In a closely watched decision, the U.S. Supreme Court has unanimously endorsed a version of the “implied false certification” theory of liability under the False Claims Act (“FCA”). In a decision that leaves almost as many questions unanswered as it resolved, the Court held that a material omission on a claim for payment may give rise to liability where two conditions are met: (1) the claim does not merely request payment, but also makes specific representations about the nature of the goods or services provided, and (2) the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths. The case is Universal Health Services v. U.S. ex rel. Escobar. Despite the Court’s endorsement of an implied false certification theory of liability, FCA defendants may find a silver lining in the Court’s newly-clarified standard of materiality, which focuses on whether the defendant knowingly violated a requirement that the defendant knows is material to the government’s payment decision. The decision rejects the distinction drawn by many other courts for FCA liability purposes between conditions of payment and conditions of participation, and it suggests that no liability should exist under the FCA if the government was fully aware of the alleged regulatory, statutory, or contractual violation but elected to pay a claim anyway.
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