Supreme Court To Address Permissibility And Scope Of Implied Certification Liability Under The False Claims Act

On Friday, December 4, the Supreme Court agreed to hear a case raising the questions of whether implied certification liability is permissible under the False Claims Act and, if so, under what circumstances. Because many of the courts of appeals have accepted implied certification liability for years, implied certification has become a common basis for FCA claims concerning many kinds of government programs. A decision by the Supreme Court to reject implied certification liability or to restrict the circumstances in which it is permissible could markedly reduce the number of FCA claims brought by both relators and the government.

The case is Universal Health Services v. United States ex rel. Escobar, No. 15-7. It comes from the First Circuit, and the precise questions presented are: (1) "[w]hether 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"; and (2) if so, "whether a government contractor's reimbursement claim can be legally 'false' under [the implied certification] 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. Circuit; or whether liability for 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."1

Background

The relators are the parents of a woman who died of a seizure after being treated by allegedly unlicensed and unsupervised staff at a provider of mental health services. The premise of their claims is that because the provider allegedly failed to hire and supervise its staff properly, in violation of state regulations, its submission of reimbursement claims to the state Medicaid agency violated both the FCA and its state equivalent.

The district court dismissed the case. Drawing a distinction between conditions of payment and conditions of participation, the court held that only noncompliance with statutory or regulatory conditions of payment could render a contractor's claims for payment actionably false. The conditions at issue in this case, the district court determined, were conditions of the defendant's participation in the relevant program, not conditions of its receiving payments.

The First Circuit reversed, holding that "any...