Law School Case Brief
Universal Health Servs. v. United States ex rel. Escobar - 136 S. Ct. 1989 (2016)
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. 31 U.S.C.S. § 3729(b)(4) defines "materiality" using language that has been employed to define materiality in other federal fraud statutes: The term "material" means having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property. This materiality requirement descends from common-law antecedents. Indeed, the common law could not have conceived of "fraud" without proof of materiality.
The decedent, Y.R., a minor and a beneficiary of Massachusetts' Medicaid program, received counseling services for several years at Arbour Counseling Services ("Arbour"), a satellite mental health facility owned and operated by a subsidiary of petitioner Universal Health Services, Inc. ("Universal"). She had an adverse reaction to a medication that a purported doctor at Arbour prescribed after diagnosing her with bipolar disorder. Her condition worsened, and she eventually died of a seizure. Respondents Carmen Correa and Julio Escobar, Y.R.'s mother and stepfather, later discovered that few Arbour employees were actually licensed to provide mental health counseling or authorized to prescribe medications or offer counseling services without supervision. Respondents thereafter filed a qui tam suit in federal district court, alleging that Universal violated the False Claims Act. Universal filed a motion to dismiss, which the district court granted, holding that respondents failed to state a claim under the "implied false certification" theory of liability. The court of appeals reversed in part. Universal was granted a writ of certiorari.
(a) Could the implied certification theory be a basis for liability under the False Claims Act ("FCA")? (b) Was Universal liable under the FCA when it failed to disclose the violation of a contractual, statutory, or regulatory provision that the Government expressly designated a condition of payment?
(a) Yes; (b) No.
The Supreme Court of the United States vacated the appellate court's judgment and remanded the matter for further proceedings. The Court ruled, inter alia, that: (a) The implied false certification theory could be a basis for liability under the FCA, 31 U.S.C.S. § 3729(a)(1)(A), at least where the claim did not merely request payment, but also made specific representations about the goods or services provided, and a failure to disclose noncompliance with material statutory, regulatory, or contractual requirements made those representations misleading half-truths. (b) 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 FCA. The FCA did not support the Government's and the appellate court's expansive view that any statutory, regulatory, or contractual violation was material so long as the defendant knew that the Government would be entitled to refuse payment were it aware of the violation.
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