Opinion ID: 220093
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Heading Rank: 2

Heading: Establishing a Claim Under the FCA

Text: The primary purpose of the FCA is to indemnify the government-through its restitutionary penalty provisions-against losses caused by a defendant's fraud. Mikes v. Straus, 274 F.3d 687, 696 (2d Cir.2001) (citing U.S. ex rel. Marcus v. Hess, 317 U.S. 537, 549, 551-52, 63 S.Ct. 379, 388, 87 L.Ed. 443 (1943)). A plaintiff, in order to establish a prima facie FCA violation under section 3729(a)(1), must prove that (1) the defendant presented or caused to be presented to an agent of the United States a claim for payment; (2) the claim was false or fraudulent; and (3) the defendant knew the claim was false or fraudulent. U.S. ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 242 (3d Cir.2004) (internal quotation marks omitted); Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176, 182 (3d Cir.2001). As we have indicated, a private individual, otherwise known as a relator, may bring a civil action in the name of the United States to enforce this provision of the FCA and may share a percentage of any recovery resulting from the suit. 31 U.S.C. § 3730(b) & (d). There are two categories of false claims under the FCA: a factually false claim and a legally false claim. U.S. ex rel. Conner v. Salina Reg'l Health Ctr., Inc., 543 F.3d 1211, 1217 (10th Cir.2008). A claim is factually false when the claimant misrepresents what goods or services that it provided to the Government and a claim is legally false when the claimant knowingly falsely certifies that it has complied with a statute or regulation the compliance with which is a condition for Government payment. Id. A legally false FCA claim is based on a false certification theory of liability. See Rodriguez v. Our Lady of Lourdes Med. Ctr., 552 F.3d 297, 303 (3d Cir.2008), overruled in part on other grounds by U.S. ex rel. Eisenstein v. City of New York, ___ U.S. ___, 129 S.Ct. 2230, 173 L.Ed.2d 1255 (2009). On this appeal, we are concerned only with allegedly legally false claims related to appellees' eligibility to receive payment, as appellants do not contend that appellees did not deliver the services for which they sought payment. There is a further division of categories of claims as the courts have recognized that there are two types of false certifications, express and implied. See, e.g., Conner, 543 F.3d at 1217. Under the express false certification theory, an entity is liable under the FCA for falsely certifying that it is in compliance with regulations which are prerequisites to Government payment in connection with the claim for payment of federal funds. Rodriguez, 552 F.3d at 303. There is a more expansive version of the express false certification theory called implied false certification liability which attaches when a claimant seeks and makes a claim for payment from the Government without disclosing that it violated regulations that affected its eligibility for payment. Id. Thus, an implied false certification theory of liability is premised on the notion that the act of submitting a claim for reimbursement itself implies compliance with governing federal rules that are a precondition to payment. Mikes, 274 F.3d at 699; see also United States v. Sci. Applications Int'l Corp., 626 F.3d 1257, 1266 (D.C.Cir.2010) (Courts infer implied certifications from silence where certification was a prerequisite to the government action sought. (internal quotation marks and citation omitted)). The United States Court of Federal Claims seems to have been the first court to recognize that there can be implied false certification liability under the FCA. See Ab-Tech Constr., Inc. v. United States, 31 Fed.Cl. 429 (Fed.Cl.1994), aff'd, 57 F.3d 1084 (Fed.Cir.1995). In Ab-Tech the court held that Ab-Tech's submission of payment vouchers to the Government impliedly certified that Ab-Tech was continuing to adhere to the eligibility requirements of a federal small business program in which it was a participant. Id. at 433-34. Though the vouchers did not contain any express misrepresentations, Ab-Tech's failure to honor the requirements of the program rendered it subject to false certification liability under the FCA. Id. at 434. While we have held that there can be express false certification liability under the FCA, see U.S. ex rel. Kosenske v. Carlisle HMA, Inc., 554 F.3d 88, 94 (3d Cir.2009), we have not decided whether there can be implied false certification liability under the FCA. See Rodriguez, 552 F.3d at 303-04. [15] However, other courts of appeals have considered this possibility and a majority of those courts, including those in the Second, Sixth, Ninth, Tenth, Eleventh, and District of Columbia Circuits have recognized that there can be implied false certification liability under the FCA. See Mikes, 274 F.3d at 699-700; U.S. ex rel. Augustine v. Century Health Servs., Inc., 289 F.3d 409, 415 (6th Cir.2002); Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d 