Bipartisan Bill to Amend FCA Tinkers With 'Materiality' in Wake of Supreme Court Case

A bill that amends the False Claims Act is seen as a way to right the False Claims Act (FCA) ship after it was knocked off course by a 2016 Supreme Court decision. It focuses on the relationship between the “materiality” of the noncompliance of a claim for payment and the government continuing to pay the claim. But some attorneys think the legislation is unnecessary and tips the scale too far toward whistleblowers.

The bipartisan False Claims Amendments Act of 2021 was sponsored by Republican Sen. Charles Grassley, the longtime champion of the FCA; Democrat Sen. Dick Durbin; and other senators.[1] It has been advanced by the Senate Judiciary Committee but so far has no companion in the House. A spokesperson for Grassley said the bill is awaiting action on the Senate floor, and “several House offices have expressed interest in teaming up with Senator Grassley on this issue and we are currently working with them.”

The most significant change is a response to the U.S. Supreme Court’s landmark decision in Universal Health Services vs. United States ex rel. Escobar, attorneys said.[2]  The Escobar decision supported the theory of implied certification in an FCA lawsuit. Implied certification means the submission of a claim for payment carries with it the assurance that providers have complied with all conditions of payment, even if they haven’t expressly certified compliance. The decision set forth two conditions under which the implied certification theory can be a basis for liability: (1) “The claim does not merely request payment, but also makes specific representations about the goods or services provided”; and (2) “The defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.”

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