Court Opinion

ID: 9414819
Source: CourtListenerOpinion
Date Created: 2023-08-02 17:00:59.060793+00
Date Added: 2024-06-11T17:18:07.137116
License: Public Domain

In the

    United States Court of Appeals
                For the Seventh Circuit
                    ____________________
No. 22-1515
UNITED STATES OF AMERICA ex rel. TODD HEATH,
                                         Relator-Appellant,
                                v.

WISCONSIN BELL, INC.,
                                                Defendant-Appellee.
                    ____________________

        Appeal from the United States District Court for the
                  Eastern District of Wisconsin.
         No. 2:08-cv-00724-LA — Lynn Adelman, Judge.
                    ____________________

    ARGUED FEBRUARY 9, 2023 — DECIDED AUGUST 2, 2023
                ____________________

   Before EASTERBROOK, HAMILTON, and LEE, Circuit Judges.
    HAMILTON, Circuit Judge. Congress established the Schools
and Libraries Universal Service Support program to keep tel-
ecommunications services aﬀordable for schools and libraries
in rural and economically disadvantaged areas. The program
subsidizes services and requires providers to charge these
customers rates less than or equal to the lowest rates they
charge to similarly situated customers. Relator Todd Heath
brought this qui tam action under the False Claims Act,
2                                                 No. 22-1515

31 U.S.C. § 3729 et seq., alleging that defendant Wisconsin
Bell charged schools and libraries more than was allowed un-
der the program, causing the federal government to pay more
than it should have. The district court granted summary judg-
ment in favor of Wisconsin Bell.
    Heath’s brieﬁng and evidence focused more on which
party bore the burden of proving violations than on identify-
ing speciﬁc violations in his voluminous exhibits and lengthy
expert report. We understand how the district court could
look at this record and rule in Wisconsin Bell’s favor. Never-
theless, Heath identiﬁed enough speciﬁc evidence of discrim-
inatory pricing to allow a reasonable jury to ﬁnd that Wiscon-
sin Bell, acting with the required scienter, charged speciﬁc
schools and libraries more than it charged similarly situated
customers. Accordingly, we reverse the judgment of the dis-
trict court and remand the case for trial.
I. Factual and Procedural Background
   In 1996, Congress created the E-rate program (known
more formally as the Schools and Libraries Universal Service
Support program) to help schools and libraries across the
country aﬀord telecommunications and information services.
See Telecommunications Act of 1996, Pub. L. No. 104-104, 110
Stat. 56. As part of the program, schools and libraries receive
federal subsidies for 20 to 90 percent of charges on a sliding
scale that depends on the income level in the surrounding
community and whether the community is urban or rural.
47 C.F.R. § 54.505(b) & (c). Under Federal Communications
Commission regulations implementing the E-rate program,
service providers must follow what is known as the “lowest-
corresponding-price” rule and oﬀer schools and libraries “the
No. 22-1515                                                    3

lowest price … charge[d] to non-residential customers who
are similarly situated.” 47 C.F.R. § 54.500.
    The regulations do not impose a speciﬁc formula to deter-
mine when a school or library is similarly situated to a partic-
ular non-residential customer for purposes of comparing
prices. Yet the FCC has long made clear that service providers
cannot escape their obligation to provide the lowest price
charged to similarly situated customers simply “by arguing
that none of their non-residential customers are identically
situated to a school or library.” In re Federal-State Joint Board
on Universal Service, Report and Order, 12 FCC Rcd. 8776,
¶ 488 (1997) (“First Order”), adopted by FCC at Universal Ser-
vice, 62 Fed. Reg. 32862 §§ 290–97 (June 17, 1997). Diﬀerences
in rates between similarly situated customers are acceptable
only when “providers can show that they face demonstrably
and signiﬁcantly higher costs” in serving the school or library
due to diﬀerences between the customers “that clearly and
signiﬁcantly aﬀect the cost of service, including mileage from
switching facility[,] … length of contract,” “traﬃc volumes,”
and “any other factor that the state public service commission
has recognized.” Id., ¶¶ 488–89.
    Wisconsin Bell has provided services to at least hundreds
of eligible schools and libraries. Those customers have sub-
mitted claims to the FCC requesting reimbursement for Wis-
consin Bell’s services, and Wisconsin Bell has submitted reim-
bursement claims directly for eligible services provided to E-
rate program customers.
   As the E-rate program began, Wisconsin Bell’s parent
company helped develop industry proposals about its imple-
mentation. Wisconsin Bell admitted during this lawsuit that it
had been aware of the lowest-corresponding-price rule from
4                                                  No. 22-1515

