United States: Supreme Court To Decide Whether Implied Certification Theory Of False Claims Act Liability Is Viable With Likely Significant Impact On Contractor FCA Risk

Last Friday, the US Supreme Court granted certiorari in Universal Health Services, Inc. v. United States and Massachusetts ex rel. Escobar and Correa, No. 15-7. The Court will decide whether federal government contractors can be held liable under the controversial implied certification theory of liability under the False Claims Act (FCA). Implied certification is a judge-made theory that treats every contractor claim for reimbursement as an implicit representation that the contractor has complied with all applicable statutory, regulatory, and contractual requirements. In combination with a broad interpretation of the FCA's "reckless disregard" standard of knowledge, implied certification has become a powerful weapon that qui tam relators and the Department of Justice use to convert common contract breaches into potential fraud.

The Supreme Court will address two specific issues: (i) whether implied certification is a viable theory of liability under the FCA, and if so, (ii) whether compliance with a contract term, regulation or statute must be an express condition of payment in order to establish that the claim is legally false.

Currently, federal courts of appeals are all over the map on implied certification. Many circuits have accepted the theory in some form. The Fifth and Seventh Circuits are the only circuits that have rejected implied certification outright.

Among the circuits that have embraced implied certification, there is a split regarding whether compliance with the contractual term, regulation, or statute at issue must be an express condition of payment to establish legal falsity, or whether such a condition can be inferred. The Second and Sixth Circuits require that compliance be an express condition of payment in order to establish legal falsity. The Tenth Circuit has held that compliance must be an express condition of payment only with regard to statutory and regulatory requirements. Requiring compliance to be an express condition of payment  makes sense, as procurement contracts potentially impose an enormous number of contractual and federal, state and local requirements. Alleged noncompliance with most such requirements typically should be addressed through the ordinary contract administration process, and not treated as fraud.

On the other hand, the First, Fourth and DC Circuits do not require that compliance with the legal requirement at issue be an express condition of payment, meaning that any potential noncompliance, no matter how inconsequential to the work being performed, may constitute fraud under the implied certification theory.

The Supreme Court's decision in Universal Health Services should establish a uniform national rule that could have significant consequences for contractors. The implied certification theory long has been a favorite of qui tam relators because it effectively serves as a mechanism to treat all of a contractor's invoices as legally false, and thus fraudulent, even though the contractor did not make any misrepresentation, and regardless of whether the noncompliance had any bearing on the government's decision or willingness to pay for the goods or services rendered. Thus, the Supreme Court's acceptance of the theory would embolden relators to pursue fraud claims based on alleged noncompliance with obscure regulatory requirements. That in turn could result in an explosion of qui tam suits, and if victorious, harsh civil penalties, treble damages, and reputational harm imposed upon government contractors and subcontractors. Conversely, the Supreme Court's rejection of implied certification would be a major victory for contractors and likely result in the dismissal of numerous pending FCA complaints across the country.

Fortunately for contractors, in recent years the Supreme Court has shown a propensity to reign-in relators' efforts to expand contractor liability under the FCA. See, e.g., Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, 135 S. Ct. 1970, 1974, 191 L. Ed. 2d 899 (2015) (the Wartime Suspension of Limitation Act does not toll the statute of limitations under the FCA); Schindler Elevator Corp. v. United States ex rel. Kirk, 536 U.S. 401 (2011) (strengthening the pubic disclosure bar by holding that a response to a Freedom of Information Act request is a "public disclosure"); Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662 (2008) (clarifying that a defendant must intend for a false record or statement be material to the government's decision to pay or approve a false claim); Rockwell Int'l Corp. v. United States ex rel. Stone, 595 U.S. 457 (2007) (public disclosure bar is jurisdictional). Based on these recent decisions, there is reason for cautious optimism that the Court may get it right in Universal Health Services.

The Petitioner's opening brief in Universal Health Services is expected to be filed in mid-January 2016. Amicus briefs supporting the Petitioner are due seven days after the Petitioner's brief is filed. Strong industry support explaining why the implied certification theory of FCA liability is legally wrong, economically and pragmatically onerous, and detrimental to the government's procurement interests should help the Court reach the right result.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions