D.C. Circuit Rejects Expansive Theory of FCA Liability Predicated on Failure to Pay an Unassessed Penalty
On July 5, 2019, the D.C. Circuit affirmed the dismissal of a qui tam lawsuit against several chemical manufacturers alleging that they violated the False Claims Act by failing to pay civil penalties owed under the Toxic Substances Control Act, 15 U.S.C. §§ 2601 (1976) (“TSCA”) for the manufacturers’ repeated failures to report “information regarding the dangers of isocyanate chemicals” to the EPA. The law firm Kasowitz Benson Torres LLP, which is the relator in the case, urged the D.C. Circuit “to become the first court to recognize FCA liability based on the defendants’ failure to meet a TSCA reporting requirement and on their failure to pay an unassessed TSCA penalty.” The D.C. Circuit declined that invitation.
Ninth Circuit Addresses Impact of Escobar’s Falsity and Materiality Requirements On Existing Circuit Precedent
In Escobar, the Supreme Court held that the implied false certification theory of liability is viable under the False Claims Act when “at least two conditions” are satisfied: “[F]irst, the claim does not merely request payment, but also makes specific representations about the goods or services provided; and second, the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.” As we have previously discussed here, courts are split as to whether Escobar’s two-part test is a mandatory baseline to demonstrate an implied false certification or merely one way to plead such a claim, leaving open the door for other variants of implied certification claims not explicitly identified by the Supreme Court. Recently, in United States ex rel. Scott Rose, et al. v. Stephens Institute, No. 17-15111 (9th Cir. Aug. 24, 2018), the Ninth Circuit held that Escobar’s two-part test was mandatory—effectively overruling its pre-Escobar test for establishing implied certification claims outlined in Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993 (9th Cir. 2010). (more…)