the rule’s inception in the 1990s. In 2001, a future leader of
Wisconsin Bell’s legal and regulatory group recommended to
an industry trade group representing Wisconsin Bell that the
group withdraw its request to the FCC for clariﬁcation of the
lowest-corresponding-price rule. He advised in an email that
the rule “is a non-issue. We support not raising [it] …. Let a
sleeping dog lie; it needs to keep a low proﬁle unless it starts
to cause problems for us.”
   Despite being aware of the E-rate program and its pricing
rule, Wisconsin Bell did not train its sales representatives on
the rule, nor did it put into place any mechanism to comply
with it, until 2009. Wisconsin Bell admits there was no diﬀer-
ence between the way it treated pricing contracts with schools
and libraries versus with private businesses or any other cus-
tomers. By Wisconsin Bell’s own testimony, these practices in-
cluded instructing sales representatives to oﬀer the highest
prices “whenever possible.” Employees responsible for train-
ing Wisconsin Bell’s salesforce testiﬁed that they had never
heard of the lowest-corresponding-price rule before 2009.
    In 2009, Wisconsin Bell developed a plan for complying
with the rule. It did so after its parent company settled a De-
partment of Justice and FCC investigation of its E-rate prac-
tices in Indiana through a monetary payment and a compli-
ance agreement. Wisconsin Bell admits that, beginning in
2009, it used “interim policies and processes for at least two
years” and that these policies did not reach a “steady state”
until 2011. Wisconsin Bell also admits that it considered the
prices charged to similarly situated customers “as just one fac-
tor among many in deciding what price” to charge an E-rate
customer even after 2009.
No. 22-1515                                                       5

    Under the False Claims Act, a private citizen may sue as a
“relator” in a qui tam action to recover funds fraudulently ob-
tained from the United States government. 31 U.S.C.
§ 3729(a)(1)(A). Such suits are brought in the name of the gov-
ernment and for its beneﬁt, but a successful relator may re-
cover a signiﬁcant portion of any recovery. See generally
United States ex rel. Polansky v. Executive Health Resources, Inc.,
143 S. Ct. 1720, 1726–28 (2023) (summarizing qui tam litigation
under the Act); Vermont Agency of Natural Resources v. United
States ex rel. Stevens, 529 U.S. 765, 774–77 (2000) (holding that
qui tam relator has Article III standing and noting that qui tam
actions appear to have originated in England in 13th century,
had long tradition in both England and the American Colo-
nies, and were “prevalent” immediately before and after
framing of Constitution).
    Todd Heath ﬁled this qui tam action under the False
Claims Act in 2008. He alleged that Wisconsin Bell submitted
false claims and caused others to submit false claims for more
money than was allowed to be charged, as well as expressly
and implicitly false certiﬁcations of compliance with E-rate
program rules. In 2011, the federal government decided not
to intervene. The district court then granted Wisconsin Bell’s
motion to dismiss for lack of subject matter jurisdiction. This
court reversed. United States ex rel. Heath v. Wisconsin Bell, Inc.,
760 F.3d 688, 692 (7th Cir. 2014). Heath ﬁled his Second
Amended Complaint in 2015. The parties engaged in discov-
ery, and Heath hired an expert to analyze the extensive and
detailed pricing data. Wisconsin Bell moved for summary
judgment, and the district court granted that motion. United
States ex rel. Heath v. Wisconsin Bell, Inc., 593 F. Supp. 3d 855,
861–62 (E.D. Wis. 2022). This appeal followed.
6                                                     No. 22-1515

