The U.S. Supreme Court has scheduled oral arguments in a case that will have significant implications for cases brought under the False Claims Act (FCA). In Universal Health Services v. United States ex rel. Escobar, No. 15-7, the Court will hear argument on two important questions. First, whether the “implied certification” theory of legal falsity is viable under the FCA, a question on which the circuit courts of appeal are divided. If the Court concludes the implied certification theory is viable, then the second issue it will consider is whether government contractors’ reimbursement claims can be legally “false” under that theory when the statute, regulation, or contractual provision claimed to be violated does not expressly state that its compliance is a condition of payment. The Court’s decision on this latter question also will resolve a circuit split; the First, Fourth, and D.C. Circuits each have held that liability can attach despite the absence of language in a contract or applicable rule or regulation that the contractor’s compliance with such requirement is an express condition of payment. Conversely, the Second and Sixth Circuits have held that the statute, regulation, or contractual provision must expressly state that it is a condition of payment.
This is an important case for companies doing business with the government because it will have a significant and direct impact on one of the most prolific kinds of FCA claims currently being prosecuted by relators and the government.