The False Claims Act is all about addressing fraud resulting in financial loss to the government. But the statute does not actually define what constitutes this essential element. Instead, it has been up to the courts to decide how far to extend the statute’s ultimate reach. This has led to a divergence of views with some courts taking a narrow and more formalistic approach to the statute’s coverage, and others being more expansive to get at all types of fraud against the government regardless of the form.
Here are some of the more recent court decisions on the scope of what constitutes fraud under the statute.
April 5, 2017
Last month, the Fifth Circuit applied Escobar’s materiality standard in U.S. ex rel Abbott et al. v. BP Exploration and Production, Inc. et al., a whistleblower case former BP contractor Kenneth Abbott brought under the False Claims Act (FCA) in 2009. Abbott alleged BP had falsely certified compliance with certain safety regulations applicable to its Atlantis Platform, a semi-submersible oil production facility in the Gulf of Mexico that was the company’s second largest in the region. Abbott alleged that by falsely certifying compliance with regulatory requirements, BP had lied to obtain offshore leases, and had thus submitted false claims in violation of the FCA. Abbott’s complaint was amended in late 2010 to include claims under the Outer Continental Shelf Lands Act (OCSLA). Click here for more.
January 18, 2017
Last Thursday, the Ninth Circuit issued United States ex rel. Kelly v. Serco, Inc., the latest in a series of False Claims Act decisions—including in the First, Seventh, and Eighth Circuits—wrestling with the Supreme Court’s holding on materiality in Universal Health Services, Inc. v. United States ex rel. Escobar. Citing Escobar’s “rigorous” and “demanding” materiality standard, the Ninth Circuit affirmed the district court’s summary judgment dismissal of whistleblower Darryn Kelly’s FCA action against government defense contractor Serco, Inc.
Kelly, a former Serco, Inc. employee, alleged Serco submitted false claims for technology and project management services it provided pursuant to a contract with the U.S. Navy’s Space and Naval Warfare Systems Command. Serco’s work involved a project to upgrade wireless communications systems along the U.S.-Mexico border. Kelly said Serco failed to follow required billing processes, instead tracking costs manually using a single charge code, and falsifying monthly costs reports to match budgeted costs. Click here for more.
December 9, 2016
The Supreme Court’s opinion in Universal Health Services, Inc. v. United States ex rel. Escobar—in which the high court upheld the implied false certification theory of liability but placed a new focus on materiality under the False Claims Act (FCA)—has predictably spawned a number of lower court decisions grappling with materiality in the varied factual landscape of FCA litigation, including decisions in the Seventh and Eighth Circuits. The First Circuit added to post-Escobar FCA materiality jurisprudence with a recent decision in Escobar itself, which it considered on remand from the Supreme Court. Click here for more.
November 18, 2016
Another federal circuit recently weighed in to apply the U.S. Supreme Court’s holding in Universal Health Services, Inc. v. United States ex rel. Escobar. Escobar was largely a victory for the United States and whistleblowers combatting fraud under the False Claims Act (FCA), resolving a split in the federal circuits by unanimously upholding implied false certification as a viable theory of FCA liability. Following the decision, however, at least two issues are left to percolate in the lower courts:
- Whether FCA liability may be premised on implied certification only where a defendant’s claim for payment included specific misrepresentations that were misleading in light of its noncompliance with the requirement at issue; and
- The standard for determining whether compliance with a particular requirement was material to the government’s decision to pay.
The Seventh Circuit directly addressed both issues in its recent opinion in United States ex rel. Nelson v. Sanford Brown, on remand to the court under a Supreme Court order to reconsider the case in light of Escobar. Click here for more.
October 31, 2016
The Supreme Court’s June 2016 decision in Universal Health Services, Inc. v. United States ex rel. Escobar—which unanimously endorsed the FCA’s implied false certification theory of liability, but reframed the Act’s materiality standard—left open questions as to how lower courts would interpret the high court’s holding that material noncompliance with an applicable statute, regulation, or contract provision is required to support an FCA action. Much remains to be determined in the wake of Escobar, and courts will continue to hash out the case’s impact on FCA cases for the foreseeable future, but at least for those litigating in the Eighth Circuit, some clarity has been provided. Read more here.
March 19, 2015
The False Claims Act is all about addressing fraud resulting in financial loss to the government. But the statute does not actually define what constitutes this essential element. Instead, it has been up to the courts to decide how far to extend the statute’s ultimate reach. This has led to a divergence of views with some courts taking a narrow and more formalistic approach to the statute’s coverage, and others being more expansive to get at all types of fraud against the government regardless of the form. In its United States ex rel. Escobar v. Universal Health Services decision issued Tuesday, the First Circuit made a clear pronouncement it was joining the latter camp of courts.
Click here for more.
January 15, 2015
Another circuit court decision giving a properly expansive view of what it takes to make out a fraud claim under the False Claims Act. This one from the Fourth Circuit in United States v. Triple Canopy, Inc.. Before the Court were two key questions. One, whether a defense contractor’s claim for payment still could be false when there was nothing false on the face of the invoice. And two, whether a false statement or record still could be material to the government’s decision to pay when the government did not rely on or even see the statement or record. The Fourth Circuit answered with a resounding “Yes” to both questions.
Click here for more.
September 4, 2014
By Jason Enzler
The Eighth Circuit has become the latest appellate court to join the fray over what is required of False Claims Act complaints. Last Friday, in U.S. ex rel. Thayer v. Planned Parenthood of the Heartland, the Court held that a qui tam relator need not plead a representative sample of a false claim in order to survive a motion to dismiss the complaint. In doing so, the Eighth Circuit sided with what appears to be the majority of circuit courts in taking a less restrictive view of what a relator must allege in order to meet Rule 9(b)’s pleading requirements and stay in court.
Click here for more.
June 12, 2014
By Jason Enzler
Last Friday, the Court of Appeals for the Third Circuit held that it would join three other circuit courts in rejecting a more restrictive view of what qui tam relators must allege in order to survive challenges to their False Claims Act complaints. In doing so, the Third Circuit’s decision in Foglia, ex rel. U.S. v. Renal Ventures Management, LLC has deepened the split forming among the circuit courts, with four circuit courts taking a more restrictive view on the minimum facts whistleblowers must state in their complaints.
Click here for more.