Commercial Litigation Update

The U.S. Court of Appeals for the Eleventh Circuit held in United States ex rel. Sedona Partners LLC v. Able Moving and Storage Inc., No. 22-13340 (11th Cir. Jul. 25, 2025), that while a district court has the discretion to dismiss a relator’s complaint before or once discovery has begun, it may not disregard the allegations of qui tam relators at the motion to dismiss stage solely because those allegations reflect information obtained in discovery.

In many cases, the payment of restitution by a party in a lawsuit involving the government or a governmental entity creates a tax-deductible business expense under Title 26, United States Code, Section 162(f) (hereinafter, “Section 162”). When it comes to violations of the False Claims Act, the Anti-Kickback Statute, Stark Law, or even common law fraud claims and contract disputes, understanding how this statute operates can offer substantial short- and long-term tax-benefits to entities facing stiff financial recoupments.  While it is unlikely that the costs of an investigation or restitution order will ever generate a financial net-gain for the entity footing the bill, it is important to appreciate that restitution and proactive remediation costs are viewed differently by both government enforcers (i.e. prosecutors) and tax-collectors, compared with other types of remuneration. Recognizing that there is a difference can, in some cases, help mitigate significant financial burdens.