Director of Regulatory Compliance Studies at Loyola University Chicago School of Law
The Supreme Court’s decision yesterday in Universal Health Services, Inc. v. U.S. ex rel Escobar (“UHS”) has had some strange initial summaries suggesting this is a gloom and doom opinion for actors who submit claims to the United States. I think these are missing the mark. While UHS has endorsed the “implied false certification theory” under the False Claims Act, in practice it is considerably narrow. And although the Court also seems to have brushed aside the up-until-now handy distinction in FCA liability that had been growing in the lower courts between non-compliance with conditions of participation (unlikely exposure) and non-compliance with conditions of payment (likely exposure). The Court introduces “materiality” as the hinge upon whether an error or omission in a claim gives rise to FCA liability. That is, liability will not attached unless the error was material in that the United States (or its agent) would not have paid if it had the correct information. Merely having the authority or option not to have paid if it knew the real information is not sufficient grounds to assert FCA liability under the implied false certification theory.
Writing with a unanimous court behind him, Justice Thomas sets out succinctly that “[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.”
Justice Thomas concludes with a line that should help manage Compliance Officer anxiety for a little while: “We emphasize, however, that the False Claims Act is not a means of imposing treble damages and other penalties for insignificant regulatory or contractual violations.”
There is much more to be analyzed in this opinion and watch for future posts on this blog.