II. Analysis
    A company violates the False Claims Act if it “knowingly
presents, or causes to be presented, a false or fraudulent claim
for payment or approval” that is material to the government’s
decision on the use of federal funds. 31 U.S.C. § 3729(a)(1)(A);
Universal Health Servs., Inc. v. United States ex rel. Escobar, 579
U.S. 176, 193 (2016) (§ 3729(a)(1)(A) requires falsity regarding
material issue). Thus, a False Claims Act case requires proof
of falsity, knowledge, materiality (meaning whether the al-
leged misrepresentations had the natural tendency to inﬂu-
ence the payment or receipt of funds), and the involvement of
federal funds. The district court granted summary judgment
for Wisconsin Bell, ﬁnding that Heath did not show a genuine
dispute as to a material fact concerning either falsity or
knowledge. In its summary judgment ruling, the district court
did not reach the issues of materiality or whether the E-rate
program involves federal funds, though the court had ad-
dressed these issues in prior orders.
    Summary judgment is proper when there is no genuine
dispute about any material fact. Fed. R. Civ. P. 56(a); Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986). We review de novo
the district court’s grant of summary judgment. E.g., Anderson
v. Nations Lending Corp., 27 F.4th 1300, 1304 (7th Cir. 2022). We
give Heath the beneﬁt of conﬂicting evidence and draw rea-
sonable inferences from the evidence in his favor. Id. The
question is whether he oﬀered evidence raising “some genu-
ine issue for trial such that a reasonable jury could return a
verdict” agreeing with him that Wisconsin Bell knowingly
caused the submission of claims that overcharged schools or
libraries and that those overcharges were material to a pay-
ment decision involving federal funds. United States v. King-
No. 22-1515                                                   7

Vassel, 728 F.3d 707, 711 (7th Cir. 2013) (quotation omitted).
We address four issues in turn: (A) falsity; (B) knowledge or
scienter; (C) materiality; and (D) involvement of federal funds.
   A. Falsity
    The district court found that Heath failed to show falsity
because he did not “show that any customers that were
charged the lower rates were similarly situated to those who
were charged a higher rate.” Heath, 593 F. Supp. 3d at 860.
Heath’s brieﬁng and the district court’s opinion focused pri-
marily on which party bore the burden of identifying simi-
larly situated customers as proper comparators to determine
compliance with E-rate price rules.
    In the district court’s eyes, Heath waived the crucial argu-
ment that the customers he analyzed who were charged dif-
ferent prices were in fact similarly situated. Id. at 859 & n.1.
The court wrote that Heath’s expert witness, James Webber,
did not “describe what factors” he used to conclude that cus-
tomers were similarly situated and thus proper comparators
for rates charged. Id. at 859 n.1. The court acknowledged that
Webber compared at least one school directly paying “a rate
more than three times higher than the rate charged to” an-
other customer but said that this comparison did not “attempt
to show that the two customers were similarly situated.” Id.
at 860.
    Heath’s heavy focus on persuading the district court that
Wisconsin Bell should have had the burden to identify simi-
larly situated customers seems to have distracted from the
fact that he did muster quite speciﬁc evidence showing that
certain schools and libraries were charged more than certain
non-residential customers and that those pairs of customers
8                                                             No. 22-1515

appeared to be similarly situated. See Pl. Br. in Opp’n to
Summ. J., at 14, Dkt. 311; Decl. of James D. Webber ¶ 7, Dkt.
308. Heath’s evidence also showed that his expert did in fact
take into account key factors, including contract duration, ur-
ban versus rural location, size of contracting entity, and dis-
tance from the provider. There is no complete list of which
factors may be considered in deciding whether two customers
are similarly situated. But Heath oﬀered evidence that his ex-
pert considered those that the parties continue to identify in
their brieﬁng as relevant. Expert Report of James D. Webber,
at 76–81, Dkt. 279, Ex. 111. 1
    We do not doubt that Heath could have better presented
his evidence to walk the district judge through the parts of his
expert’s report that directly compared customers who all
known factors indicated were similarly situated. But critiqu-
ing advocacy is not our role. For our purposes, the critical
points are that this speciﬁc evidence was in the expert report
and that Heath’s brieﬁng spelled it out with suﬃcient expla-
nation and argument. For example, Heath’s brief opposing
the motion for summary judgment and his statement of facts
included a chart showing wide-ranging pricing for the same
circuit product. All customers in the chart were in Wisconsin,
and at least some were identiﬁed as being in the same city.
The chart also displayed each contract’s duration and the

