Court Opinion

ID: 3213871
Source: CourtListenerOpinion
Date Created: 2016-06-16 15:01:28.054359+00
Date Added: 2024-06-11T07:39:35.271867
License: Public Domain

(Slip Opinion)              OCTOBER TERM, 2015                                       1

                                       Syllabus

         NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
       being done in connection with this case, at the time the opinion is issued.
       The syllabus constitutes no part of the opinion of the Court but has been
       prepared by the Reporter of Decisions for the convenience of the reader.
       See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

                                       Syllabus

    UNIVERSAL HEALTH SERVICES, INC. v. UNITED 

        STATES ET AL. EX REL. ESCOBAR ET AL. 

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
                  THE FIRST CIRCUIT

        No. 15–7. Argued April 19, 2016—Decided June 16, 2016
Yarushka Rivera, a teenage beneficiary of Massachusetts’ Medicaid
  program, received counseling services for several years at Arbour
  Counseling Services, a satellite mental health facility owned and op-
  erated by a subsidiary of petitioner Universal Health Services, Inc.
  She had an adverse reaction to a medication that a purported doctor
  at Arbour prescribed after diagnosing her with bipolar disorder. Her
  condition worsened, and she eventually died of a seizure. Respond-
  ents, her mother and stepfather, later discovered that few Arbour
  employees were actually licensed to provide mental health counseling
  or authorized to prescribe medications or offer counseling services
  without supervision.
     Respondents filed a qui tam suit, alleging that Universal Health
  had violated the False Claims Act (FCA). That Act imposes signifi-
  cant penalties on anyone who “knowingly presents . . . a false or
  fraudulent claim for payment or approval” to the Federal Govern-
  ment, 31 U. S. C. §3729(a)(1)(A). Respondents sought to hold Univer-
  sal Health liable under what is commonly referred to as an “implied
  false certification theory of liability,” which treats a payment request
  as a claimant’s implied certification of compliance with relevant stat-
  utes, regulations, or contract requirements that are material condi-
  tions of payment and treats a failure to disclose a violation as a mis-
  representation that renders the claim “false or fraudulent.”
  Specifically, respondents alleged, Universal Health (acting through
  Arbour) defrauded the Medicaid program by submitting reimburse-
  ment claims that made representations about the specific services
  provided by specific types of professionals, but that failed to disclose
  serious violations of Massachusetts Medicaid regulations pertaining
2     UNIVERSAL HEALTH SERVICES, INC. v. UNITED STATES
                     EX REL. ESCOBAR

                          Syllabus

    to staff qualifications and licensing requirements for these services.
    Universal Health thus allegedly defrauded the program because Uni-
    versal Health knowingly misrepresented its compliance with mental
    health facility requirements that are so central to the provision of
    mental health counseling that the Medicaid program would have re-
    fused to pay these claims had it known of these violations.
       The District Court granted Universal Health’s motion to dismiss.
    It held that respondents had failed to state a claim under the “im-
    plied false certification” theory of liability because none of the regula-
    tions violated by Arbour was a condition of payment. The First Cir-
    cuit reversed in relevant part, holding that every submission of a
    claim implicitly represents compliance with relevant regulations, and
    that any undisclosed violation of a precondition of payment (whether
    or not expressly identified as such) renders a claim “false or fraudu-
    lent.” The First Circuit further held that the regulations themselves
    provided conclusive evidence that compliance was a material condi-
    tion of payment because the regulations expressly required facilities
    to adequately supervise staff as a condition of payment.
Held:
    1. The implied false certification theory can be a basis for FCA lia-
 bility when a defendant submitting a claim makes specific represen-
 tations about the goods or services provided, but fails to disclose non-
 compliance with material statutory, regulatory, or contractual
 requirements that make those representations misleading with re-
 spect to those goods or services. Pp. 8–11.
       (a) The FCA does not define a “false” or “fraudulent” claim, so the
 Court turns to the principle that “absent other indication, ‘Congress
 intends to incorporate the well-settled meaning of the common-law
 terms it uses,’ ” Sekhar v. United States, 570 U. S. ___, ___. Under
 the common-law definition of “fraud,” the parties agree, certain mis-
 representations by omission can give rise to FCA liability. Respond-
 ents and the Government contend that every claim for payment im-
 plicitly represents that the claimant is legally entitled to payment,
 and that failing to disclose violations of material legal requirements
 renders the claim misleading. Universal Health, on the other hand,
 argues that submitting a claim involves no representations and that
 the nondisclosure of legal violations is not actionable absent a special
 duty of reasonable care to disclose such matters. Today’s decision
 holds that the claims at issue may be actionable because they do
 more than merely demand payment; they fall squarely within the
 rule that representations that state the truth only so far as it goes,
 while omitting critical qualifying information, can be actionable mis-
 representations. Pp. 8–10.
       (b) By submitting claims for payment using payment codes corre-
                   Cite as: 579 U. S. ____ (2016)                      3

