Law § 189[1][g], [3]). Actions commenced by a whistleblower (known as a “qui tam civil action”) are subject to a specific procedure delineated in the statute and provide the whistleblower with the possibility of being awarded 15 to 25 percent of the total recovery just for commencing the case, and 25 to 30 percent if the government does not intervene, plus expenses, costs, and attorneys fees (see N.Y. State Fin. Law § 190).
False Claims Act enforcement has traditionally been focused on the healthcare and construction industries. The Dale case demonstrates that sports-related businesses are not outside the reach of the federal and state False Claims Acts.
In Dale, the defendant company had contracts with federally-funded schools administered by the Department of Defense Education Activity as well as public school districts in 11 different states and the District of Columbia to recondition athletic equipment including football helmets. A former employee of the defendant company, brought a qui tam whistleblower action against the defendant company and several of its officers and executives alleging violations of the federal False Claims Act and several state versions of the act, including the New York False Claims Act. Specifically, the complaint alleges that defendants falsely certified that the reconditioned football helmets they provided to schools were in compliance with testing standards set by the National Operating Committee on Standards for Athletic Equipment. The plaintiff also alleged, among other violations of the False Claims Act, that defendants engaged in fraud in the bidding process and fraudulent acts of double-billing. The Dale court denied defendants’ motion to dismiss, holding that plaintiff had alleged sufficient facts supporting violations of the federal and state False Claims Act to allow the plaintiff’s claims to proceed to further litigation.
The rash of recent traumatic and tragic sports injuries are not likely to lead to a decrease in litigation, even where the theories of liability are unclear or ultimately untenable. The Dale decision demonstrates a new potential area of liability exposure to equipment manufacturers and suppliers that contract with schools or other government entities, without the necessity of any physical injury to a particular plaintiff. The lesson to all sports-related businesses is to exercise increasing diligence in processes and procedures to increase player safety and compliance with all applicable safety standards.