    1 One chart was reproduced in briefing before this court that was not

filed under seal. Additional evidence of comparisons indicating that dif-
ferently charged customers appear similarly situated is in the district court
record but still under seal. On remand it will be appropriate for the district
court to ask whether any portions of the evidence, especially prices and
contract terms from so many years ago, should be kept under seal any
longer.
No. 22-1515                                                                  9

number of products purchased by each customer. Thus, the
chart accounted for the key factors determining whether cus-
tomers are similarly situated.
    The diﬀerences in pricing are not disputed (or even ex-
plained) by Wisconsin Bell, at least so far. For example, one
school in Milwaukee, Bruce Guadalupe Community School,
paid $1,110 per month for each of two telecommunications
circuits on a month-to-month contract. At the same time, an-
other school in Milwaukee, Messmer High School, paid $743
per month for one circuit, also on a month-to-month contract.
Meanwhile, the Lake Geneva-Genoa City School District paid
$459 per month for one circuit on a 36-month contract while a
private business, Automatic Data, paid only $337 per month
for one circuit on a contract of the same length. These com-
parisons and the fact that Wisconsin Bell did not dispute them
or provide any explanation for the price diﬀerences present
genuine factual disputes over whether Wisconsin Bell was
charging schools and libraries the lowest price it was charging
similarly situated customers. 2
   This same chart was reproduced in Webber’s declaration,
ﬁled under seal. Though we do not go into detail here about

    2 As discussed at oral argument and in supplemental submissions by

the parties, Heath could have used statistical evidence to support his
claim. We have recognized that statistical analyses may be used to support
False Claims Act cases. See United States ex rel. Absher v. Momence Meadows
Nursing Ctr., Inc., 764 F.3d 699, 713–14 (7th Cir. 2014) (vacating jury verdict
where there was no “evidence—statistical or otherwise—from which the
jury could determine (at least approximately) how many of [the] docu-
ments contained false certifications”). Here, even without statistics, Heath
has done enough to proceed past summary judgment because he identi-
fied customers who appear similarly situated yet were charged different
rates in apparent violation of the lowest-corresponding-price rule.
10                                                No. 22-1515

the contents of that sealed document, it makes clear that the
$1,110 monthly price charged to Bruce Guadalupe Commu-
nity School was higher than would be expected from looking
at prices charged to other customers of the same circuit that
same year. Further, Webber showed that in 2009 Wisconsin
Bell entered a new contract with that school and dropped the
price signiﬁcantly.
    In another chart, Webber calculated the overcharges to
schools and libraries per year based on the lowest rate
charged for the same service to a customer in Wisconsin. Web-
ber went on to adjust this basic calculation based on the fac-
tors that might justify diﬀerent prices: contract duration, ur-
ban versus rural location, customer size (in terms of number
of employees), and distance between the customer and the
provider. Even when Webber limited his overcharges calcula-
tion by directly comparing schools and libraries only to cus-
tomers who shared these factors, the schools and libraries
were still charged more every single year. Expert Report of
James D. Webber, at 81, Dkt. 279, Ex. 111.
    Alongside this evidence was Wisconsin Bell’s admission
that it had no methods or procedures in place to comply spe-
ciﬁcally with the E-rate program prior to 2009, as well as the
email sent on behalf of a trade organization representing Wis-
consin Bell suggesting that the company withdraw a petition
to the government asking for clariﬁcation on the E-rate pro-
gram and instead “let a sleeping dog lie; [the rule] needs to
keep a low proﬁle unless it starts to cause problems for us.”
Webber’s speciﬁc comparisons against this factual backdrop
were enough to raise a genuine dispute about the central issue
of whether schools or libraries were charged more than simi-
larly situated non-residential customers. In response,
No. 22-1515                                                              11