                              Syllabus

sponding to specific counseling services, Universal Health represent-
ed that it had provided specific types of treatment. And Arbour staff
allegedly made further representations by using National Provider
Identification numbers corresponding to specific job titles. By con-
veying this information without disclosing Arbour’s many violations
of basic staff and licensing requirements for mental health facilities,
Universal Health’s claims constituted misrepresentations. Pp. 10–
11.
   2. Contrary to Universal Health’s contentions, FCA liability for
failing to disclose violations of legal requirements does not turn upon
whether those requirements were expressly designated as conditions
of payment. Pp. 11–17.
      (a) Section 3729(a)(1)(A), which imposes liability on those pre-
senting “false or fraudulent claim[s],” does not limit claims to misrep-
resentations about express conditions of payment. Nothing in the
text supports such a restriction. And under the Act’s materiality re-
quirement, statutory, regulatory, and contractual requirements are
not automatically material, even if they are labeled conditions of
payment. Nor is the restriction supported by the Act’s scienter re-
quirement. A defendant can have “actual knowledge” that a condi-
tion is material even if the Government does not expressly call it a
condition of payment. What matters is not the label that the Gov-
ernment attaches to a requirement, but whether the defendant know-
ingly violated a requirement that the defendant knows is material to
the Government’s payment decision. Universal Health’s policy ar-
guments are unavailing, and are amply addressed through strict en-
forcement of the FCA’s stringent materiality and scienter provisions.
Pp. 12–14.
      (b) A misrepresentation about compliance with a statutory, regu-
latory, or contractual requirement must be material to the Govern-
ment’s payment decision in order to be actionable under the FCA.
The FCA’s materiality requirement is demanding. An undisclosed
fact is material if, for instance, “[n]o one can say with reason that the
plaintiff would have signed this contract if informed of the likelihood”
of the undisclosed fact. Junius Constr. Co. v. Cohen, 257 N. Y. 393,
400, 178 N. E. 672, 674. When evaluating the FCA’s materiality re-
quirement, the Government’s decision to expressly identify a provi-
sion as a condition of payment is relevant, but not automatically dis-
positive. A misrepresentation cannot be deemed material merely
because the Government designates compliance with a particular re-
quirement as a condition of payment. Nor is the Government’s option
to decline to pay if it knew of the defendant’s noncompliance suffi-
cient for a finding of materiality. Materiality also cannot be found
where noncompliance is minor or insubstantial. Moreover, if the
4     UNIVERSAL HEALTH SERVICES, INC. v. UNITED STATES
                     EX REL. ESCOBAR

                          Syllabus

    Government pays a particular claim in full despite its actual
    knowledge that certain requirements were violated, that is very
    strong evidence that those requirements are not material. The FCA
    thus does not support the Government’s and First Circuit’s expansive
    view that any statutory, regulatory, or contractual violation is mate-
    rial so long as the defendant knows that the Government would be
    entitled to refuse payment were it aware of the violation. Pp. 14–17.
780 F. 3d 504, vacated and remanded.

    THOMAS, J., delivered the opinion for a unanimous Court.
                        Cite as: 579 U. S. ____ (2016)                              1

                             Opinion of the Court

     NOTICE: This opinion is subject to formal revision before publication in the
     preliminary print of the United States Reports. Readers are requested to
     notify the Reporter of Decisions, Supreme Court of the United States, Wash-
     ington, D. C. 20543, of any typographical or other formal errors, in order
     that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES
                                   _________________

                                     No. 15–7
                                   _________________

UNIVERSAL HEALTH SERVICES, INC., PETITIONER v. 

  UNITED STATES AND MASSACHUSETTS, EX REL.

     JULIO ESCOBAR AND CARMEN CORREA

 ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF 

             APPEALS FOR THE FIRST CIRCUIT

                                 [June 16, 2016] 

   JUSTICE THOMAS delivered the opinion of the Court.
   The False Claims Act, 31 U. S. C. §3729 et seq., imposes
significant penalties on those who defraud the Govern-
ment. This case concerns a theory of False Claims Act
liability commonly referred to as “implied false certifica-
tion.” According to this theory, when a defendant submits
a claim, it impliedly certifies compliance with all condi-
tions of payment. But if that claim fails to disclose the
defendant’s violation of a material statutory, regulatory,
or contractual requirement, so the theory goes, the de-
fendant has made a misrepresentation that renders the
claim “false or fraudulent” under §3729(a)(1)(A). This case
requires us to consider this theory of liability and to clarify
some of the circumstances in which the False Claims Act
imposes liability.
   We first hold that, at least in certain circumstances, the
implied false certification theory can be a basis for liabil-
ity. Specifically, liability can attach when the defendant
submits a claim for payment that makes specific represen-
tations about the goods or services provided, but knowingly
2   UNIVERSAL HEALTH SERVICES, INC. v. UNITED STATES
                   EX REL. ESCOBAR

