If you do business with the federal government, when does violating a statute, regulation, or contract provision become fraud? This is the question facing the U.S. Supreme Court in Universal Health Services v. United States ex rel. Escobar, which examines the scope of the False Claims Act (FCA). The FCA provides for treble damages and civil fines for anyone submitting false claims for payment to the federal government. Violations of the FCA must involve a “false or fraudulent claim” or “a false record or statement material to a false or fraudulent claim.” Traditionally, the falsity element of an FCA claim required a “factual falsehood” (e.g., submitting a claim for payment for 10 computers when only 5 were delivered) or an express false certification (e.g., certifying to a lack of organizational conflicts of interest when such conflicts exist). But does submitting a claim for payment, by itself, represent to the government that all applicable legal requirements were followed such that failing to comply with those requirements renders the claims “false”? Circuit Courts have split on this question, and now the Supreme Court will decide.
This case has significant implications for anyone doing business with the federal government. If the Court recognizes a so-called “implied certification” theory of liability, it could substantially increase contractors’ exposure to the FCA’s punishing statutory regime.
- Shane B. Kelly, Associate, Wiley Rein LLP
- Stephen J. Obermeier,Partner, Wiley Rein LLP