Wisconsin Bell provided no evidence showing that these spe-
ciﬁcally compared customers were either not similarly situ-
ated or that cost diﬀerences justiﬁed the pricing. 3
    Rather than explain why the apparent price diﬀerences
were acceptable, Wisconsin Bell argued generally that Heath
never showed that any two customers were similarly situated.
But Wisconsin Bell indisputably had schools and libraries eli-
gible for the program as customers, including the schools
identiﬁed in the chart discussed above. The FCC’s guidance
makes clear that providers cannot escape the E-rate program
pricing rules by simply arguing that no customers are simi-
larly situated. First Order, § 488. Wisconsin Bell’s assertion
that Heath never identiﬁed any similarly situated customers
throughout the lengthy expert analysis comes very close to
that impermissible escape.
    In sum, Heath used the information provided by Wiscon-
sin Bell in discovery to identify seemingly similarly situated
customers. He identiﬁed individual schools that, when com-
pared against each other, look like they were charged

    3 Wisconsin Bell argues that it complied with the E-rate program rules

by complying with separate federal and state rules more generally prohib-
iting discriminatory pricing. See 47 U.S.C. § 202(a); Wis. Stat.
§ 196.60(1)(a). The theory is not persuasive. The federal nondiscrimination
rule prohibits “unjust or unreasonable discrimination in charges,” and the
state rule uses similar language. Both rules apply a different standard than
the E-rate program created for school and library pricing. In fact, the FCC
says that schools and libraries are “eligible for preferential rates … not-
withstanding the nondiscrimination requirements of section 202(a).” First
Order, ¶ 483. Even if Wisconsin Bell could show absolute compliance with
the nondiscrimination rules, that showing would not necessarily defeat a
claim that schools and libraries were overcharged in violation of the E-rate
program requirements.
12                                                          No. 22-1515

diﬀerent rates under comparable contract terms for the same
products in the same geographic areas. Wisconsin Bell made
no attempt to show how those identiﬁed customers were not
similarly situated or why the schools and libraries were
charged apparently higher prices for similar services, let
alone to establish those points beyond reasonable dispute, as
would be needed to resolve the issue as a matter of law on a
motion for summary judgment. Heath oﬀered evidence suﬃ-
cient to show falsity as to whether Wisconsin Bell impermis-
sibly charged schools and libraries more than it charged sim-
ilarly situated customers. 4
     B. Scienter
     The False Claims Act imposes liability for the knowing sub-
mission of false claims. The Act provides that a person acts
“knowingly” if that person “with respect to information—
(i) has actual knowledge of the information; (ii) acts in delib-
erate ignorance of the truth or falsity of the information; or
(iii) acts in reckless disregard of the truth or falsity of the in-
formation.” 31 U.S.C. § 3729(b)(1)(A). To show the defendant
acted knowingly, the relator is not required to prove “speciﬁc
intent to defraud.” Id.
    The district court, applying circuit precedent that has since
been reversed by the Supreme Court, ruled that even if Heath
had oﬀered evidence of falsity, his claims would nonetheless
fail on the knowledge element. Heath, 593 F. Supp. 3d at 860.
The district court said that Wisconsin Bell’s interpretation of

