The Implied Certification Theory: An Expansion of False Claims Liability?
On June 16, 2016, in Universal Health Services v. Escobar, the U.S. Supreme Court handed down an important and unanimous decision on False Claims Act liability. The Court held that Implied Certification is a valid basis for establishing liability under the False Claims Act. The case follows from an inconsolable circumstance. In 2007, Yarushka Rivera, the daughter of relators Julio Escobar and Carmen Correa (“Escobar”), died after receiving treatment by unlicensed employees of a mental health facility. The relators subsequently filed a qui tam action alleging that the mental-health services provider violated the FCA when it submitted Medicaid reimbursement claims that included representations about the services provided but failed to disclose that the service providers were actually not qualified nor licensed in violation of certain regulatory obligations that would render the claim for payment misleading. Universal Health Services argued that they should not be held liable for fraud if they fail to comply with regulations that were never explicitly stated by the government in receiving payment. Ruling in favor of Escobar, the Court ruled held that implied certification can impose liability if a contractor failed to disclose noncompliance.
The Implied Certification Theory and the Escobar decision will potentially bring more FCA liability cases against healthcare providers and contractors. With the increasing number of FCA cases, their executives, directors, and legal advisors should be updated with the mechanics and scope of the FCA. In this two-hour LIVE webcast, a panel of key thought leaders and professionals will discuss recent regulatory updates and developments in FCA litigation. Speakers will also provide audience with a roadmap on how to survive FCA investigations and the best practices on how to minimize potential risks and common pitfalls.
Key topics include:
- False Claims Act: An Overview
- Current Trends and Theories
- Universal Health Services v. Escobar
- Up-to-the-Minute Regulatory Updates
- Potential Risks and Common Pitfalls
- Best Practices
Sanford Heisler LLP
- Escobar affirms that that the False Claims Act does not impose categorical limitations on falsity under the FCA. Instead of relying upon artificial categories such as express false statements or express designation of payment conditions in order to cabin liability, Escobar establishes that knowledge and materiality are the appropriate bounding principles.
- Escobar did not create a heightened materiality standard, but only reaffirmed materiality’s pre-existing focus on whether the conduct is important enough so as to be capable of influencing the government’s payment decisions. Towards that end, Escobar clarified that materiality can be established from the perspective of either an objectively “reasonable person,” or defendant with subjective knowledge of the likely effect of its actions on the government.
- Litigation ahead is likely to address, among other issues: (1) the Court’s election not to resolve whether the submission of claims for payment in itself could amount to a potentially false representation, absent any other affirmative statement accompanying the claim; and (2) language in the opinion reviving a longstanding a debate over the relevance of government knowledge concerning the underlying conduct to the materiality inquiry.
Parker Poe Adams & Bernstein LLP
- The Supreme Court’s decision in Escobar has injected an additional degree of uncertainty into implied certification cases. At least in theory, it appears that the Court’s analysis collapses into a single inquiry – a fact-based determination of materiality. Depending on the type of case at issue, the question of what the government knew when it was purchasing will be highly relevant As at least one post-Escobar court has noted, many of the facts arguably necessary to this inquiry may not be available to defendants until discovery has been conducted, making it less likely that a motion to dismiss will be successful.
- That being said, several post-Escobar decisions have granted motions to dismiss under 12(b)(6) and 9(b) based on a failure to sufficiently plead materiality. It is therefore very unclear what affect Escobar will have on defendant’s ability to successfully dismiss cases at an early stage.
- It is possible that the uncertainty created by Escobar may cause both plaintiffs and defendants to re-evaluate cases in a new light. Plaintiffs will need to consider whether their claims can withstand a new and more stringent materiality standard and face the possibility of a lengthened litigation process that increases the potential for first-to-file disputes to arise. Defendants will need to consider the growing potential of enduring a long and costly discovery process. Although it was not likely the Court’s intent, this may have the unintended effect of driving more cases to settlement at an early stage.
