Failure to disclose noncompliance with a state or federal regulation or law may result in a false claim under the federal False Claims Act. In a landmark decision, the United States Supreme Court confirmed in Universal Heath Servicers, Inc. v. United States ex rel. Escobar the “implied false certification theory of lability.” The Court stated that “not every undisclosed violation of an expressed condition of payment automatically triggers liability.” Id. But the failure to disclose noncompliance “must be material to the government’s payment decision.”Id.
When evaluating materiality, the Court held that a factual inquiry should be made on whether noncompliance has a natural tendency to influence payment by the government.
The take away from Escobar as applied by the 5th, 7th and 9th Circuits, is for a plaintiff to be successful in proving implied certification claims, the plaintiff must allege the defendant submitted claims that make specific representations about goods or services AND fails to disclose noncompliance with a material statutory or regulatory requirement.
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