June 22, 2016

Question of the Week: Who Won in Universal Health Care v. Escobar?

By the C|C Whistleblower Lawyer Team

Last week, the Supreme Court issued a unanimous opinion in Universal Health Care v. Escobar, the most significant False Claims Act (FCA) case to come before the Court in a long while.  The Court considered whether government contractors can be liable for an implied, rather than an express, misrepresentation.  The “implied certification” at issue in Escobar was made by a mental health treatment facility that allegedly hired unlicensed and unqualified mental health counselors—in clear violation of Medicaid requirements.  The plaintiffs argued that a claim for payment for mental health services carries an implied representation that the service providers are licensed and qualified.  Otherwise, patients like the plaintiffs’ teenage daughter, who committed suicide, are put at tragic risk.

Justice Thomas wrote the Court’s opinion, which held that implied certifications can indeed be the basis of FCA liability—there’s no difference between a lie by omission and a false affirmative statement.  Furthermore, the Court rejected the defendant’s argument that only false statements related to express conditions of payment identified by the government could give rise to liability.  The Court did emphasize that these misrepresentations must be to “material” terms for liability to attach.  But as the “materiality” requirement is already in the FCA statutory language, the Court’s holding, strong language aside, may not have actually changed the standard in any meaningful way.

Despite the Court’s unanimous rejection of the defendant’s two arguments, commentators are divided on who won in Escobar.  Some call it a clear big win for the government and FCA plaintiffs, while others are spinning it as a big loss for them (still others call it a mixed bag).  No one seems to know yet whether it’s likely to expand FCA liability, or limit it.  The only thing that seems certain is that the question just won’t be answered until the lower courts begin to interpret Escobar’s holding.

What do you think?  Is Escobar a win for the government and FCA plaintiffs?

Is Escobar a win for the government and FCA plaintiffs?

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