Who Should Attend:
- Healthcare Providers
- Attorneys General
- Senior Management
- In-House Counsel
- Corporate Counsel
- Chief Compliance Officers
- General Counsel
- Litigation Attorneys
- Other Interested Professionals and Organizations
Ross Brooks, co-chair of Sanford Heisler’s whistleblower practice, represents whistleblowers in actions brought under the False Claims Act (“FCA”), the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the IRS Whistleblower Law, among other whistleblower statutes. Throughout his career, Mr. Brooks has participated in the recovery of hundreds of millions in defrauded funds on behalf of the government. Notably, he was counsel to the plaintiffs in United States ex rel. Silva v. Amgen, 08-cv-04157 (E.D. Pa.)($762 million intervened settlement of claims against pharmaceutical manufacturer arising from unlawful marketing and kickbacks paid to physicians to induce purchases of anemia drugs); United States ex rel. Gale v. Omnicare, 10-cv-0127 (N.D. Ohio)($116 million non-intervened settlement of claims against long-term care pharmacy arising from unlawful kickbacks paid to nursing homes to induce drug purchases); and United States ex rel. Gipson et al. v. Pathway Genomics Corporation, 14-cv-01919 (S.D. Cal.)($4.1 million settlement of claims against genetic testing manufacturer arising from unlawful kickbacks paid to physicians to induce purchases of generic testing products). In addition to guiding relators through qui tam litigation, Mr. Brooks represents governmental entities, labor unions, and individuals in consumer fraud class actions and other civil litigation. He earned his undergraduate degree at Cornell University and his law degree at The University of Chicago Law School.
Ross Brooks, co-chair of Sanford Heisler’s whistleblower practice, represents whistleblowers in actions brought under the False Claims Act (“FCA”), the …
Eric Cottrell leads the firm’s Business Litigation and Government Investigations Practice Group. He is a seasoned litigator in both civil and criminal matters and has been lead counsel in multiple jury trials. He divides his practice between white collar criminal matters and commercial litigation, including cases that involve claims under the False Claims Act. Mr. Cottrell is also a member of the Public Company Growth and Compliance Group.
In his commercial litigation practice, Mr. Cottrell represents public and private entities in shareholder litigation, commercial contract disputes, financial services and securities litigation, trade secret litigation and product liability defense. He has served as trial counsel for companies in federal and state court and has often litigated in the North Carolina Business Court. Mr. Cottrell also has extensive experience in managing complex and time-sensitive electronic discovery matters.
Eric Cottrell leads the firm’s Business Litigation and Government Investigations Practice Group. He is a seasoned litigator in both civil …
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Business Law - Technical
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Areas of Professional Practice
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About Sanford Heisler LLP
Sanford Heisler, LLP is a public interest litigation law firm that specializes in claims relating to consumer fraud, employment retaliation and discrimination, qui tam matters and whistleblowing, ERISA/401(k) matters, financial elder abuse, predatory lending, and wage and hour violations. The Firm has an impressive history of success. Among other remarkable accomplishments, Sanford Heisler has won $250 million for 7,000 female sales representatives, has achieved a $99 million wage and hour recovery on behalf of pharmaceutical representatives, and has helped the government recover $120 million in a whistleblower case against Omnicare.
About Parker Poe Adams & Bernstein LLP
Parker Poe is a well-respected regional law firm in the United States. For more than a century, attorneys in the firm have represented many of the region's largest local governments and companies in corporate, finance, regulatory, real estate and litigation matters. Parker Poe has approximately 200 attorneys serving clients from seven offices in Charlotte and Raleigh, North Carolina; Charleston, Columbia, Greenville and Spartanburg, South Carolina; and Atlanta, Georgia.
In the past five years, The National Law Journal has ranked Parker Poe among America's 200 largest law firms and the country's fastest-growing firms. Lawyers in each of our offices are rated among the highest quality attorneys across their respective states, recognized for effective and efficient service. Best Lawyers lists more than 70 of our attorneys in their rankings of top lawyers, and we are equally well-recognized by U.S. News & World Report, Super Lawyers, Chambers & Partners and other ratings publications.