[Cross-posted from L3: Long Leaf Law Blog]
In Universal Health Services v. United States ex rel. Escobar (UHS), the Supreme Court upheld the Civil False Claims Act (FCA) theory of “implied certification,” under which the submission of a claim for reimbursement “implies” that the claimant is in compliance with the statutes, regulations, and contract provisions necessary for that claim to be paid. Escobar was filed by the parents of a young woman who died after receiving Medicaid-covered mental health treatment from a Massachusetts clinic that violated state licensing and supervision regulations. Her parents alleged that the clinic’s claims were fraudulent because they implicitly (and falsely) represented that the facility was in compliance with the relevant provisions. A district court dismissed the suit, but the First Circuit reversed. In a unanimous opinion written by Justice Thomas, the Supreme Court held that where a defendant “makes specific representations about the goods or services provided, but knowingly fails to disclose . . . noncompliance with a statutory, regulatory, or contractual requirement[,] . . . liability may attach if the omission renders those representations misleading.” But cautioning that such misrepresentations must be “material to the Government’s payment decision,” the Court reversed and remanded because the First Circuit had applied an impermissibly broad test.
Escobar was not the only federal appellate case to grapple with implied certification in recent years. In 2015, the year the First Circuit considered Escobar, no fewer than four federal appellate cases confronted the theory. Arguably the most important of these cases, at least from the standpoint of national security, was United States ex rel. Badr v. Triple Canopy, Inc., a Fourth Circuit case reversing the dismissal of a suit alleging that a military contractor had falsified marksmanship scores for Ugandan security guards hired to protect Al Asad Airbase in Iraq. Noting that the contract did not expressly condition payment on marksmanship, the district court had concluded that the claims did not contain any factually false statements. The Fourth Circuit disagreed, upholding the allegations under the theory of implied certification. Perhaps due to the tragic facts and sympathetic plaintiffs, or perhaps in recognition of the important role Medicare and Medicaid FCA cases now occupy, the Court instead chose to review Escobar rather than Triple Canopy. Nevertheless, in light of Escobar, Triple Canopy was reversed and remanded for further proceedings. On May 16, 2017, the Fourth Circuit issued its long-awaited decision on remand.