Lance R. Pomerantz
Attorney at Law

Land     Title     Law

“Constructive Notice”  The  Newsletter

Excerpted from the December 7, 2016 mailing of "Constructive Notice":

The False Claims Act & Reverter Clauses

In a case of nationwide first impression, the U.S. Court of Appeals for the Sixth Circuit has construed the recently amended scienter requirement of the False Claims Act, 31 U.S.C. § 3729(a)(1)(G). As luck would have it, the opportunity arose out of an alleged breach of a reverter provision in a deed. U. S. A. ex rel. Harper v. Muskingum Watershed Conservancy District, No. 15-4406 (6th Cir., Nov. 21, 2016).

In 1949, the United States deeded a large parcel of land in Ohio to the Muskingum Watershed Conservancy District (“MWCD”). The deed provided the land would revert to the U. S. if MWCD alienated or attempted to alienate it, or if MWCD stopped using the land for recreation, conservation, or reservoir-development purposes. MWCD subsequently gave leases for fracking operations on the land. Fracking opponents discovered the deed restrictions and, believing the leases triggered the reverter, filed an action against MWCD under the False Claims Act, alleging that MWCD was knowingly withholding United States property from the federal government.

The Court held that under the newly-added requirement, “the term 'knowingly' must be interpreted to refer to a defendant’s awareness of both an obligation to the United States and his violation of that obligation.” Because the complaint failed to allege facts that create the inference that MWCD knew that the relevant deed restrictions required it to deliver property to the United States, and that it “act[ed] in deliberate ignorance” or in “reckless disregard” of that obligation, the complaint was properly dismissed.


Not discussed in the opinion is that the plaintiff’s claim presumed the reverter provision required MWCD to affirmatively convey the property to the federal government. Reverter clauses are typically self-executing and legal disputes usually concern whether the facts are sufficient to trigger the reverter contingency. The Harper opinion notes “after considering whether to involve itself in the [instant] action, the United States declined to intervene.” It was clear the federal government had not attempted to recover possession or otherwise clear its title pursuant to the reverter. Under these circumstances, it was far from certain MWCD had any obligation to “transmit property to the Government.”