993, 996-98 (9th Cir.2010); Conner, 543 F.3d at 1217-18; McNutt ex rel. U.S. v. Haleyville Med. Supplies, Inc., 423 F.3d 1256, 1259 (11th Cir.2005); Sci. Applications Int'l Corp., 626 F.3d at 1266, 1269; but see U.S. ex rel. Hutcheson v. Blackstone Med. Inc., 647 F.3d 377, 2011 WL 2150191, at  (1st Cir. June 1, 2011) (declining to employ judicially created categories of express and implied false certification); Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 786 n. 8 (4th Cir. 1999) (stating without addressing validity of implied false certification theory under FCA, that its precedent makes the theory questionable). We now join with these many courts of appeals in holding that a plaintiff may bring an FCA suit under an implied false certification theory of liability. We adopt the implied false certification theory for liability for several reasons. First, the implied false certification theory gives effect to Congress' expressly stated purpose that the FCA should reach all fraudulent attempts to cause the Government to pay [out] sums of money or to deliver property or services. S.Rep. No. 99-345, at 9 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5274; see also United States v. Neifert-White Co., 390 U.S. 228, 232, 88 S.Ct. 959, 961, 19 L.Ed.2d 1061 (1968) ([T]he [FCA] was intended to reach all types of fraud, without qualification, that might result in financial loss to the government.). Moreover, our ruling is consistent with Congress' stated intent inasmuch as under the implied false certification theory of liability, even in the absence of a false certification of compliance, the Government or qui tam plaintiffs successfully may bring an action that holds a claimant liable for submitting legally false claims to the Government: [A] false claim may take many forms, the most common being a claim for goods or services not provided, or provided in violation of contract terms, specification, statute, or regulation. . . . [Claims made to Medicare or Medicaid programs] may be false even though the services are provided as claimed if, for example, the claimant is ineligible to participate in the program. . . . S.Rep. No. 99-345, at 9, reprinted in 1986 U.S.C.C.A.N. 5266, 5274. In addition, the language and the structure of the FCA support the conclusion that a claim based on an implied false certification may constitute [an actionable] false or fraudulent claim. Shaw v. AAA Eng'g & Drafting, Inc., 213 F.3d 519, 531 (10th Cir.2000) (internal quotation marks omitted). Under § 3729(a)(2), liability is premised on the presentation of a `false record or statement to get a false or fraudulent claim paid or approved.' Id. On the other hand, section 3729(a)(1) requires only that a claimant present a `false or fraudulent claim for payment or approval' without the additional element of a `false record or statement.' Id. Therefore, section 3729(a)(1), when compared with section 3729(a)(2), indicates that a plaintiff can bring a claim under the FCA even without evidence that a claimant for Government funds made an express false statement in order to obtain those funds. Id. As several courts of appeals have held, however, the implied certification theory of liability should not be applied expansively, particularly when advanced on the basis of FCA allegations arising from the Government's payment of claims under federally funded health care programs. In particular, the Court of Appeals for the Second Circuit in Mikes recognized that the rationale behind Ab-Tech does not fit comfortably into the health care context because the [FCA] was not designed for use as a blunt instrument to enforce compliance with all medical regulationsbut rather only those regulations that are a precondition to payment. . . . Mikes, 274 F.3d at 699. Moreover, in Rodriguez, although we did not expressly adopt the implied false certification theory, we stated that [t]o state a claim under [the implied false certification] theory it is necessary to allege not only a receipt of federal funds and a failure to comply with applicable regulations, but also that payment of the federal funds was in some way conditioned on compliance with those regulations. 552 F.3d at 304. Thus, under this theory a plaintiff must show that if the Government had been aware of the defendant's violations of the Medicare laws and regulations that are the bases of a plaintiff's FCA claims, it would not have paid the defendant's claims. See Conner, 543 F.3d at 1219-20 (If the government would have paid the claims despite knowing that the contractor has failed to comply with certain regulations, then there is no false claim for purposes of the FCA.). Absent this requirement, the FCA could turn into `a blunt instrument to enforce compliance with all . . . regulations' rather than `only those regulations that are a precondition to payment.' Rodriguez, 552 F.3d at 304 (quoting Mikes, 274 F.3d at 699). With these principles in mind, we now will consider appellants' FCA allegations.