What makes our firm unique when we represent whistleblowers is our experience and expertise in the area of both Qui Tam lawsuits and employment law.  For Chicago residents, our attorneys may privately discuss your potential case and bring the highly specialized Qui Tam matter to ensure that private individuals, called relators, are heard, protected and that the government is fully informed of the potential False Claims Act (“FCA”) violations.

False Certification Liability

The most common FCA claims are based on government payment for products or services that the company/defendant knew, or was reckless in not knowing, that they were not permitted.  On the other hand, “False Certification Liability” takes place when a company/defendant does not comply with certain government requirements.  For example, there is express false certification and implied false certification.  Express False Certification takes place when a company submits claims and expressly certifies that it has complied with the government’s requirements for that claim whether it is with the invoice or as part of a routine or time-related audit requirement. Alternatively, an Implied False Certification takes place when a company impliedly certifies it is in compliance with the requirements though it does not state so expressly.

Certain courts have rejected the implied certification theory that sets the foundation for an FCA case.  Some circuit courts have interpreted the FCA liability broadly where they held that FCA claims may be brought under the false certification theory if they are based on a company’s alleged non-compliance with a contractual or statutory provision or regulation that is material to the government’s payment decision, irrespective of whether the violations were expressly designated as conditions of payment.  To resolve the confusion between the different circuits, on June 16, 2016, the United States Supreme Court in Universal Health Services, Inc. v. Escobar held that

  • The implied false certification theory may set a basis for FCA liability at least when the following two conditions are satisfied:

(1) The claim does not only request payment, but also makes specific representations about the goods and services provided; and

(2) The defendant’s failure to disclose non-compliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.

Proper application of a rigorous and demanding materiality standard is a key safeguard in separating truly fraudulent claims from regulatory and contractual violations.

Regarding the materiality standard, the Supreme Court clarified that a misrepresentation should not be deemed material merely because the government designates compliance with a particular statutory, regulatory, or contractual requirement as a condition of payment. Similarly, the government’s option to decline payment if it knew of the defendant’s non-compliance is alone insufficient for a finding of materiality, as are the cases where non-compliance is minor or insubstantial. On the other hand, proof of materiality would not be as strong of an argument in cases where the defendant submitted claims knowing that the government consistently refuses to pay similar claims in cases of non-compliance with a particular statutory, regulatory, or contractual requirement.  (136 S. Ct. 1989 (2016).)

Following Escobar, the government or relator will likely need to plead “specific and particularized” facts meeting the materiality standard in order to support FCA liability claims under a false certification theory.