                  Opinion of the Court 

fails to disclose the defendant’s noncompliance with a
statutory, regulatory, or contractual requirement. In
these circumstances, liability may attach if the omission
renders those representations misleading.
   We further hold that False Claims Act liability for fail-
ing to disclose violations of legal requirements does not
turn upon whether those requirements were expressly
designated as conditions of payment. Defendants can be
liable for violating requirements even if they were not
expressly designated as conditions of payment. Conversely,
even when a requirement is expressly designated a
condition of payment, not every violation of such a re-
quirement gives rise to liability. What matters is not the
label the Government attaches to a requirement, but
whether the defendant knowingly violated a requirement
that the defendant knows is material to the Government’s
payment decision.
   A misrepresentation about compliance with a statutory,
regulatory, or contractual requirement must be material
to the Government’s payment decision in order to be ac-
tionable under the False Claims Act. We clarify below
how that rigorous materiality requirement should be
enforced.
   Because the courts below interpreted §3729(a)(1)(A)
differently, we vacate the judgment and remand so that
those courts may apply the approach set out in this
opinion.
                             I

                             A

  Enacted in 1863, the False Claims Act “was originally
aimed principally at stopping the massive frauds perpe-
trated by large contractors during the Civil War.” United
States v. Bornstein, 423 U. S. 303, 309 (1976). “[A] series
of sensational congressional investigations” prompted
hearings where witnesses “painted a sordid picture of how
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                     Opinion of the Court

the United States had been billed for nonexistent or
worthless goods, charged exorbitant prices for goods deliv-
ered, and generally robbed in purchasing the necessities of
war.” United States v. McNinch, 356 U. S. 595, 599
(1958). Congress responded by imposing civil and criminal
liability for 10 types of fraud on the Government, subject-
ing violators to double damages, forfeiture, and up to five
years’ imprisonment. Act of Mar. 2, 1863, ch. 67, 12 Stat.
696.
   Since then, Congress has repeatedly amended the Act,
but its focus remains on those who present or directly
induce the submission of false or fraudulent claims. See
31 U. S. C. §3729(a) (imposing civil liability on “any person
who . . . knowingly presents, or causes to be presented, a
false or fraudulent claim for payment or approval”). A
“claim” now includes direct requests to the Government
for payment as well as reimbursement requests made to
the recipients of federal funds under federal benefits
programs. See §3729(b)(2)(A). The Act’s scienter re-
quirement defines “knowing” and “knowingly” to mean
that a person has “actual knowledge of the information,”
“acts in deliberate ignorance of the truth or falsity of the
information,” or “acts in reckless disregard of the truth or
falsity of the information.” §3729(b)(1)(A). And the Act
defines “material” to mean “having a natural tendency to
influence, or be capable of influencing, the payment or
receipt of money or property.” §3729(b)(4).
   Congress also has increased the Act’s civil penalties so
that liability is “essentially punitive in nature.” Vermont
Agency of Natural Resources v. United States ex rel. Ste-
vens, 529 U. S. 765, 784 (2000). Defendants are subjected
to treble damages plus civil penalties of up to $10,000 per
false claim. §3729(a); 28 CFR §85.3(a)(9) (2015) (adjusting
penalties for inflation).
4   UNIVERSAL HEALTH SERVICES, INC. v. UNITED STATES
                   EX REL. ESCOBAR

                  Opinion of the Court 

                               B
   The alleged False Claims Act violations here arose
within the Medicaid program, a joint state-federal pro-
gram in which healthcare providers serve poor or disabled
patients and submit claims for government reimburse-
ment. See generally 42 U. S. C. §1396 et seq. The facts
recited in the complaint, which we take as true at this
stage, are as follows. For five years, Yarushka Rivera, a
teenage beneficiary of Massachusetts’ Medicaid program,
received counseling services at Arbour Counseling Ser-
vices, a satellite mental health facility in Lawrence, Massa-
chusetts, owned and operated by a subsidiary of peti-
tioner Universal Health Services. Beginning in 2004,
when Yarushka started having behavioral problems, five
medical professionals at Arbour intermittently treated
her. In May 2009, Yarushka had an adverse reaction to a
medication that a purported doctor at Arbour prescribed
after diagnosing her with bipolar disorder. Her condition
worsened; she suffered a seizure that required hospitaliza-
tion. In October 2009, she suffered another seizure and
died. She was 17 years old.
   Thereafter, an Arbour counselor revealed to respondents
Carmen Correa and Julio Escobar—Yarushka’s mother
and stepfather—that few Arbour employees were actually
licensed to provide mental health counseling and that
supervision of them was minimal. Respondents discovered
that, of the five professionals who had treated Yarushka,
only one was properly licensed. The practitioner who
diagnosed Yarushka as bipolar identified herself as a
psychologist with a Ph. D., but failed to mention that her
degree came from an unaccredited Internet college and
that Massachusetts had rejected her application to be
licensed as a psychologist. Likewise, the practitioner who
prescribed medicine to Yarushka, and who was held out as
a psychiatrist, was in fact a nurse who lacked authority to
prescribe medications absent supervision. Rather than
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                     Opinion of the Court

