Universal Health Services, Inc. v. United States ex rel. Escobar

136 S. Ct. 1989, 195 L. Ed. 2d 348, 579 U.S. 176, 26 Fla. L. Weekly Fed. S 258, 84 U.S.L.W. 4410, 2016 U.S. LEXIS 3920, 41 I.E.R. Cas. (BNA) 709
CourtSupreme Court of the United States
DecidedJune 16, 2016
Docket15–7.
StatusPublished
Cited by772 cases

This text of 136 S. Ct. 1989 (Universal Health Services, Inc. v. United States ex rel. Escobar) is published on Counsel Stack Legal Research, covering Supreme Court of the United States primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 195 L. Ed. 2d 348, 579 U.S. 176, 26 Fla. L. Weekly Fed. S 258, 84 U.S.L.W. 4410, 2016 U.S. LEXIS 3920, 41 I.E.R. Cas. (BNA) 709 (U.S. 2016).

Opinion

Justice THOMAS delivered the opinion of the Court.

The False Claims Act, 31 U.S.C. § 3729 et seq., imposes significant penalties on those who defraud the Government. This case concerns a theory of False Claims Act liability commonly referred to as "implied false certification." According to this theory, when a defendant submits a claim, it impliedly certifies compliance with all conditions of payment. But if that claim fails to disclose the defendant's violation of a material statutory, regulatory, or contractual requirement, so the theory goes, the defendant has made a misrepresentation that renders the claim "false or fraudulent" under § 3729(a)(1)(A). This case requires us to consider this theory of liability and to clarify some of the circumstances in which the False Claims Act imposes liability.

We first hold that, at least in certain circumstances, the implied false certification theory can be a basis for liability. Specifically, liability can attach when the defendant submits a claim for payment that makes specific representations about the goods or services provided, but knowingly fails to disclose the defendant's noncompliance with a statutory, regulatory, or contractual requirement. In these circumstances, liability may attach if the omission renders those representations misleading.

*1996 We further hold that False Claims Act liability for failing to disclose violations of legal requirements does not turn upon whether those requirements were expressly designated as conditions of payment. Defendants can be liable for violating requirements even if they were not expressly designated as conditions of payment. Conversely, even when a requirement is expressly designated a condition of payment, not every violation of such a requirement gives rise to liability. What matters is not the label the Government attaches to a requirement, but whether the defendant knowingly violated a requirement that the defendant knows is material to the Government's payment decision.

A misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be material to the Government's payment decision in order to be actionable under the False Claims Act. We clarify below how that rigorous materiality requirement should be enforced.

Because the courts below interpreted § 3729(a)(1)(A) differently, we vacate the judgment and remand so that those courts may apply the approach set out in this opinion.

I

A

Enacted in 1863, the False Claims Act "was originally aimed principally at stopping the massive frauds perpetrated by large contractors during the Civil War." United States v. Bornstein, 423 U.S. 303 , 309, 96 S.Ct. 523 , 46 L.Ed.2d 514 (1976). "[A] series of sensational congressional investigations" prompted hearings where witnesses "painted a sordid picture of how the United States had been billed for nonexistent or worthless goods, charged exorbitant prices for goods delivered, and generally robbed in purchasing the necessities of war." United States v. McNinch, 356 U.S. 595 , 599, 78 S.Ct. 950 , 2 L.Ed.2d 1001 (1958). Congress responded by imposing civil and criminal liability for 10 types of fraud on the Government, subjecting violators to double damages, forfeiture, and up to five years' imprisonment. Act of Mar. 2, 1863, ch. 67, 12 Stat. 696 .

Since then, Congress has repeatedly amended the Act, but its focus remains on those who present or directly induce the submission of false or fraudulent claims. See 31 U.S.C. § 3729 (a) (imposing civil liability on "any person who ... knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval"). A "claim" now includes direct requests to the Government for payment as well as reimbursement requests made to the recipients of federal funds under federal benefits programs. See § 3729(b)(2)(A). The Act's scienter requirement defines "knowing" and "knowingly" to mean that a person has "actual knowledge of the information," "acts in deliberate ignorance of the truth or falsity of the information," or "acts in reckless disregard of the truth or falsity of the information." § 3729(b)(1)(A). And the Act defines "material" to mean "having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property." § 3729(b)(4).

Congress also has increased the Act's civil penalties so that liability is "essentially punitive in nature." Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765 , 784, 120 S.Ct. 1858 , 146 L.Ed.2d 836 (2000). Defendants are subjected to treble damages plus civil penalties of up to $10,000 per false claim. § 3729(a) ; 28 CFR § 85.3 (a)(9) (2015) (adjusting penalties for inflation).

B

The alleged False Claims Act violations here arose within the Medicaid program, a *1997 joint state-federal program in which healthcare providers serve poor or disabled patients and submit claims for government reimbursement. See generally 42 U.S.C. §

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Bluebook (online)
136 S. Ct. 1989, 195 L. Ed. 2d 348, 579 U.S. 176, 26 Fla. L. Weekly Fed. S 258, 84 U.S.L.W. 4410, 2016 U.S. LEXIS 3920, 41 I.E.R. Cas. (BNA) 709, Counsel Stack Legal Research, https://law.counselstack.com/opinion/universal-health-services-inc-v-united-states-ex-rel-escobar-scotus-2016.