Implied Certification Theory in False Claims Act Cases

A defendant may be liable under the False Claims Act on two different theories: the presentment of factually false claims and the presentment of legally false claims.

A claim is factually false when a government payee submits information that is untrue on its face and misrepresents the goods or services that it provided to the Government.

A claim is legally false when a government payee knowingly falsely certifies that it has complied with a statute or regulation, the compliance with which is a condition for Government payment.

Express False Certification vs. Implied False Certification

Claims of legal falsity can rest on one of two theories — express false certification and implied false certification.

An express false certification theory applies when a government payee falsely certifies compliance with a particular statute, regulation or contractual term, where compliance is a prerequisite to payment.

An implied false certification claim can occur where the claimant fails to disclose that it violated regulations that affect its eligibility for payment.

“The implied certification theory can be a basis for liability, at least where two conditions are satisfied: first, the claim does not merely request payment, but also makes specific representations about the goods or services provided; and second, the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.” Universal Health Services v. United States ex rel. Escobar, 136 S.Ct. 1989, 2001 (2016).

The pertinent inquiry for implied false certification claims is not whether a defendant made an affirmative or express false statement, but whether, through the act of submitting a claim, a defendant knowingly and falsely implied that it was entitled to payment when it was not because it violated applicable statutes and regulations before submitting a claim, which would disqualify it from payment.

The Ninth Circuit[1], First[2] and Seventh Circuits[3] hold that liability under an implied false certification theory requires satisfying Escobar‘s two-part test, including that specific representations about the goods or services provided are required.

In contrast, the Fourth Circuit holds that a “misleading half-truth” consistent with that in Escobar could establish implied false certification liability even in the absence of a clear, specific representation about the goods or services provided.[4]

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[1] United States ex rel. Rose v. Stephens Institute , — F.3d —-, No. 17-15111 (9th Cir. Aug. 24, 2018).

[2] United States ex rel. Nargol v. DePuy Orthopaedics Inc. , 865 F.3d 29 (1st Cir. 2017) (where the Court went out of its way to expressly discuss the existence of specific representations as a basis for potential FCA liability in an implied false certification context).

[3] United States v. Sanford-Brown Ltd. , 840 F.3d 445, 447 (7th Cir. 2016).

[4] United States ex rel. Badr v. Triple Canopy Inc. , 857 F.3d 174 (4th Cir. 2017).