A Business Litigation & False Claims Act/Whistleblower Firm

Escobar Did Not Create A Rigid Two-Part Test Applicable To All Implied Certification Cases

On September 20, 2016, U.S. District Judge Hamilton held that Escobar did not establish a ridge two-part test for falsity that must be met in every single implied certification case under the False Claims Act. The ruling was made in Rose v. Stephens Institute, Civil Action No. 09-cv-05966, which is pending in the United States District Court for the Northern District of California. The Rose case alleges that the defendant violated Title IV of the Higher Education Act by providing commissions, bonuses or other incentive payments based on successfully securing student enrollments. The defendants asked the court to reconsider summary judgment in light of the Supreme Court’s decision in Escobar.

On reconsideration, the court denied defendant’s renewed request for summary judgment. In Escobar, the Supreme Court said that liability can be found under the False Claims Act when the claim does not merely request payment, but also makes specific representations about the goods or services provided; and the defendant’s failure to disclose noncompliance with material requirements makes the representations misleading half-truths. According to the district court, the language in Escobar relied on by the defendant “does not purport to set out, as an absolute requirement, that implied false certification liability can attach only when these two conditions are met.” The district court specifically noted that the Supreme Court’s test must be read in context, and that the Supreme Court’s decision in Escobar did not establish a rigid two-part test that must be met in every implied certification case.

We will continue to follow post-Escobar develops, and report them in our blog.

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