ensuring supervision of unlicensed staff, the clinic’s direc-
tor helped to misrepresent the staff ’s qualifications. And
the problem went beyond those who treated Yarushka.
Some 23 Arbour employees lacked licenses to provide
mental health services, yet—despite regulatory require-
ments to the contrary—they counseled patients and pre-
scribed drugs without supervision.
   When submitting reimbursement claims, Arbour used
payment codes corresponding to different services that its
staff provided to Yaruskha, such as “Individual Therapy”
and “family therapy.” 1 App. 19, 20. Staff members also
misrepresented their qualifications and licensing status to
the Federal Government to obtain individual National
Provider Identification numbers, which are submitted in
connection with Medicaid reimbursement claims and
correspond to specific job titles. For instance, one Arbour
staff member who treated Yaruskha registered for a num-
ber associated with “ ‘Social Worker, Clinical,’ ” despite
lacking the credentials and licensing required for social
workers engaged in mental health counseling. 1 id., at 32.
   After researching Arbour’s operations, respondents filed
complaints with various Massachusetts agencies. Massa-
chusetts investigated and ultimately issued a report de-
tailing Arbour’s violation of over a dozen Massachusetts
Medicaid regulations governing the qualifications and
supervision required for staff at mental health facili-
ties. Arbour agreed to a remedial plan, and two Arbour
employees also entered into consent agreements with
Massachusetts.
   In 2011, respondents filed a qui tam suit in federal
court, see 31 U. S. C. §3730, alleging that Universal
Health had violated the False Claims Act under an im-
plied false certification theory of liability. The operative
complaint asserts that Universal Health (acting through
Arbour) submitted reimbursement claims that made
representations about the specific services provided by
6   UNIVERSAL HEALTH SERVICES, INC. v. UNITED STATES
                   EX REL. ESCOBAR

                  Opinion of the Court 

specific types of professionals, but that failed to disclose
serious violations of regulations pertaining to staff qualifi-
cations and licensing requirements for these services.1
Specifically, the Massachusetts Medicaid program re-
quires satellite facilities to have specific types of clinicians
on staff, delineates licensing requirements for particular
positions (like psychiatrists, social workers, and nurses),
and details supervision requirements for other staff. See
130 Code Mass. Regs. §§429.422–424, 429.439 (2014).
Universal Health allegedly flouted these regulations
because Arbour employed unqualified, unlicensed, and
unsupervised staff. The Massachusetts Medicaid pro-
gram, unaware of these deficiencies, paid the claims.
Universal Health thus allegedly defrauded the program,
which would not have reimbursed the claims had it known
that it was billed for mental health services that were
performed by unlicensed and unsupervised staff. The
United States declined to intervene.
  The District Court granted Universal Health’s motion to
dismiss the complaint. Circuit precedent had previously
embraced the implied false certification theory of liability.
See, e.g., United States ex rel. Hutcheson v. Blackstone
Medical, Inc., 647 F. 3d 377, 385–387 (CA1 2011). But the
District Court held that respondents had failed to state a
claim under that theory because, with one exception not
relevant here, none of the regulations that Arbour violated
was a condition of payment. See 2014 WL 1271757, *1,
*6–*12 (D Mass., Mar. 26, 2014).
  The United States Court of Appeals for the First Circuit
reversed in relevant part and remanded. 780 F. 3d 504,
517 (2015). The court observed that each time a billing
——————
  1 Although Universal Health submitted some of the claims at issue

before 2009, we assume—as the parties have done—that the 2009
amendments to the False Claims Act apply here. Universal Health
does not argue, and we thus do not consider, whether pre-2009 conduct
should be treated differently.
                  Cite as: 579 U. S. ____ (2016)            7

                      Opinion of the Court

party submits a claim, it “implicitly communicate[s] that it
conformed to the relevant program requirements, such
that it was entitled to payment.” Id., at 514, n. 14. To
determine whether a claim is “false or fraudulent” based
on such implicit communications, the court explained, it
“asks simply whether the defendant, in submitting a claim
for reimbursement, knowingly misrepresented compliance
with a material precondition of payment.” Id., at 512. In
the court’s view, a statutory, regulatory, or contractual
requirement can be a condition of payment either by ex-
pressly identifying itself as such or by implication. Id., at
512–513. The court then held that Universal Health had
violated Massachusetts Medicaid regulations that “clearly
impose conditions of payment.” Id., at 513. The court
further held that the regulations themselves “constitute[d]
dispositive evidence of materiality,” because they identi-
fied adequate supervision as an “express and absolute”
condition of payment and “repeated[ly] reference[d]” su-
pervision. Id., at 514 (internal quotation marks omitted).
   We granted certiorari to resolve the disagreement
among the Courts of Appeals over the validity and scope of
the implied false certification theory of liability. 577 U. S.
___ (2015). The Seventh Circuit has rejected this theory,
reasoning that only express (or affirmative) falsehoods can
render a claim “false or fraudulent” under 31 U. S. C.
§3729(a)(1)(A). United States v. Sanford-Brown, Ltd., 788
F. 3d 696, 711–712 (2015). Other courts have accepted the
theory, but limit its application to cases where defendants
fail to disclose violations of expressly designated condi-
tions of payment. E.g., Mikes v. Straus, 274 F. 3d 687, 700
(CA2 2011). Yet others hold that conditions of payment
need not be expressly designated as such to be a basis for
False Claims Act liability. E.g., United States v. Science
Applications Int’l Corp., 626 F. 3d 1257, 1269 (CADC
2010) (SAIC).
8   UNIVERSAL HEALTH SERVICES, INC. v. UNITED STATES
                   EX REL. ESCOBAR

