As we reported earlier, district courts have split on whether Escobar’s so-called “two-part test” is the sole means of establishing implied certification liability under the FCA. In Escobar, the Supreme Court held that implied certification liability may exist where: (1) the claim does not merely request payment, but also makes specific representations about the goods or services provided; and (2) the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading. While some courts have determined that Escobar’s two-part test is the exclusive means of establishing implied certification liability, DOJ and various qui tam relators have argued that implied certification claims may proceed—at least in some cases—without establishing “specific misrepresentations” about the goods or services provided.

At least two courts have adopted that broader view of implied certification liability. Earlier this month, in United States ex rel. Panarello v. Kaplan Early Learning Co., No. 11-cv-00353, 2016 U.S. Dist. LEXIS 158193 (W.D.N.Y. Nov. 14, 2016)[2], a magistrate judge held that “Escobar cannot be read to impose the ‘specific misrepresentations’ requirement in every case. Id. at *11. Thus, even though the Supreme Court described the alleged claims in Escobar as misleading precisely because they invoked Medicare payment codes, and thereby represented that the defendant had furnished a “specific” medical service, the magistrate judge in Panarello permitted an implied certification claim to proceed even though the defendant’s claims did “not use payment codes” or “contain specific representations about the goods or services provided.” Id. at *12 (internal quotation marks omitted). Earlier this year, the district court in Rose v. Stephens Institute, 2016 U.S. Dist. LEXIS 128269 (N.D. Cal. 2016), reached the same conclusion.

Importantly, however, both courts recognized that their decision not to treat the “two conditions of Escobar as absolute requirements” are debatable. Panarello, 2016 U.S. Dist. LEXIS 158193, *14. As we discussed here, the district court in Rose certified the question to the Ninth Circuit pursuant to 28 U.S.C. § 1292(b). And the magistrate judge in Panerello recommended certification to the Second Circuit.

Regardless of whether the Ninth and Second Circuits address the certified questions in these particular cases, it appears inevitable that this important issues—left open by Escobar—will continue to divide district courts, and will require consideration by the federal courts of appeals in the near future.