Yes, a company can be sued for fraud for hiding that it broke important rules. The Court said that when the clinic sent bills, it was telling a 'half-truth.' It said it provided therapy but left out the critical fact that the therapy was done by unqualified people. Lying by leaving out key information is a form of fraud. The Court explained that what really matters is whether the broken rule was 'material'—meaning, it was a big enough deal that the government would have refused to pay the bill if it had known the truth.

Yes, a company can get in trouble under the False Claims Act if it does two things: 1) asks for money and says specific stuff about what it did, and 2) doesn't mention breaking important rules that would make what it said untrue. It doesn't matter if the rules were officially called 'payment rules.' What matters is if the company knew it broke rules that were really important to the government's choice to pay. 'Really important' means it would change what the government did. The Court is sending the case back to other courts to look at it again using this way of thinking about it.

Under the False Claims Act, "[a] misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be material to the Government's payment decision in order to be actionable."

A theory of implied false certification can be a basis for liability where two conditions are satisfied: "first, the claim does not merely request payment, but also makes specific representations about the goods or services provided; and second, the defendant's failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those …

Or, if the Government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated, and has signaled no change in position, that is strong evidence that the requirements are not material.

—relevant to the materiality analysis include (1) "the Government's decision to expressly identify a provision as a condition of payment";(2) whether "the Government consistently refuses to pay claims in the mine run of cases based on noncompliance with the particular statutory, regulatory, or contractual requirement" or pays the claim "despite its actual knowledge that …

The Supreme Court has emphasized that because the FCA is "not `an all-purpose antifraud statute,'or a vehicle for punishing garden-variety breaches of contract or regulatory violations, "the materiality standard is" demanding. "

The Court explicitly said that, "absent other indication, Congress intends to incorporate the well-settled meaning of the common-law terms it uses" and that "the term `fraudulent'is a paradigmatic example of a statutory term that incorporates the common-law meaning of fraud. "

—the Supreme Court held that the implied false certification theory can serve as a basis for liability under the FCA

Escobar specifically rejected a view of materiality that "any statutory, regulatory, or contractual violation is material so long as the defendant knows that the Government would be entitled to refuse payment were it aware of the violation."

Materiality "look [s] to the effect on the likely or actual behavior of the recipient of the alleged misrepresentation."

The claims that Vatan alleges that QTC made here, like the claims in Universal Health Services, "fall squarely within the rule that half-truths—representations that state the truth only so far as it goes, while omitting critical qualifying information—can be actionable misrepresentations."

Yes, the False Claims Act permits liability under an implied false certification theory. The Court held that when a defendant submits a claim that makes specific representations about the goods or services provided, but knowingly fails to disclose noncompliance with a material statutory, regulatory, or contractual requirement, the omission can render those representations misleading half-truths actionable under the FCA. The Court rejected the argument that liability attaches only when a violated requirement is expressly designated a 'condition of payment.' Instead, the central inquiry is the 'rigorous' and 'demanding' standard of materiality. A misrepresentation is material if it has a 'natural tendency to influence, or be capable of influencing, the payment or receipt of money,' which is not met by minor or insubstantial noncompliance. Evidence that the government consistently pays claims despite knowledge of similar violations is strong evidence that the requirement is not material.

Yes, the implied false certification theory can be a basis for liability under the False Claims Act when two conditions are met: 1) the claim 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. Liability does not depend on whether the requirement is expressly designated as a condition of payment. What matters is whether the defendant knowingly violated a requirement that it knows is material to the government's payment decision. The materiality standard is demanding and looks to the effect on the likely or actual behavior of the recipient of the alleged misrepresentation. The Court vacates the First Circuit's judgment and remands for the lower courts to determine whether the plaintiffs have sufficiently pleaded a False Claims Act violation under this standard.

Universal Health Services, Inc. v. United States ex rel. Escobar

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