Whistleblowers Urge Supreme Court Not to Restrict Government’s Ability to Prosecute Fraud

On February 25, 2016, Respondents in Universal Health Services v. United States ex rel. Escobar, cautioned the Supreme Court against limiting the Government’s ability to prosecute fraud and argued that the Supreme Court should find the implied certification theory of liability a viable theory under which to bring claims against contractors.

Respondents’ framing of the case places significant emphasis on the purpose of the FCA combined with the fact the Department of Justice recoups only a tiny fraction of fraud losses as reasons for allowing the use of the implied certification theory.  To that end, Respondents cite the legislative history from 1968 and note that when Congress significantly amended the FCA in 1986 they “sought to strengthen the FCA as ‘the Government’s primary litigative tool for combating fraud’ and to ‘make the statute a more useful tool against fraud in modern times.’” Respondents’ brief at 4 (quoting S. Rep. No. 99-345, at 2).  Moreover, Respondents state that the 2009 Fraud Enforcement and Recovery Act abrogated several court rulings that “limited the reach of the False Claims Act,” “derailed meritorious actions,” and thus “jeopardize[ed] billions in Federal funds.” Respondents’ brief at 4 (quoting H.R. Rep. No. 111-97, at 2, 5 (2009)).

Respondents advance three arguments: (1) the FCA’s plain language makes it clear that demanding payment for which the claimant knows it is not entitled because it has violated the Government’s payment conditions is prohibited; (2) restricting implied false certification claims to those requirements explicitly labeled “conditions of payment” runs afoul of the FCA’s purpose; and (3) the First Circuit correctly reversed the dismissal of Respondents’ complaint.

First, Respondents argue that the implied certification theory of liability is a viable theory under the FCA.  In so arguing, Respondents first discuss the plain language of the FCA before turning to the purpose of the FCA.

The FCA’s plain language, as the Supreme Court has long held, prohibits false and fraudulent claims and “reach[es] all types of fraud, without qualification, that might result in financial loss to the Government.”  Respondents’ brief at 22 (quoting United States v. Neifert-White Co., 390 U.S. 228, 232 (1968)).  Making a claim of entitlement to payment necessarily includes an implied representation that the contractor is entitled to payment, according to Respondents.

In so arguing, Respondents reject Petitioner’s argument that a claim is false only if it is “factually false” as contravening the FCA’s plain language.  Additionally, Respondents’ reject Petitioner’s contention that the implied certification theory presupposes that the government received the amount of goods or services paid for, as contradicted by the case law applying the implied certification theory that demonstrates the government does not necessarily receive the goods or services for which it paid.  Finally, Respondents’ reject Petitioner’s attempt to analogize the FCA to common-law fraud: the FCA “does not embrace every element of common law fraud.”  Respondents’ brief at 28.

Respondents argue that the Court should conclude that all federal contractors have an affirmative duty to disclose their failure to comply with the Government’s conditions of payment, as well as undisclosed defects in the goods or services provided to the Government.  This heightened duty, they argue, is inherent in the Court’s statement in an unrelated case that “[p]rotection of the public fisc requires those who seek public funds act with scrupulous regard for the requirements of the law….” Respondents’ brief at 30 (quoting Heckler v. Community Health Servs. of Crawford Cnty., Inc., 467 U.S. 51, 63 (1984).

Respondents also argue that implied certification advances the purposes of the FCA as originally enacted and later modernized.  Respondents place significant emphasis on the Senate Judiciary Committee report that accompanied the 1986 amendments, which states that a false or fraudulent claim under the FCA includes claims for goods or services “provided in violation of contract terms, specification, statute, or regulation.” Respondents’ brief at 36 (quoting S. Rep. No. 99-345, at 9) (emphasis omitted).  In so arguing, Respondents reject Petitioner’s policy arguments—that the implied false certification theory of liability renders express certifications surplussage and that it deprives contractors of fair notice of what is material—as improperly narrowing the intended broad scope of the FCA.

Second, in the alternative, Respondents argue that Petitioner’s argument to limit implied certification claims to only those cases in which a defendant requests payment in violation of an express condition of payment, is contrary to the text of the FCA.  Respondents note that such an interpretation has been rejected by many Circuit courts.  Furthermore, the Supreme Court has rejected “rigid” and “restrictive” limitations on FCA liability.  Respondents’ brief at 42 (quoting Neifert-White, 390 U.S. at 232).

Third and finally, Respondents argue that the Supreme Court should affirm the First Circuit’s decision to reverse the district court’s decision to dismiss their case.

A copy of Respondents’ brief can be found here.