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Law Offices of Elizabeth “Booka” Smith, LLC Blog

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June 16, 2016: US Supreme Court Recognizes "Implied Certification" Theory of FCA Liability

On June 16, 2016, the United States Supreme Court handed down a major victory to False Claims Act (FCA) whistleblowers by unanimously ruling (in Universal Health Services, Inc. v. U.S. et al. ex rel. Escobar et al.) that FCA liability can be predicated on a theory of “implied certification.” The Supreme Court’s decision means that FCA whistleblowers do not have to prove that the government contractor actually billed the federal government for non-existent services or unnecessary services in order to prevail in an FCA qui tam action. Rather, FCA whistleblowers can prevail by simply proving that the government contractor failed to comply with the “material” term(s) and requirement(s) of the government contract. Specifically, the Supreme Court weighed in on the First Circuit Court of Appeals’ decision in United States ex rel. Escobar v. United Health Services, Inc. While the Supreme Court agreed with the First Circuit’s decision that “implied certification” is a viable theory of FCA liability, the Supreme Court ultimately vacated the First Circuit’s decision in Escobar citing that the “materiality” standard articulated by the First Circuit is too broad. The Supreme Court clarified that in order to prevail on an implied certification theory of FCA liability, an FCA whistleblower is behooved to allege that the government contractor’s implicit certification was false to the point where had the government known about the non-compliance, it would not have paid the claim. In Escobar, the relators alleged that a mental health center’s grossly inadequate staff supervision and patient care lead to the death of their daughter. In considering the allegations presented, the Supreme Court suggested that if the government contract with United Health Services (UHS) mental health center made clear that proper staffing was a condition of payment, and if UHS falsely implied to the government that it was complicit with the contract’s staffing requirements in order to get paid, then UHS is exposed to a viable FCA qui tam action. Counsel for the relators in the Escobar case expressed confidence that the FCA whistleblowers will ultimately prevail because the requirements UHS violated were “material” under the Supreme Court’s definition. The Supreme Court’s ruling in UHS v. Escobar confirms that the FCA is arguably the most effective whistleblower law in the US to prevent fraud against the federal government. Since 2009, US taxpayers have recovered over $29.5 billion from government contractors committing fraud. The Law Offices of Elizabeth “Booka” Smith, LLC represents FCA whistleblowers. If you have knowledge or information about a company submitting fraudulent claims for payment on a government contract, CONTACT US to schedule an appointment to discuss potential FCA liability and your best course of action.

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