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Supreme Court mulling expansion of False Claims Act lawsuits

By Michael Carroll | Apr 26, 2016

NEW YORK (Legal Newsline) – U.S. Supreme Court justices on April 19 heard arguments in a case that could expand liability for defendants in False Claims Act cases.

The lawsuit involves a young woman who suffered a seizure and died after treatment at a Massachusetts mental health center that was found to have lacked proper medical supervision. Her parents claimed the center made false claims for reimbursement to the Medicaid program because it lacked proper supervision of mental health workers.

How the justices will rule ultimately remains difficult to predict, a Columbia Law School professor said.

In the case of Universal Health Services v. U.S. ex rel Escobar, the justices are expected to decide by June how broadly to apply the False Claims Act. At stake is whether the high court will open the door to increased civil fraud lawsuits against government contractors.

“I think it’s hard to say how the court will rule,” said professor Ronald Mann, who wrote an article on the case for the SCOTUSBlog website. He pointed to uncertainty about whether the justices would fully accept the contractor’s brief about the problems of expanding liability to health care contractors for virtually any breach of industry regulations.

“On the one hand, the justices ordinarily are protective of government contractors; on the other, they tend to be almost reflexively hostile to those who defraud the government,” Mann stated on SCOTUSBlog.

The parents of the woman who died, Yarushka Rivera, filed a whistleblower lawsuit against the counseling center, claiming the center delivered improper care while receiving Medicaid payments from the government. At issue is what constitutes a legal falsity under the False Claims Act.

Some federal circuit courts have favored the theory of “implied certification” under FCA – that is, a contractor’s act of submitting a reimbursement claim to the government implies that the contractor affirms it is following all related rules and regulations.

Other circuits, however, have argued that for a claim to be labeled false, the applicable law or regulation must clearly state that the violation is a condition of payment.

In this case, the federal government is supporting the family’s position and the theory of implied certification.

“The federal government is always on the side of expanding liability,” Mann said, “because it increases their ability to recover from contractors.”

Mann said an affirmation of implied certification would mainly affect legal costs for businesses.

“Implied certification is widely accepted in the lower courts already, and it makes the costs of doing business go up as litigation challenges proliferate,” he said.

“I don’t think it changes much in the way of doing business because these cases almost always deal with mistakes nobody considered at the time. It really just changes litigation costs.”

The main industries that will be affected by the outcome of the case are providers of health care and medical services, as well as defense contractors that depend heavily on government funds, Mann said.

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