                  Opinion of the Court 

                               II
   We first hold that the implied false certification theory
can, at least in some circumstances, provide a basis for
liability. By punishing defendants who submit “false or
fraudulent claims,” the False Claims Act encompasses
claims that make fraudulent misrepresentations, which
include certain misleading omissions. When, as here, a
defendant makes representations in submitting a claim
but omits its violations of statutory, regulatory, or contrac-
tual requirements, those omissions can be a basis for
liability if they render the defendant’s representations
misleading with respect to the goods or services provided.
   To reach this conclusion, “[w]e start, as always, with the
language of the statute.” Allison Engine Co. v. United
States ex rel. Sanders, 553 U. S. 662, 668 (2008) (brackets
in original; internal quotation marks omitted). The False
Claims Act imposes civil liability on “any person who . . .
knowingly presents, or causes to be presented, a false
or fraudulent claim for payment or approval.”
§3729(a)(1)(A). Congress did not define what makes a
claim “false” or “fraudulent.” But “[i]t is a settled principle
of interpretation that, absent other indication, Congress
intends to incorporate the well-settled meaning of the
common-law terms it uses.” Sekhar v. United States, 570
U. S. ___, ___ (2013) (slip op., at 3) (internal quotation
marks omitted). And the term “fraudulent” is a paradig-
matic example of a statutory term that incorporates the
common-law meaning of fraud. See Neder v. United
States, 527 U. S. 1, 22 (1999) (the term “actionable ‘fraud’”
is one with “a well-settled meaning at common law”).2
——————
  2 The False Claims Act abrogates the common law in certain respects.

For instance, the Act’s scienter requirement “require[s] no proof of
specific intent to defraud.” 31 U. S. C. §3729(b)(1)(B). But we presume
that Congress retained all other elements of common-law fraud that are
consistent with the statutory text because there are no textual indicia
to the contrary. See Neder, 527 U. S., at 24–25.
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                     Opinion of the Court

    Because common-law fraud has long encompassed cer-
tain misrepresentations by omission, “false or fraudulent
claims” include more than just claims containing express
falsehoods. The parties and the Government agree that
misrepresentations by omission can give rise to liability.
Brief for Petitioner 30–31; Brief for Respondents 22–31;
Brief for United States as Amicus Curiae 16–20.
    The parties instead dispute whether submitting a claim
without disclosing violations of statutory, regulatory, or
contractual requirements constitutes such an actionable
misrepresentation. Respondents and the Government
invoke the common-law rule that, while nondisclosure
alone ordinarily is not actionable, “[a] representation
stating the truth so far as it goes but which the maker
knows or believes to be materially misleading because of
his failure to state additional or qualifying matter” is
actionable. Restatement (Second) of Torts §529, p. 62
(1976). They contend that every submission of a claim for
payment implicitly represents that the claimant is legally
entitled to payment, and that failing to disclose violations
of material legal requirements renders the claim mislead-
ing. Universal Health, on the other hand, argues that
submitting a claim involves no representations, and that a
different common-law rule thus governs: nondisclosure of
legal violations is not actionable absent a special “ ‘duty
. . . to exercise reasonable care to disclose the matter in
question,’ ” which it says is lacking in Government con-
tracting. Brief for Petitioner 31 (quoting Restatement
(Second) of Torts §551(1), at 119).
    We need not resolve whether all claims for payment
implicitly represent that the billing party is legally enti-
tled to payment. The claims in this case do more than
merely demand payment. They fall squarely within the
rule that half-truths—representations that state the truth
only so far as it goes, while omitting critical qualifying
10 UNIVERSAL HEALTH SERVICES, INC. v. UNITED STATES
                  EX REL. ESCOBAR

