U.S. Supreme Court Agrees To Review The Validity Of 'Implied Certification' Liability Under The False Claims Act

On December 4, 2015, the U.S. Supreme Court granted certiorari in Universal Health Services, Inc. v. United States ex rel. Escobar, No. 15-7, to review the so-called "implied certification" theory of liability under the federal False Claims Act (FCA). That theory, which both the federal government and private "relators" have invoked with increasing frequency, finds an FCA violation for those who seek funds from the government while in violation of a legal or contractual obligation—even when they have not expressly verified their compliance with that legal or contractual obligation. Given the breadth of circumstances in which the implied certification theory has been, and can be, applied, the Court's ruling in Universal Health Services could bring far-reaching changes to the scope of FCA liability.

The FCA, which targets particular forms of fraud committed against the federal government, reaches virtually every aspect of the economy because it extends to those who seek and receive federal funds. Specifically, the statute imposes liability—along with treble damages and substantial civil penalties—for knowingly presenting (or causing to be presented) a "false or fraudulent claim" for payment on the federal government, or for making a false "record or statement material" to a "false or fraudulent claim" for payment. 31 U.S.C. § 3729(a)(1)(A), (B). The FCA does not, however, define "false or fraudulent" for purposes of this provision, so courts have adopted their own theories of falsity. One of those theories is the "implied certification" theory, which most circuits have adopted in one form or another. Under that theory, a defendant can be liable where a claim for payment is made to the government while the defendant is in violation of a statutory, regulatory or contractual provision—even if the defendant has not communicated to the government or anyone else that it is in compliance with such a provision. In this circumstance, the defendant is found to have implied its compliance when it (or someone at its behest) makes a claim for payment.

Many circuits have approved this theory even where the law or contract at issue does not expressly state that compliance with it is a condition of getting paid. See United States v. Triple Canopy, Inc., 775 F.3d 628, 636 (4th Cir. 2015), petition for cert. filed, No. 14-1440 (U.S. June 5, 2015); U.S. ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 387 (1st Cir. 2011); United States v. Sci...