Sbaiti & Co. Featured In Law360 Article About Impact of Universal Health Services v. Escobar on False Claims Act Litigation

Recently, Law360 published its Article “Attorneys Dish on Escobar’s FCA Impact One Year Later.” I was honored to be among the lawyers whose views about Escobar were included in the article. My friend and partner, Kevin Colquitt, is more of a False Claims Act lawyer than I am, and helped considerably putting our views together.  The article is available on Law360 if you’d like to read it (my blurb is on page 7) (or you can find it here).

As a more fulsome treatment: The gravamen of the issue is that Escobar (Universal Health Services v. Escobar, 579 U.S. ___ (2016)) was supposed to ratify the theory of implied certification under the False Claims Act. As that theory goes, when a government contractor or other government payee makes a request for payment, they implicitly certify that they have complied with the applicable laws, rules and regulations–and Escobar held that under certain circumstances, that implied certification could be the basis of a False Claims Act claim. But a footnote suggested that any certification or representation had to be held to the materiality standard. Meaning, it has to be the type of thing that is important to the agency making the payment.

FCA defendants have taken this issue to the bank to basically suggest that if the alleged misstatement or omission is known to the agency, and the agency does nothing about it, then that is evidence, potentially conclusive evidence, that the alleged misstatement or omission was “immaterial.” If the agency doesn’t care, then why should the courts?

There are reasonable responses to that argument, but an FCA plaintiff — a “relator” as they are called — has to make those arguments, and now has to try and get evidence of the agency’s attitude and knowledge of the alleged misconduct. The defendant will simply point to the agency’s non-response to supposed disclosure as prima facie evidence that had the agency known about it in real time (i.e., at the time the claim was submitted), it would have done nothing.  This makes it a steep climb for FCA relators.