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Universal Health Servs. v. United States ex rel. Escobar

Supreme Court of the United States

April 19, 2016, Argued; June 16, 2016, Decided

No. 15-7

Opinion

Justice Thomas delivered the opinion of the Court.

 The False Claims Act, 31 U. S. C. §3729 et seq., imposes significant penalties on those who defraud the Government. This case concerns a theory of False Claims Act liability commonly referred to as “implied false certification.” According to this theory, when a defendant submits a claim, it impliedly certifies compliance with all conditions of payment. But if that claim fails to disclose the defendant’s violation of a material statutory, regulatory, or contractual requirement, so the theory goes, the defendant has made a misrepresentation [***8]  that renders the claim “false or fraudulent” under §3729(a)(1)(A). This case requires us to consider this theory of liability and to clarify some of the circumstances in which the False Claims Act imposes liability.

We first hold that, at least in certain circumstances, the implied false certification theory can be a basis for liability. Specifically, liability can attach when the defendant submits a claim for payment that makes specific representations about the goods or services provided, but knowingly fails to disclose the defendant’s noncompliance with a statutory, regulatory, or contractual requirement. In these circumstances, liability may attach if the omission renders those representations misleading.

 [*1996]  We further hold that False Claims Act liability for failing to disclose violations of legal requirements does not turn upon whether those requirements were expressly designated as conditions of payment. Defendants can be liable for violating requirements even if they were not expressly designated as conditions of payment. Conversely, even when a requirement is expressly designated a condition of payment, not every violation of such a requirement gives rise to liability. What matters is not the [***9]  label the Government attaches to a requirement, but whether the defendant knowingly violated a requirement that the defendant knows is material to the Government’s payment decision.

A misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be material to the Government’s payment decision in order to be actionable under the False Claims Act. We clarify below how that rigorous materiality requirement should be enforced.

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136 S. Ct. 1989 *; 195 L. Ed. 2d 348 **; 2016 U.S. LEXIS 3920 ***; 84 U.S.L.W. 4410; 41 I.E.R. Cas. (BNA) 709; 26 Fla. L. Weekly Fed. S 258

UNIVERSAL HEALTH SERVICES, INC., Petitioner v. UNITED STATES and MASSACHUSETTS, ex rel. JULIO ESCOBAR and CARMEN CORREA

Notice: The LEXIS pagination of this document is subject to change pending release of the final published version.

Prior History:  [***1] ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT

United States ex rel. Escobar v. Universal Health Servs., 780 F.3d 504, 2015 U.S. App. LEXIS 4234 (1st Cir. Mass., 2015)

Disposition: 780 F. 3d 504, vacated and remanded.

CORE TERMS

false claim, condition of payment, misrepresentation, violations, contractual, staff, submitting, fail to disclose, representations, compliance, designated, licensing, supervision, common-law, fraudulent, regulations, misleading, false certificate, fraudulent claim, misrepresented, noncompliance, knowingly, attach, materiality requirement, reimbursement claim, actual knowledge, social worker, qualifications, circumstances, counseling

Governments, Federal Government, Claims By & Against, Legislation, Interpretation, Torts, Business Torts, Fraud & Misrepresentation, Nondisclosure, Contracts Law, Defenses, Affirmative Defenses, Fraud & Misrepresentation, Public Health & Welfare Law, Social Security, Medicaid, State Plans, Actual Fraud, Elements, Material Misrepresentations, Civil Procedure, Pleadings, Heightened Pleading Requirements, Fraud Claims, Complaints, Requirements for Complaint