Term: 2015
Docket: 15-7
Universal Health Services, Inc. v. Escobar, Julio, Et Al
- Pro
15-7 UNIVERSAL HEALTH SERVICES, INC. V. ESCOBAR DECISION BELOW: 780 F.3d 504 LOWER COURT CASE NUMBER: 14-1423 QUESTION PRESENTED: The False Claims Act ("FCA") makes it unlawful to present a "false or fraudulent" claim for government reimbursement. 31 U.S.C. § 3729(a)(1)(A). A claim can be "factually false" because, for example, the contractor has not provided the products or services for which reimbursement is sought. Some courts have held that a claim can be "legally false" for purposes of the FCA because the contractor, while providing the products or services for which reimbursement is sought, did not comply with a condition of payment imposed by statute, regulation, or contract. This latter theory of FCA liability is divided into two categories: "express certification" and "implied certification." The viability and scope of the latter theory is at issue here. Respondents' complaint alleged that petitioner's reimbursement claims were legally false because petitioner's services did not comply with several specific regulatory provisions with which petitioner impliedly certified compliance. The district court dismissed the complaint pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6) because none of the regulatory provisions alleged in respondents' complaint, or otherwise cited by respondents in the proceeding, imposed conditions of payment, except one, and respondents did not plausibly allege any violation of that provision. The First Circuit below reversed, holding that respondents' complaint (1) alleged conduct that violated a regulation neither pled in respondents' complaint nor cited by respondents at any point in the proceedings below, and that (2) compliance with this unpled and uncited regulation was a condition of payment. According to the First Circuit, respondents thus stated a claim for legal falsity under the FCA. Although the First Circuit has eschewed labels used by other circuits in describing different types of FCA claims, it applied an "implied certification" theory of legal falsity. The questions presented are: 1. Whether the First Circuit, by sua sponte identifying and relying upon a regulatory provision not invoked by respondents at any point in the proceedings below to reverse the district court's dismissal of respondents' complaint, has so far deviated from the adversary system's party presentation rule "so as to call for an exercise of this Court's supervisory power" under this Court's Rule 10(a). 2. Whether the "implied certification" theory of legal falsity under the FCA-applied by the First Circuit below but recently rejected by the Seventh Circuit-is viable. 3. If the "implied certification" theory is viable, whether a government contractor's reimbursement claim can be legally "false" under that theory if the provider failed to comply with a statute, regulation, or contractual provision that does not state that it is a condition of payment, as held by the First, Fourth, and D.C. Circuits; or whether liability for a legally "false" reimbursement claim requires that the statute, regulation, or contractual provision expressly state that it is a condition of payment, as held by the Second and Sixth Circuits. LIMITED TO QUESTIONS 2 & 3 PRESENTED BY THE PETITION. CERT. GRANTED 12/4/2015
The case of Universal Health Services, Inc. v. Escobar revolved around the issue of whether a claimant can be held liable under the False Claims Act for implied false certification theory without proving that the defendant knowingly violated specific statutory or regulatory requirements. The Supreme Court ruled in favor of Escobar, establishing that liability could apply if two conditions were met: 1) claims made to government not only requested payment but also made specific representations about goods or services provided; and 2) failure to disclose noncompliance with material statutory, regulatory, or contractual requirements would mislead about those goods or services. This ruling expanded potential liability under the False Claims Act by allowing cases where defendants did not explicitly certify compliance with relevant regulations but were found implicitly misleading through omission.
In the dissenting opinion for Universal Health Services, Inc. v. Escobar, Justice Thomas argued that the majority's interpretation of implied false certification theory under the False Claims Act (FCA) was too broad and could potentially lead to excessive litigation and liability risks for government contractors. He expressed concern that this expansive view could allow minor contractual or regulatory violations to be treated as FCA frauds even if they were not material to the government’s decision to pay a claim. Furthermore, he disagreed with the majority's adoption of a subjective standard for determining whether a violation is material, arguing it would create uncertainty and unpredictability in enforcement of contracts by making it dependent on individual perceptions rather than objective standards.
