In Wake of Escobar, Cases Return to Circuit Courts

by Mintz Levin - Health Law & Policy Matters
Contact

On Monday, the U.S. Supreme Court issued summary dispositions vacating the judgments in three cases brought under the False Claims Act (“FCA”). The Court remanded the cases back to their respective circuit courts for reconsideration in light of the Court’s decision in Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U. S. ___ (2016).  As we discussed in our advisory on Escobar, the Court held that liability under the False Claims Act can arise under the “implied false certification” theory.  Under this theory, prior to Escobar, some circuits held that a claim could be “false” if the defendant submitted an accurate claim but violated an underlying “condition of payment” that arose from a statute, regulation, or contract. In Escobar, the Court found that FCA liability can be premised on a theory of implied false certification, provided that: (1) “the claim does not merely request payment, but also makes specific representations about the goods or services provided,” and (2) the defendant’s “failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.”

The following cases have been remanded:

  • Triple Canopy, Inc. v. United States ex rel. Badr, U.S., No. 14-1440. The Court vacated a Fourth Circuit decision holding Triple Canopy, Inc. liable under the FCA for providing unqualified guards at a U.S. base. The case against Triple Canopy was premised on allegations that the company had falsified marksmanship scores for guards that it hired at Al Asad Air Base in Iraq, and for which it was reimbursed by the federal government. The government argued that the untrue marksmanship scores should be considered false claims because the guards were unqualified for their duties, therefore making reimbursement related to their services fraudulent. Triple Canopy argued that the government’s reimbursement was not specifically conditioned on the marksmanship scores, and that it therefore cannot be the basis for FCA liability.
  • United States ex rel. Nelson v. Sanford-Brown Ltd., U.S., No. 15-729. In Sanford-Brown, a former employee of a for-profit college alleged that the company defrauded the federal government by receiving federal subsidies while in violation of the Higher Education Act and its program participation agreement (PPA) with the Department of Education. Under federal law, the PPA conditions federal subsidies on continued compliance with statutory, regulatory and contractual requirements.  The relator claimed that the college’s recruiting and retention practices violated its conditions of participation, and that any subsidies were therefore the result of false claims. The Supreme Court vacated the Seventh Circuit ruling that granted the college’s motion for summary judgment. The circuit had found that “it would be unreasonable for us to hold that an institution’s continued compliance with the thousands of pages of federal statutes and regulations incorporated by reference into the PPA are conditions of payment for purposes of liability under the FCA…”
  • Weston Educ., Inc. v. United States ex rel. Miller, U.S., No. 15-404. In another case involving an educational institution, a for-profit college was alleged to have violated the FCA as a result of inflating its grades and attendance records to avoid repaying federal loans. Former employees of the college alleged that the school’s grade inflation and record manipulation violated its PPA, and as a result, exposed it to liability under the FCA. The Supreme Court vacated the Eighth Circuit’s decision which dismissed the case after finding that the false record-keeping was not material to its claims for federal subsidies.

While the decision in Escobar upheld the theory of implied false certification as a basis for FCA liability, the Court also adopted a heightened materiality standard that may impact the outcome of the above cases on remand. In its decision, the Court described a “rigorous” and “demanding” materiality standard, underscoring that the FCA cannot become an “all-purpose antifraud statute” or a “vehicle for punishing garden-variety breaches of contract or regulatory violations.”

Laurence Freedman, a Member of Mintz Levin’s Health Care Enforcement Defense Group, noted that:

The heightened materiality standard is new, and the remands will be the first occasions for the courts to apply it.  Under this standard, it is the government or relator’s burden to demonstrate the violation was actually material and, we would expect, this will require government evidence to prevail on the theory, not just legal arguments.

We will continue to closely follow the impact of the Escobar decision on these and other cases.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Mintz Levin - Health Law & Policy Matters | Attorney Advertising

Written by:

Mintz Levin - Health Law & Policy Matters
Contact
more
less

Mintz Levin - Health Law & Policy Matters on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.