Universal Health Services, Inc. v. United States ex rel. Escobar: U.S. Supreme Court Permits “Implied False Certification” Theory of False Claims Act Liability in Limited Circumstances

Sullivan & Cromwell LLP - June 17, 2016
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In its highly anticipated decision in Universal Health Services, Inc. v. United States ex rel. Escobar, the Supreme Court held that the “implied false certification” theory—which is based on allegations that a defendant failed to disclose noncompliance with a relevant statutory, regulatory, or contractual requirement—may serve as a basis for liability under the False Claims Act (“FCA”) when certain conditions are met.   Specifically, the plaintiff must show that the defendant submitting a claim to the U.S. Government made specific representations about the goods or services provided, but failed to disclose noncompliance with material statutory, regulatory, or contractual requirements that make those representations misleading.  The relevant legal requirement need not be expressly designated by the Government as a condition of payment, but the plaintiff must show that the alleged misrepresentation was actually material to the Government’s decision to pay (not, as the Government argued, simply that the misrepresentation would have entitled the Government to refuse payment).  The Court emphasized the “demanding” nature of this materiality inquiry.