David W. O'BrienBrian Tully McLaughlinJason M. CrawfordJared Engelking

Last week, in a case that will have a significant impact on the health care and government contracting industries, and also on potential whistleblowers, the Supreme Court granted certiorari in Universal Health Services, Inc. v. United States ex rel. Escobar, a False Claims Act (FCA) case from the First Circuit. By agreeing to hear the case, the Court appears set to resolve a circuit split over the “implied certification” theory of legal falsity under the FCA.  Specifically, the court will consider: (1) whether the implied certification theory of legal falsity under the FCA is viable; and (2) if so, whether a government contractor’s reimbursement claim can be legally false when the claimant failed to comply with a statute, regulation, or contractual provision that is deemed “material” to the government’s decision to pay the claim, even when the statute, regulation or contractual provision does not expressly state that compliance with that provision is a condition of payment.

False certification li­ability involves a claim that is legally false—e.g., a contractor fails to satisfy a legal re­quirement underlying the claim for payment. The false certification theory posits that if the Govern­ment pays funds to a party, but would not have paid those funds if it had known of a violation of a law or regulation, the claim submitted for those funds is a violation of the FCA.  Courts have found that a false certification case can arise from an ex­press or an implied certification. An express certifi­cation occurs if a company certifies compliance with specific legal requirements when it submits a claim for payment. “Implied certification” comes into play when the contractor does not make any express certifications when it submits a claim for payment, but arguably implies that it is in compliance with an array of governing laws and regulations by submitting its claim under its contract.

In 2015, four circuit courts addressed the issue of implied certification, underscoring the importance of the implied certification theory to the Government and so-called whistleblowers (referred to as “relators” under the FCA). At present, eight of the thirteen circuits have accepted the implied certification theory in some form, with only the Seventh Circuit rejecting the theory outright, but the eight circuits have reached varying conclusions about the appropriate scope of the theory. The Sixth and Second Circuits have held that liability for a legally false reimbursement claim requires that the contract, statute, or regulation expressly state that it is a prerequisite of payment. On the other hand, the Fourth, First, and D.C. Circuits have generally held that a government contractor’s reimbursement claim can still be legally false, and thus subject it to FCA liability, if the provider failed to comply with a contract, statute, or regulatory provision that does not state that compliance is a prerequisite of payment. Under this theory, a contractor can face liability even if it failed to comply with one of the technical requirements imposed by the contract, so long as that requirement was somehow material to payment. The Court’s decision will have implications for any business that submits claims for payment to the federal government, and will likely eliminate the possibility of different outcomes for attaching FCA liability—under factually identical circumstances—based on where the case is filed.