LITIGATION/CONTROVERSY
March 8, 2018
False Claims Act Alert
An Escobar Roundup: Falsity, Materiality, and Scienter
By Jonathan G. Cedarbaum, Ni Qian and Samuel M. Strongin
In its June 2016 decision in Universal Health Services, Inc. v. United States ex rel. Escobar, 136
S. Ct. 1989 (2016), the Supreme Court held that implied certification claims are viable under the
False Claims Act (FCA), but only in certain circumstances. In the year and a half since the Court
handed down Escobar, dozens of lower courts have addressed issues left uncertain by the
Supreme Court’s ruling, above all: (i) when does a claim for payment constitute a false implied
certification of compliance with a regulatory or contractual obligation; (ii) what suffices to allege
or prove that alleged non-compliance was material to the government’s decision to pay; and (iii)
what suffices to allege or prove scienter. This article traces the debates in the lower courts
concerning these issues, some of which are just now beginning to return to the Supreme Court
in petitions for certiorari.1
A few key takeaways:
• The lower courts remain divided over the circumstances in which false implied
certifications may be found, with many treating the two conditions identified in Escobar
as exclusive, but others, often relying on pre-Escobar Circuit precedents, finding implied
certifications in other circumstances as well.
• Many courts have followed Escobar’s instruction to treat continued government payment
in the face of knowledge of alleged non-compliance as strong evidence of the alleged
non-compliance’s immateriality to government payment and so have dismissed
complaints or granted summary judgment to defendants on that basis; but a minority of
courts, sometimes with the urging of the Justice Department, have kept claims alive
despite informed and ongoing payment of claims by the government. The issue may be
headed up to the Supreme Court in a pending petition for certiorari filed by Gilead
Sciences in Gilead Sciences, Inc. v. United States ex rel. Campie, No. 17-936 (docketed
Jan. 3, 2018).
• Only a few courts have so far picked up on an aspect of Escobar that deserves more
attention: the Court’s holding that relators and the government must allege and prove not
just that a defendant’s non-compliance was material to the government’s decision to
pay, but also that the defendant knew the non-compliance was material at the time it
sought payment.
