“I meant what I said, and I said what I meant.”1 Or maybe not. Industry is eagerly awaiting the Supreme Court’s decision in Escobar. 2 The Court is expected to clarify whether a person can be held liable, not for something that the person said, but for what the person implied. Or more accurately, for what it is assumed that the person implied.

The False Claims Act (“Act”) was enacted in 1863 to attack fraud in the government’s procurement of supplies and services for use in the Civil War. The Act prohibits persons from knowingly making a false claim for monies to the government, either directly or indirectly.3 A “claim” can include any request for monies. The most typical claim is an invoice - either for payment due under a contract or for reimbursement of services rendered (e.g. Medicare reimbursements). “Indirectly” refers to a situation where one makes a false claim to a third party - for example, a subcontractor’s invoice to a prime contractor - knowing that the third party will use that claim to make further claim against the Government.

Violators can be liable for triple damages and statutory fines per false claim from $5,500 to $11,500.4

The most typical false claim is where a contractor invoices the Government for work not performed. Liability has been imposed, however, where the invoice itself is accurate, but the person knowingly misrepresents some fact associated with the invoice - for example, where a contractor knowingly misrepresents that it has complied with a particular contract requirement.

More recently, a number of Federal Circuit Courts of Appeal have held persons liable on the theory that simply by submitting a claim for payment, the person is implicitly certifying that it has complied with all of the prerequisites to payment. If the person knows that it has not, the associated claim is false, and the person can be held liable under the False Claims Act.

To be sure, the courts have held that the prerequisite in question - a contract requirement, for example - must be material to the government’s decision to pay the claim. That is, however, an ambiguous standard.

Industry’s concern with the theory of implied certifications rests less with concern over the government’s abuse of the theory and more with abuse by private persons. The Act allows private persons - employees, for example - to sue persons alleging violations of the Act - and to keep between 1/4 to 1/3 of any recovery.5 Private persons, therefore, have an incentive to bring such suits.

Industry’s concern is that given the complexity of government contracts it is an easy matter for a person, whether acting on good faith or not, to “see” something non-compliant in a company’s performance, and to use the same to allege that the company, in submitting invoices under the contract, violated the Act. That is, industry is concerned that the theory of implied certifications has led, and will continue to lead, to a number of frivolous suits.

Most of the Federal Circuits that have considered the matter have adopted the theory of implied certification. A few have rejected it.

It is widely expected that the Supreme Court, in Escobar, will reject or endorse the theory - and if it endorses the theory, will attempt to give greater guidance regarding its proper application.

It is, of course, risky business to attempt to predict a Court’s decision in any case. One strain of thought, however, is that the Court will follow the majority of the Circuit Courts of Appeal and endorse the theory. Another is that the Court will reject the theory viewing the question of what is material to the government’s decision to pay as one best left to Congress or the agencies. That is, for example, if any agency wants to hold its contractors liable under the Act it is an easy matter for the agency to identify what requirements the agency considers material to its decision to pay, and to require the contractor to expressly certify that it is compliant with the same.

The Court is expected to issue its decision this summer. In the meantime, and with a nod to the Courts that have adopted the theory, I will end this note starting that I do not intend to imply anything that I have not said - and that nothing that I have said, or am assumed to have implied, is, in any case, material to anything.