SCOTUS Strikes a Blow to Government Contractors

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In Supreme Court Validates “Implied Certification” Liability Under False Claims Act, sadwe and our colleague Danielle Vrabie discuss the U.S. Supreme Court’s June 16, 2016 decision in Universal Health Services, Inc. v. United States ex rel. Escobar, No. 15-7. The government contractor and health care communities had hoped the Court would use this case to narrow the scope of liability under the federal False Claims Act (FCA). That did not happen. Rather, a unanimous Court held that: (1) “implied certification” is a valid theory of liability under the FCA and (2) FCA liability for failing to disclose violations of legal requirements depends on the “materiality” of those requirements, not on whether those requirements were express conditions of payment. The Court’s holdings expand the scope of FCA liability previously recognized in several jurisdictions, resulting in a defeat for companies that sell to or seek reimbursement from the federal government.

Photo:  Pixel Addict, Depressed, May 21, 2007 – Creative Commons