This morning Justice Thomas announced a unanimous opinion in Universal Health Services, Inc. v. United States ex rel. Escobar. The Supreme Court held that implied certifications can violate the False Claims Acts in limited circumstances—when the “rigorous” and “demanding” materiality standard is met.
On May 31, 2016, the Supreme Court granted certiorari in State Farm Fire and Casualty Co. v. United States ex rel. Cori Rigsby and Kerri Rigsby, making it the third False Claims Act (FCA) case the Supreme Court has taken up in the last two terms. The issue to be decided by the Court is “[w]hat standard governs the decision whether to dismiss a relator’s claim for violation of the FCA’s seal requirement, 31 U.S.C. § 3730(b)(2)?”
Sidley partner Joshua Hill recently published an article in the Daily Journal about the “implied certification” theory of falsity, which is at issue in the pending Supreme Court case Universal Health Services v. United States ex rel. Escobar, as discussed here. The Supreme Court heard oral argument in Escobar on April 19th, and its upcoming decision has important implications for the scope of the False Claims Act.
Sidley partners Jack Pirozzolo and Scott Stein, and associate Brenna Jenny, published an article in BNA’s Health Law Reporter analyzing the oral arguments in Escobar. We reflect on what the Court’s questioning may portend for its ultimate resolution of the case, and how the Court’s approach to redefining materiality will impact the future of implied certification cases.
A decision in the case is expected by the end of the term.
This past January, we wrote about the First Circuit decision’s in United States ex rel. Gadbois v. PharMerica Corp., No. 14-2164 (1st Cir. Dec. 16, 2015), which addressed the applicability of the first-to-file bar once the first-filed case is dismissed (see here). The first-to-file bar provides that “[w]hen a person brings an action under [the FCA], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” 31 U.S.C. § 3730(b)(5). Although the relator, Gadbois, filed his complaint during the pendency of a related action, the unanimous panel held that settlement of the related action subsequent to the district court’s ruling cured the jurisdictional defect in Gadbois’s complaint. Accordingly, the First Circuit remanded the case and permitted Gadbois to file a motion for leave to supplement his complaint.
As we have discussed here and here, yesterday the Supreme Court heard oral arguments in Universal Health Services v. United States ex rel. Escobar, which presents questions over the viability and scope of the implied certification theory. The justices actively questioned the advocates, raising concerns over whether the position of the government and the respondents (“Escobar”) contains logical limitations, and pressing the petitioner (defendant Universal Health Services (“UHS”)) over whether the limitations it proposes truly are consistent with common understandings of fraud.
The Supreme Court recently ruled that plaintiffs under the Fair Labor Standards Act may, in at least certain circumstances, use statistical sampling to establish liability. See Tyson Foods v. Bouphakeo, 135 S. Ct. 2806 (2015). The Court’s embrace of the use of statistical sampling suggests that it would be unlikely to hold in the FCA context that sampling is per se inappropriate to demonstrate liability. However, Tyson Foods does not suggest that sampling is appropriate in every case, and the opinion provides helpful guidance as to the circumstances under which statistical sampling might not be appropriate to establish FCA liability. We explore these arguments in an article available here.
On March 28, 2016, Petitioners in Universal Health Services v. United States ex rel. Escobar filed their reply brief reinforcing their argument that the implied certification theory of liability is not a valid basis of liability under the False Claims Act (“FCA”). Alternatively, Petitioners argue that if the Court accepts the implied certification theory of liability, the theory must be limited to noncompliance with an express condition of payment.
A number of amici recently filed briefs in United States ex rel. Escobar v. Universal Health Services supporting the relator and asking the Supreme Court to uphold the implied certification theory of liability.
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.
As we previously reported, the Supreme Court’s pending decision in United Health Services, Inc. v. United States ex rel. Escobar has attracted a number of amicus briefs encouraging the Supreme Court to reject the implied certification theory altogether, or at the very least significantly cabin its scope. Below we summarize the highlights of several additional amicus briefs filed in support of the petitioner.