                 Opinion of the Court 

information—can be actionable misrepresentations.3 A
classic example of an actionable half-truth in contract law
is the seller who reveals that there may be two new roads
near a property he is selling, but fails to disclose that a
third potential road might bisect the property. See Junius
Constr. Co. v. Cohen, 257 N. Y. 393, 400, 178 N. E. 672,
674 (1931) (Cardozo, J.). “The enumeration of two streets,
described as unopened but projected, was a tacit represen-
tation that the land to be conveyed was subject to no
others, and certainly subject to no others materially affect-
ing the value of the purchase.” Ibid. Likewise, an appli-
cant for an adjunct position at a local college makes an
actionable misrepresentation when his resume lists prior
jobs and then retirement, but fails to disclose that his
“retirement” was a prison stint for perpetrating a $12
million bank fraud. See 3 D. Dobbs, P. Hayden, & H.
Bublick, Law of Torts §682, pp. 702–703, and n. 14 (2d ed.
2011) (citing Sarvis v. Vermont State Colleges, 172 Vt. 76,
78, 80–82, 772 A. 2d 494, 496, 497–499 (2001)).
   So too here, by submitting claims for payment using
payment codes that corresponded to specific counseling
services, Universal Health represented that it had pro-
vided individual therapy, family therapy, preventive medica-
tion counseling, and other types of treatment. Moreover,
Arbour staff members allegedly made further representa-
tions in submitting Medicaid reimbursement claims by
using National Provider Identification numbers corre-
sponding to specific job titles. And these representations
——————
  3 This  rule recurs throughout the common law. In tort law, for exam-
ple, “if the defendant does speak, he must disclose enough to prevent
his words from being misleading.” W. Keeton, D. Dobbs, R. Keeton, &
D. Owen, Prosser and Keeton on Law of Torts §106, p. 738 (5th ed.
1984). Contract law also embraces this principle. See, e.g., Restate-
ment (Second) of Contracts §161, Comment a, p. 432 (1979). And we
have used this definition in other statutory contexts. See, e.g., Matrixx
Initiatives, Inc. v. Siracusano, 563 U. S. 27, 44 (2011) (securities law).
                    Cite as: 579 U. S. ____ (2016)                  11

                         Opinion of the Court

were clearly misleading in context. Anyone informed that
a social worker at a Massachusetts mental health clinic
provided a teenage patient with individual counseling
services would probably—but wrongly—conclude that the
clinic had complied with core Massachusetts Medicaid
requirements (1) that a counselor “treating children [is]
required to have specialized training and experience in
children’s services,” 130 Code Mass. Regs. §429.422, and
also (2) that, at a minimum, the social worker possesses
the prescribed qualifications for the job, §429.424(C).
By using payment and other codes that conveyed this
information without disclosing Arbour’s many violations
of basic staff and licensing requirements for mental
health facilities, Universal Health’s claims constituted
misrepresentations.
   Accordingly, we hold that the implied certification theory
can be a basis for liability, at least 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
representations misleading half-truths.4
                                 III
   The second question presented is whether, as Universal
Health urges, a defendant should face False Claims Act
liability only if it fails to disclose the violation of a contrac-
tual, statutory, or regulatory provision that the Govern-
——————
  4 As an alternative argument, Universal Health asserts that mislead-

ing partial disclosures constitute fraudulent misrepresentations only
when the initial statement partially disclosed unfavorable information.
Not so. “[A] statement that contains only favorable matters and omits
all reference to unfavorable matters is as much a false representation
as if all the facts stated were untrue.” Restatement (Second) of Torts,
§529, Comment a, pp. 62–63 (1976).
12 UNIVERSAL HEALTH SERVICES, INC. v. UNITED STATES
                  EX REL. ESCOBAR

                 Opinion of the Court 

ment expressly designated a condition of payment. We
conclude that the Act does not impose this limit on liabil-
ity. But we also conclude that not every undisclosed viola-
tion of an express condition of payment automatically
triggers liability. Whether a provision is labeled a condi-
tion of payment is relevant to but not dispositive of the
materiality inquiry.
                              A
   Nothing in the text of the False Claims Act sup-
ports Universal Health’s proposed restriction. Section
3729(a)(1)(A) imposes liability on those who present “false
or fraudulent claims” but does not limit such claims to
misrepresentations about express conditions of payment.
See SAIC, 626 F. 3d, at 1268 (rejecting any textual basis
for an express-designation rule). Nor does the common-
law meaning of fraud tether liability to violating an ex-
press condition of payment. A statement that misleadingly
omits critical facts is a misrepresentation irrespective of
whether the other party has expressly signaled the im-
portance of the qualifying information. Supra, at 9–11.
   The False Claims Act’s materiality requirement also
does not support Universal Health. Under the Act, the
misrepresentation must be material to the other party’s
course of action. But, as discussed below, see infra, at 15–
17, statutory, regulatory, and contractual requirements
are not automatically material, even if they are labeled
conditions of payment. Cf. Matrixx Initiatives, Inc. v.
Siracusano, 563 U. S. 27, 39 (2011) (materiality cannot
rest on “a single fact or occurrence as always determina-
tive” (internal quotation marks omitted)).
   Nor does the Act’s scienter requirement, §3729(b)(1)(A),
support Universal Health’s position. A defendant can
have “actual knowledge” that a condition is material with-
out the Government expressly calling it a condition of
payment. If the Government failed to specify that guns it
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                     Opinion of the Court

