Breaking: SCOTUS to Resolve Central Issue under the False Claims Act

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The Supreme Court announced that it is taking a case to resolve several hot issues fundamental to the False Claims Act. In Universal Health Services v. United States ex rel. Escobar, the Court will tackle whether the implied-certification theory is viable and, if so, the scope of that theory. If the implied-certification theory is viable, the second question is whether only violations of express conditions of payment are actionable under that theory.

Here are the exact questions the court has agreed to hear (it declined on the first):

2. Whether the “implied certification” theory of legal falsity under the FCA–applied by the First Circuit below but recently rejected by the Seventh Circuit–is viable.
3. If the “implied certification” theory is viable, whether a government contractor’s reimbursement claim can be legally “false” under that theory if the provider failed to comply with a statute, regulation, or contractual provision that does not state that it is a condition of payment, as held by the First, Fourth, and D.C. Circuits; or whether liability or a legally “false” reimbursement claim requires that the statute, regulation, or contractual provision expressly state that it is a condition of payment, as held by the Second and Sixth Circuits.

Notably, the Supreme Court has never adopted the express vs. implied certification framework at the center of the case. Nor does the text of the statute support the framework. That framework, in my opinion (and the First Circuit‘s), makes the task of applying the statute more difficult, does not accurately reflect the statutory text, and should be abandoned.

I agree with the First Circuit on this one: “Judicially-created categories sometimes can help carry out a statute’s requirements, but they can also create artificial barriers that obscure and distort those requirements.” That is what has happened here, as an ad-hoc analytical framework first adopted in 2001 by the Second Circuit for a very narrow application has taken on a life of its own and come to overshadow the text of the statute.

The Supreme Court needs to get back to basics–the text of the statute–which mentions nothing about “certifications,” whether they be “express” or “implied”, and which says nothing about “conditions of payment.” 

We will be following the progress of this very important case as it moves forward. Stay tuned…