Kirsten Mayer, Ropes & Gray litigation & enforcement partner, examines the implied certification theory of liability under the False Claims Act.
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In 2016, the Supreme Court decided Universal Health Services v. U.S. ex rel. Escobar, which was an important case in the False Claims Act area. It's the first time the Supreme Court has addressed the scope of liability under the False Claims Act in a very long time.
The False Claims Act at its simplest says that you cannot submit a false claim for payment to the government. So you could submit a false claim for payment to the government if, for example, you provided a certain type of health service and the government says that we'll pay $100 for that service, but you billed $125 to the government. If you submit that claim for payment, that would be a false claim, because it's more than it should be. There's a different kind of False Claims Act liability though that some district courts and circuit courts had started recognizing over the last 10 to 15 years, and that is what has been known as implied certification liability. In that type of liability, the claim itself is still for $100 – you provided a service that cost $100 and you billed the government $100 for it. However, what makes it false under this theory is that there was some other legal requirement that you were required to comply with that you failed to comply with. And in one version of implied certification liability, the fact that you billed when you had failed to comply with that other legal requirement itself makes the claim false.
So the challenge under the False Claims Act implied certification theory for companies and other individuals who are subject to complex regulatory and statutory schemes or complex contractual requirements is, how can you tell whether compliance with a particular legal requirement is material to any claim for payment that you make to the government? And by “material,” means is it important? Is it something that the government needs you to be in compliance with when you submit a claim for payment? What the Supreme Court did in Escobar is it addressed this question head on. First, and it's important to understand this, it did not endorse all implied certification. It said that implied certification can be a basis for False Claims Act liability under some circumstances. In particular, it held that if the claim for payment identified goods or services that were being provided and billed for and a failure to comply with a statutory, regulatory, or contractual requirement that was material to payment made those representations false, then the failure to comply with that material legal requirement can render the claim false.
Escobar is only a year old. There have been a number of courts that have already interpreted it in the district courts and in some circuits. However, what remains an open question is how strictly courts are going to enforce Escobar. So what's going to be critical for clients and for companies and individuals who are subject potentially to False Claims Act liability is to pay attention to the way the law is developing in the circuits in particular where you could potentially be reached in litigation. There is considerable variety that's emerging among the circuits in how they are approaching both what a whistleblower needs to plead in these cases and what they need to prove, as well as with respect to the scope of what implied false certification liability may reach. Ultimately, these issues will likely need to be resolved by the Supreme Court, but until then, the best thing you can do is to pay attention to how the law is developing in your immediate area.