On Thursday of last week, the Supreme Court for the first time addressed the “implied certification” theory of liability under the False Claims Act. The Court ruled unanimously that the theory is valid in certain circumstances. More specifically, the Court held that a defendant may be liable for submitting claims that violate statutory, regulatory, or contractual requirements so long as the violation would have been material to the government’s decision to pay the claim. The Court rejected the dividing line between conditions of payment and conditions of participation as the criterion for when a claim can form the basis for a False Claims Act violation under the implied certification theory. The relevant question, according to the Court, is instead whether the noncompliance is material to the government’s payment decision. As explained below, the Court’s decision will significantly affect qui tam relators, the defense bar, and contractors who participate in federal programs.

Background on the Implied Certification Theory -

Enacted during the Civil War to combat fraud by those who supplied goods and services to the Union Army, the False Claims Act imposes liability on whoever “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1)(A). The FCA also punishes whoever “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” Id. § 3729(a)(1)(B).