The Fourth Circuit ruled recently in U.S. ex rel. Bunk v. Government Logistics N.V., No. 15-1088, 2016 WL 6695787 (4th Cir. Nov. 15, 2016), that the Relators had presented sufficient evidence to proceed to trial against Defendant Government Logistics (GovLog) based on the traditional fraudulent transaction theory of successor liability. The Court declined, however, to expand the scope of successor liability under the FCA to include the substantial continuation theory, which, as discussed here, would have allowed Relators to establish liability by showing merely that GovLog retained its predecessor’s employees, managers, assets, and operations, among other indicia of corporate continuity. See United States v. Carolina Transformer, 978 F.2d 832, 840 (4th Cir. 1992).
As we reported here, in its ruling in Universal Health Services, Inc. v. United States ex rel. Escobar last June, the Supreme Court affirmed the viability of the implied certification theory of liability under the FCA, but remanded the case to the First Circuit to apply the Court’s newly-articulated framework for analysis of such claims. Last week, the First Circuit ruled that even under the Supreme Court’s demanding test for liability, the relators still stated a cognizable implied certification claim, and therefore reversed the district court’s dismissal of the relators’ complaint. Critical to the First Circuit’s ruling was its view that evidence of the government’s payment practices when faced with similar alleged violations are less important to the analysis than the court’s assessment of the centrality of a regulation to the contractual relationship between the government and the defendant.