Supreme Court Rules E-Rate Reimbursement Requests Subject to False Claims Act Liability

Supreme Court Rules E-Rate Reimbursement Requests Subject to False Claims Act Liability

On February 21, 2025, the U.S. Supreme Court unanimously ruled that E-Rate program reimbursement requests can qualify as “claims” under the False Claims Act (FCA), significantly increasing potential liability for service providers participating in the program. The decision in Wisconsin Bell, Inc. v. United States ex rel. Heath means that carriers could face treble damages and substantial civil penalties if they submit false or fraudulent requests for E-Rate reimbursement.

The E-Rate program, established under the Telecommunications Act of 1996, provides subsidies for internet and telecommunications services to schools and libraries nationwide. It is primarily funded through carrier contributions to the Universal Service Fund (USF), which is administered by the Universal Service Administrative Company (USAC). A central requirement of the program is the “lowest corresponding price” rule, which prohibits carriers from charging schools and libraries more than they would charge similarly situated non-residential customers.

For providers participating in the E-Rate program, this ruling necessitates heightened vigilance in program compliance. Carriers must now ensure the strictest adherence to all program rules, particularly the “lowest corresponding price” requirement. Documentation of pricing decisions has become even more critical, as has careful verification of all information included in reimbursement requests. Even unintentional errors could potentially trigger FCA’s severe financial consequences, including up to three times the actual or compensatory damages.

Court’s Signal Future Questions on USAC and the Universal Service Fund

The Court’s decision also raises broader questions about the E-Rate program’s structure and administration. In a concurring opinion, Justice Thomas expressed concern about the constitutional implications of USAC’s role in administering federal funds. This constitutional question will be directly addressed in the upcoming Supreme Court case, Consumers’ Research v. FCC, where the Court will examine whether the FCC’s delegation of authority to USAC violates constitutional principles. The outcome could potentially reshape the entire Universal Service Fund administration, affecting all USF programs including those critical to rural providers, such as High-Cost support.

Guidance for E-Rate Participants

JSI recommends that clients who participate in the E-Rate program conduct a thorough review of their compliance procedures immediately. This should include evaluation of pricing methodologies, verification processes for reimbursement requests, and internal controls to prevent potential violations. JSI can assist with these compliance reviews and help implement enhanced safeguards to mitigate risk under this new liability framework.

For assistance with E-Rate compliance or questions about how this Supreme Court decision affects your operations, please contact Brett Hallagan or Dounia Chikhoune.