On June 16, the United States Supreme Court issued an opinion vacating a First Circuit ruling on the grounds that the appellate court’s interpretation of the False Claims Act’s (FCA) materiality requirement to include any statutory, regulatory, or contractual violation is overly broad. Universal Health Servs., Inc. v. U.S. ex rel. Escobar, No. 15-7 (U.S. June 16, 2016). In a unanimous opinion delivered by Justice Clarence Thomas, the Court held that the implied false certification theory can be a basis for liability under the FCA when (i) the defendant submits a claim for payment to the government that makes specific representations about the goods or services provided; and (ii) the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements make its representations misleading half-truths. However, the Court did not adopt the appellate court’s expansive interpretation of what constitutes a “false or fraudulent claim” under this theory, concluding:
A misrepresentation cannot be deemed material merely because the Government designates compliance with a particular statutory, regulatory, or contractual requirement as a condition of payment. Nor is it sufficient for a finding of materiality that the Government would have the option to decline to pay if it knew of the defendant’s noncompliance. Materiality, in addition, cannot be found where noncompliance is minor or insubstantial.