Will the Supreme Court Put the Brakes on False Claims Act Litigation? – March 14, 2016
Drinker Biddle & Reath
Description
In its opening brief in the Supreme Court, Petitioner argued that the implied certification theory “finds no purchase in the
text or history of the FCA and is unsupported by considerations of statutory purpose.” Brief of Petitioner Universal Health
Services, Inc., Universal Health Services, Inc. v. United States ex rel. Escobar, No.
15-7 (S.Ct. Jan. 19, 2016) at 28-29. Petitioner first examined the plain language of the statute and the meaning of the terms “false” and “fraudulent,” concluding that “[t]he essence of ‘falsity’ is whether a statement made is incorrect, not whether a statement that was not made would have been incorrect,” id.
at 30, and that when an allegation of fraud is based on non-disclosure, there can be no fraud absent a duty to speak, id. at 31. Next, Petitioner examined the FCA’s legislative history and policy reasons supporting rejection of the implied certification theory. Petitioner further explained that the implied certification theory “has the effect of putting words—false ones, at that—into [a] defendant’s mouth, and then penalizing the defendant for those alleged falsities.” Id. at 39-40. In the alternative, Petitioner argued that if the Court recognizes the impliedcertification theory, “its application must be limited to situations in which a defendant requests payment in violation of an expressly designated precondition payment.” Id. at 41.
Without such a restriction, there would be no way to determine what legal requirements could be the basis for imposing FCA punitive sanctions. The relators and the United States filed briefs arguing in favor of the implied certification theory and arguing that the relators’ complaint stated a claim for relief under the FCA. The Court’s decision in Escobar will have great significance for companies that do business with the government. Currently, health care entities and other companies operating in highly regulated fields do not know when they will be deemed to have “impliedly” certified compliance with a regulation enforceable under the False Claims Act. The Court’s opinion may bring clarity on this important question. The Supreme Court will hold oral argument in Escobar on April 19, 2016. 1 See, e.g., United States ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 387 (1st Cir.
2011) (applying implied certification theory of FCA liability and stating that preconditions of payment do not need to be expressly designated as such to give rise to false or fraudulent claim under this theory of liability); Mikes v. Straus, 274 F.3d 687, 700 (2d Cir. 2001) (holding that implied false certification theory is appropriately applied only when the underlying statute or regulation upon which the plaintiff relies expressly states the provider must comply in order to be paid); United States ex rel.
Wilkins v. United Health Grp., Inc., 659 F.3d 295, 307 (3d Cir. 2011) (adopting implied certification theory of liability, but noting that this “theory of liability should not be applied expansively, particularly when advanced on the basis of FCA allegations arising from the Government’s payment of claims under federally funded health care programs”); United States v.
Triple Canopy, 775 F.3d 628, 637 (4th Cir. 2015) (recognizing implied certification theory of liability and “appreciate[ing] that this theory ‘is prone to abuse’ by parties seeking ‘to turn the violation of minor contractual provisions into an FCA action’”); United States ex rel. Augustine v.
Century Health Servs., Inc., 289 F.3d 409, 415 (6th Cir. 2002) (adopting implied certification theory of liability); United States ex rel. Ebeid v.
Lungwitz, 616 F.3d 993, 995 (9th Cir. 2010) (same); United States ex rel. Conner v. Salina Reg’l Health Ctr., Inc., 543 F.3d 1211, 1217-18 (10th Cir. 2008) (same); United States ex rel. McNutt v.
Haleyville Med. Supplies, Inc., 423 F.3d 1256, 1259 (11th Cir. 2005) (same); United States v. Sci. Applications Int’l Corp., 626 F.3d 1257, 1269 (D.C. Cir. 2010) (applying implied certification theory of liability and holding that “express contractual language specifically linking compliance to eligibility for payment” is not required); but see United States v.
Sanford-Brown, Ltd., 788 F.3d 696, 711 (7th Cir. 2015) (“Although a number of other circuits have adopted this so called doctrine of implied false certification . . . we decline to join them.”). .
15-7 (S.Ct. Jan. 19, 2016) at 28-29. Petitioner first examined the plain language of the statute and the meaning of the terms “false” and “fraudulent,” concluding that “[t]he essence of ‘falsity’ is whether a statement made is incorrect, not whether a statement that was not made would have been incorrect,” id.
at 30, and that when an allegation of fraud is based on non-disclosure, there can be no fraud absent a duty to speak, id. at 31. Next, Petitioner examined the FCA’s legislative history and policy reasons supporting rejection of the implied certification theory. Petitioner further explained that the implied certification theory “has the effect of putting words—false ones, at that—into [a] defendant’s mouth, and then penalizing the defendant for those alleged falsities.” Id. at 39-40. In the alternative, Petitioner argued that if the Court recognizes the impliedcertification theory, “its application must be limited to situations in which a defendant requests payment in violation of an expressly designated precondition payment.” Id. at 41.
Without such a restriction, there would be no way to determine what legal requirements could be the basis for imposing FCA punitive sanctions. The relators and the United States filed briefs arguing in favor of the implied certification theory and arguing that the relators’ complaint stated a claim for relief under the FCA. The Court’s decision in Escobar will have great significance for companies that do business with the government. Currently, health care entities and other companies operating in highly regulated fields do not know when they will be deemed to have “impliedly” certified compliance with a regulation enforceable under the False Claims Act. The Court’s opinion may bring clarity on this important question. The Supreme Court will hold oral argument in Escobar on April 19, 2016. 1 See, e.g., United States ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 387 (1st Cir.
2011) (applying implied certification theory of FCA liability and stating that preconditions of payment do not need to be expressly designated as such to give rise to false or fraudulent claim under this theory of liability); Mikes v. Straus, 274 F.3d 687, 700 (2d Cir. 2001) (holding that implied false certification theory is appropriately applied only when the underlying statute or regulation upon which the plaintiff relies expressly states the provider must comply in order to be paid); United States ex rel.
Wilkins v. United Health Grp., Inc., 659 F.3d 295, 307 (3d Cir. 2011) (adopting implied certification theory of liability, but noting that this “theory of liability should not be applied expansively, particularly when advanced on the basis of FCA allegations arising from the Government’s payment of claims under federally funded health care programs”); United States v.
Triple Canopy, 775 F.3d 628, 637 (4th Cir. 2015) (recognizing implied certification theory of liability and “appreciate[ing] that this theory ‘is prone to abuse’ by parties seeking ‘to turn the violation of minor contractual provisions into an FCA action’”); United States ex rel. Augustine v.
Century Health Servs., Inc., 289 F.3d 409, 415 (6th Cir. 2002) (adopting implied certification theory of liability); United States ex rel. Ebeid v.
Lungwitz, 616 F.3d 993, 995 (9th Cir. 2010) (same); United States ex rel. Conner v. Salina Reg’l Health Ctr., Inc., 543 F.3d 1211, 1217-18 (10th Cir. 2008) (same); United States ex rel. McNutt v.
Haleyville Med. Supplies, Inc., 423 F.3d 1256, 1259 (11th Cir. 2005) (same); United States v. Sci. Applications Int’l Corp., 626 F.3d 1257, 1269 (D.C. Cir. 2010) (applying implied certification theory of liability and holding that “express contractual language specifically linking compliance to eligibility for payment” is not required); but see United States v.
Sanford-Brown, Ltd., 788 F.3d 696, 711 (7th Cir. 2015) (“Although a number of other circuits have adopted this so called doctrine of implied false certification . . . we decline to join them.”). .
