WASHINGTON (Legal Newsline) - An appeal scheduled for oral arguments this month before the U.S. Supreme Court will decide how broadly the federal False Claims Act applies to government contractors and whether more of them will face the prospect of heavy penalties and greater scrutiny for breaching regulations.
The high court, which has been reviewing cases with only eight members since the death of Justice Antonin Scalia in February, will decide a couple of issues involving the FCA. One is the validity of the so-called “implied certification” theory – that is, the idea that contractors that submit invoices for payment can be held liable for all regulatory and contractual requirements even if the company has not expressly complied with them in writing.
If the court affirms the implied certification theory, a second issue is whether a reimbursement claim can be deemed “legally false” if the provider did not comply with a contractual requirement or law that fails to state the issue is a condition of payment. Or the court could rule that for a claim to be considered false, the relevant statute or regulation must expressly say that the violation is a condition of payment.
Attorney Ambika Biggs of the PilieroMazza law firm in Washington noted that some government contracts can span hundreds of pages, incorporating countless statutes and regulations and references. The U.S. Supreme Court's decision could increase the burden on contractors to comply with all, she said.
Briggs said she could not predict whether fewer companies might attempt to take on contacts with the federal government if the court interprets the FCA too broadly.
“To be frank, I think it can be one of those issues where bigger government contractors or medical providers will be more cautious by dotting their i’s and crossing their t’s,” Biggs told Legal Newsline.
Small companies, however, might eventually sense a legal shift has occurred and shy away from going after contracts, she said.
Those companies showing the most interest in the outcome of Universal Health Services Inc. v. U.S. and Massachusetts are health, medical and pharmaceutical firms, Biggs said, adding that general contractors such as those involved in construction are also concerned about the application of the FCA.
“Lockheed Martin and companies with hundreds and hundreds of contracts are following it closely,” Biggs said.
Contractors that are found to violate the FCA face harsh punishment, she said. Company officials may have to pay three-fold the damages a government agency suffered because of a violation, or they can be fined up to $11,000 per violation or be sentenced to prison.
Biggs said that in the event of a 4-4 decision, the opinion of the U.S. Court of Appeals for the First Circuit would be left intact, but it would only apply in the jurisdiction of the First Circuit, which covers Maine, Massachusetts, New Hampshire, Rhode Island and Puerto Rico.
The First Circuit, in overturning the ruling of a district court, opted for a more broad interpretation of the FCA and favored the implied consent doctrine. Other circuit courts, however, have taken a narrower view of what is considered a false reimbursement claim.
“This is one of those issues that we would send out legal advisories to our clients, depending how the case comes out,” Biggs said.
The Supreme Court is scheduled to rule on the case at the end of June.