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Supreme Court Upholds Implied Certification Liability under the FCA

In Universal Health Services v. United States ex rel. Escobar, the Supreme Court held that the implied certification theory of liability can be the basis for liability under the False Claims Act when a defendant submitting a claim makes specific representations about goods or services provided, but fails to disclose non-compliance with material statutory, regulatory or contractual requirements. The Court further held that liability under the FCA does not depend on whether the requirements were expressly designated as a condition of payment.

The Supreme Court’s reasoning for upholding the implied certification theory of liability stems largely from its reasoning underlying the materiality requirement of the False Claims Act, which serves as a check on limiting the False Claims Act’s applicability to fraudulent claims for payment as opposed to mere contract violations. According to the Supreme Court, the materiality requirement looks to whether knowledge of the noncompliance would have affected the government’s payment decision, and identified a number of factors to be considered, including knowledge of the government’s failure to pay based on noncompliance with a specific requirement. Relators seeking to relying on an implied certification theory of liability will need to take care to ensure that their claims satisfy the materiality requirement as set forth in Esscobar as defendants will surely continue to make this one of the areas of attack in attempting to dismiss False Claims Act complaint.

To read the Supreme Court’s Opinion, click here: http://www.supremecourt.gov/opinions/15pdf/15-7_a074.pdf

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