orders must actually shoot, but the defendant knows that
the Government routinely rescinds contracts if the guns do
not shoot, the defendant has “actual knowledge.” Like-
wise, because a reasonable person would realize the im-
perative of a functioning firearm, a defendant’s failure to
appreciate the materiality of that condition would amount
to “deliberate ignorance” or “reckless disregard” of the
“truth or falsity of the information” even if the Govern-
ment did not spell this out.
   Universal Health nonetheless contends that False
Claims Act liability should be limited to undisclosed viola-
tions of expressly designated conditions of payment to
provide defendants with fair notice and to cabin liability.
But policy arguments cannot supersede the clear statutory
text. Kloeckner v. Solis, 568 U. S. ___, ___–___, n. 4 (2012)
(slip op., at 13–14, n. 4). In any event, Universal Health’s
approach risks undercutting these policy goals. The Gov-
ernment might respond by designating every legal re-
quirement an express condition of payment. But billing
parties are often subject to thousands of complex statutory
and regulatory provisions. Facing False Claims Act liabil-
ity for violating any of them would hardly help would-be
defendants anticipate and prioritize compliance obliga-
tions. And forcing the Government to expressly designate
a provision as a condition of payment would create further
arbitrariness. Under Universal Health’s view, misrepre-
senting compliance with a requirement that the Govern-
ment expressly identified as a condition of payment could
expose a defendant to liability. Yet, under this theory,
misrepresenting compliance with a condition of eligibility
to even participate in a federal program when submitting
a claim would not.
   Moreover, other parts of the False Claims Act allay
Universal Health’s concerns. “[I]nstead of adopting a
circumscribed view of what it means for a claim to be false
or fraudulent,” concerns about fair notice and open-ended
14 UNIVERSAL HEALTH SERVICES, INC. v. UNITED STATES
                  EX REL. ESCOBAR

                 Opinion of the Court 

liability “can be effectively addressed through strict en-
forcement of the Act’s materiality and scienter require-
ments.” SAIC, supra, at 1270. Those requirements are
rigorous.
                              B
   As noted, 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 under the False Claims Act. We now clarify
how that materiality requirement should be enforced.
   Section 3729(b)(4) defines materiality using language
that we have employed to define materiality in other
federal fraud statutes: “[T]he term ‘material’ means hav-
ing a natural tendency to influence, or be capable of influ-
encing, the payment or receipt of money or property.” See
Neder, 527 U. S., at 16 (using this definition to interpret
the mail, bank, and wire fraud statutes); Kungys v. United
States, 485 U. S. 759, 770 (1988) (same for fraudulent
statements to immigration officials). This materiality
requirement descends from “common-law antecedents.”
Id., at 769. Indeed, “the common law could not have con-
ceived of ‘fraud’ without proof of materiality.” Neder,
supra, at 22; see also Brief for United States as Amicus
Curiae 30 (describing common-law principles and arguing
that materiality under the False Claims Act should in-
volve a “similar approach”).
   We need not decide whether §3729(a)(1)(A)’s materiality
requirement is governed by §3729(b)(4) or derived directly
from the common law. Under any understanding of the
concept, materiality “look[s] to the effect on the likely or
actual behavior of the recipient of the alleged misrepre-
sentation.” 26 R. Lord, Williston on Contracts §69:12,
p. 549 (4th ed. 2003) (Williston). In tort law, for instance,
a “matter is material” in only two circumstances: (1) “[if ] a
reasonable man would attach importance to [it] in deter-
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                          Opinion of the Court

mining his choice of action in the transaction”; or (2) if the
defendant knew or had reason to know that the recipient
of the representation attaches importance to the specific
matter “in determining his choice of action,” even though a
reasonable person would not. Restatement (Second) of
Torts §538, at 80. Materiality in contract law is substan-
tially similar. See Restatement (Second) of Contracts
§162(2), and Comment c, pp. 439, 441 (1979) (“[A] misrep-
resentation is material” only if it would “likely . . . induce
a reasonable person to manifest his assent,” or the defend-
ant “knows that for some special reason [the representa-
tion] is likely to induce the particular recipient to manifest
his assent” to the transaction).5
   The materiality standard is demanding. The False
Claims Act is not “an all-purpose antifraud statute,” Alli-
son Engine, 553 U. S., at 672, or a vehicle for punishing
garden-variety breaches of contract or regulatory viola-
tions. A misrepresentation cannot be deemed material
merely because the Government designates compliance
with a particular statutory, regulatory, or contractual
requirement as a condition of payment. Nor is it sufficient
for a finding of materiality that the Government would
have the option to decline to pay if it knew of the defend-
——————
  5 Accord, Williston §69:12, pp. 549–550 (“most popular” understand-

