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Article

Abstract

In 2016, the Supreme Court altered the landscape of the False Claims Act by recognizing implied certification as a viable theory of liability. Before the Court decided Universal Health Services, Inc. v. United States ex rel. Escobar, courts disagreed over the scope and legitimacy of the theory, arguing that it could create runaway liability if not held in check. The Court, although recognizing that implied certification expanded the reach of the False Claims Act, reassured itself and government contractors by reinforcing the common law antecedents of fraud, namely, that misrepresentations and omissions must be material to the government’s decision to pay a claim. Moreover, Justice Thomas, writing for the unanimous Court, characterized the law’s materiality standard as “demanding.”

In Escobar, the Court sought to provide clarity for highly complex False Claims Act litigation. Instead, the decision created even more confusion as courts have attempted to apply the “demanding” standard for materiality. Specifically, some courts across the country have applied the new materiality standard to other theories of liability, including the express false certification theory which was not at issue in Escobar. Others have limited Escobar strictly to cases arising under implied certification. The two theories of liability, although similar, have vastly different implications for what constitutes fraud under the False Claims Act. Courts that apply Escobar to express certifications overlook this crucial, albeit subtle, difference.

This Note argues that the “demanding” materiality standard articulated by the Court in Escobar should be limited to the implied false certification theory of liability. This argument relies on the history, text, and purpose of the False Claims Act, as well as the appropriate role of the courts in determining what legislative and administrative actions are considered material. In doing so, this Note hopes to provide clarity as to when Escobar’s “demanding” materiality standard should be applied and, more importantly, when it should not.

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