Escobar made this year’s list because it addressed the reach of one of the government’s most powerful enforcement tools, the federal False Claims Act (FCA). The FCA imposes civil penalties and treble damages for knowingly presenting “false” claims for payment to federal government programs, including Medicare and Medicaid. Because the statute is not explicit about what constitutes a false claim, courts have long struggled to articulate the limits of liability under the FCA.
The Supreme Court granted certiorari in Escobar to resolve conflict in the lower courts about the implied false certification theory of FCA liability. According to that theory, a defendant violates the FCA if it submits a claim that implicitly certifies compliance with a statutory, regulatory, or contractual requirement that the defendant has failed to satisfy. In a unanimous decision, Escobar held that the implied false certification theory is a valid basis for FCA liability, at least in some circumstances, provided that the requirement at issue was material to the government’s payment decision.
Escobar’s approval of the implied false certification theory was a victory for whistleblowers and the Department of Justice but not a complete one. The Supreme Court cautioned that the materiality requirement must be applied rigorously by the lower courts and may bar FCA claims even at the pleading stage.
Already, courts are wrestling with how to apply the standards that Escobar announced. The decision is sure to have a profound impact on implied false certification cases in 2017 and beyond.