ing is “that a misrepresentation is material if it concerns a matter to
which a reasonable person would attach importance in determining his
or her choice of action with respect to the transaction involved: which
will induce action by a complaining party[,] knowledge of which would
have induced the recipient to act differently” (footnote omitted)); id., at
550 (noting rule that “a misrepresentation is material if, had it not
been made, the party complaining of fraud would not have taken the
action alleged to have been induced by the misrepresentation”); Junius
Constr. Co. v. Cohen, 257 N. Y. 393, 400, 178 N. E. 672, 674 (1931) (a
misrepresentation is material if it “went to the very essence of the
bargain”); cf. Neder v. United States, 527 U. S. 1, 16, 22, n. 5 (1999)
(relying on “ ‘natural tendency to influence’ ” standard and citing
Restatement (Second) of Torts §538 definition of materiality).
16 UNIVERSAL HEALTH SERVICES, INC. v. UNITED STATES
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                 Opinion of the Court 

ant’s noncompliance. Materiality, in addition, cannot be
found where noncompliance is minor or insubstantial. See
United States ex rel. Marcus v. Hess, 317 U. S. 537, 543
(1943) (contractors’ misrepresentation that they satisfied a
non-collusive bidding requirement for federal program
contracts violated the False Claims Act because “[t]he
government’s money would never have been placed in the
joint fund for payment to respondents had its agents
known the bids were collusive”); see also Junius Constr.,
257 N. Y., at 400, 178 N. E., at 674 (an undisclosed fact
was material because “[n]o one can say with reason that
the plaintiff would have signed this contract if informed of
the likelihood” of the undisclosed fact).
   In sum, when evaluating materiality under the False
Claims Act, the Government’s decision to expressly iden-
tify a provision as a condition of payment is relevant, but
not automatically dispositive. Likewise, proof of material-
ity can include, but is not necessarily limited to, evidence
that the defendant knows that the Government consis-
tently refuses to pay claims in the mine run of cases based on
noncompliance with the particular statutory, regulatory,
or contractual requirement. Conversely, if the Govern-
ment pays a particular claim in full despite its actual
knowledge that certain requirements were violated, that is
very strong evidence that those requirements are not
material. Or, if the Government regularly pays a particu-
lar 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 re-
quirements are not material.6
——————
   6 We reject Universal Health’s assertion that materiality is too fact

intensive for courts to dismiss False Claims Act cases on a motion to
dismiss or at summary judgment. The standard for materiality that we
have outlined is a familiar and rigorous one. And False Claims Act
plaintiffs must also plead their claims with plausibility and particular-
ity under Federal Rules of Civil Procedure 8 and 9(b) by, for instance,
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                          Opinion of the Court

   These rules lead us to disagree with the Government’s
and First Circuit’s view of materiality: that any statutory,
regulatory, or contractual violation is material so long as
the defendant knows that the Government would be enti-
tled to refuse payment were it aware of the violation. See
Brief for United States as Amicus Curiae 30; Tr. of Oral
Arg. 43 (Government’s “test” for materiality “is whether
the person knew that the government could lawfully with-
hold payment”); 780 F. 3d, at 514; see also Tr. of Oral Arg.
26, 29 (statements by respondents’ counsel endorsing this
view). At oral argument, the United States explained the
implications of its position: If the Government contracts
for health services and adds a requirement that contrac-
tors buy American-made staplers, anyone who submits a
claim for those services but fails to disclose its use of
foreign staplers violates the False Claims Act. To the
Government, liability would attach if the defendant’s use
of foreign staplers would entitle the Government not to
pay the claim in whole or part—irrespective of whether
the Government routinely pays claims despite knowing
that foreign staplers were used. Id., at 39–45. Likewise, if
the Government required contractors to aver their compli-
ance with the entire U. S. Code and Code of Federal Regu-
lations, then under this view, failing to mention noncom-
pliance with any of those requirements would always be
material. The False Claims Act does not adopt such an
extraordinarily expansive view of liability.
                      *    *     *
  Because both opinions below assessed respondents’
complaint based on interpretations of §3729(a)(1)(A) that
differ from ours, we vacate the First Circuit’s judgment
and remand the case for reconsideration of whether re-
spondents have sufficiently pleaded a False Claims Act
—————— 

pleading facts to support allegations of materiality. 

18 UNIVERSAL HEALTH SERVICES, INC. v. UNITED STATES
                  EX REL. ESCOBAR
                 Opinion of the Court

violation. See Omnicare, Inc. v. Laborers Dist. Council
Constr. Industry Pension Fund, 575 U. S. ___, ___ (2015)
(slip op., at 19). We emphasize, however, that the False
Claims Act is not a means of imposing treble damages and
other penalties for insignificant regulatory or contractual
violations. This case centers on allegations of fraud, not
medical malpractice.     Respondents have alleged that
Universal Health misrepresented its compliance with
mental health facility requirements that are so central to
the provision of mental health counseling that the Medi-
caid program would not have paid these claims had it
known of these violations. Respondents may well have
adequately pleaded a violation of §3729(a)(1)(A). But we
leave it to the courts below to resolve this in the first
instance.
   The judgment of the Court of Appeals is vacated, and
the case is remanded for further proceedings consistent
with this opinion.
                                            It is so ordered.