     4 We refer in this opinion to a few specific examples of Heath identi-

fying similarly situated customers. As the case progresses on remand,
Heath should not be limited to proving overcharges for only those cus-
tomers identified in this opinion.
No. 22-1515                                                   13

the lowest-corresponding-price rule—that it could use “cost-
based factors when determining which customers are simi-
larly situated and to allow it to oﬀer diﬀerent rates to diﬀerent
E-rate customers”—was “objectively reasonable” and “con-
sistent with the plain language of the [lowest-corresponding-
price] rule and the FCC guidance.” Id. at 861. The district court
was following United States ex rel. Schutte v. SuperValu Inc.,
9 F.4th 455, 463–65 (7th Cir. 2021), which held that knowledge
under the False Claims Act could not be shown if the defend-
ant’s interpretation of the regulation was objectively reasona-
ble and no authoritative guidance warned against that inter-
pretation, regardless of evidence of subjective intent and ac-
tual knowledge.
    After oral argument in this appeal, the Supreme Court is-
sued its decision in United States ex rel. Schutte v. SuperValu,
Inc., 143 S. Ct. 1391 (2023), vacating this court’s judgment. The
Supreme Court made clear that the knowledge analysis under
the False Claims Act “refers to respondents’ knowledge and
subjective beliefs—not to what an objectively reasonable per-
son may have known or believed.” Id. at 1399.
    Under this reasoning, Wisconsin Bell’s own conduct at
least raises a genuine question as to whether it acted in reck-
less disregard of the truth or falsity of the claims submitted.
“Reckless disregard” encompasses “defendants who are con-
scious of a substantial and unjustiﬁable risk that their claims
are false, but submit the claims anyway.” Id. at 1401; see also
King-Vassel, 728 F.3d at 713 (“a person acts with reckless dis-
regard ‘when the actor knows or has reason to know of facts
that would lead a reasonable person to realize’ that harm is
the likely result of the relevant act,” quoting Black’s Law Dic-
tionary 540–41 (9th ed. 2009)). A relator may of course rely on
14                                                           No. 22-1515

circumstantial evidence to prove scienter under the False
Claims Act. United States ex rel. Taylor-Vick v. Smith, 513 F.3d
228, 231 (5th Cir. 2008).
   Heath has oﬀered evidence that could support a reasona-
ble inference of scienter here. Wisconsin Bell admits that it
knew of the lowest-corresponding-price rule at the rule’s in-
ception. Heath has oﬀered evidence that Wisconsin Bell for
many years did not have any methods or processes in place
even to determine whether it was complying with the law in
pricing services for schools and libraries. Not until 2009, when
Wisconsin Bell’s parent company signed a compliance agree-
ment after a Department of Justice and FCC investigation in
another state, did Wisconsin Bell even inform its employees
responsible for negotiating rates with schools and libraries
that the lowest-corresponding-price rule existed.
    Wisconsin Bell also did not have a system for identifying
similarly situated customers within the meaning of the E-rate
program rules. Wisconsin Bell does not present any compel-
ling explanation for how it could have known whether the
prices it was charging those schools and libraries were con-
sistent with the lowest-corresponding-price rule without the
ability to know what the lowest corresponding price was. 5
Drawing inferences in Heath’s favor, this behavior indicates
at least a genuine question as to whether Wisconsin Bell was
acting with reckless disregard of the possibility that it was

     5 Wisconsin Bell asserts that even before 2009, it instructed employees

responsible for pricing to “consider” what “similarly situated customers”
were charged. But this vague instruction to “consider” other customers
falls short of the requirements of the E-rate program, which were to ensure
that schools and libraries would in fact be charged the lowest price charged
to a similarly situated customer.
No. 22-1515                                                  15

charging E-rate eligible customers in violation of the lowest-
corresponding-price rule and thus submitting false claims
and causing others to submit false claims.
     The evidence of knowledge after Wisconsin Bell imple-
mented its new policies in 2009 may not be as strong but is
still suﬃcient to reach a jury. Heath’s expert reported that es-
timated overcharges increased from 2008 through 2010 before
dropping in 2011, even controlling for diﬀerences in custom-
ers based on contract duration, rural versus urban location,
size of customer, and distance from Wisconsin Bell facilities.
This evidence is enough to create a genuine issue as to
whether Wisconsin Bell continued acting with reckless disre-
gard for the lowest-corresponding-price rule during its
rollout of new compliance procedures. With this evidence, a
jury could reasonably infer that Wisconsin Bell acted in reck-
less disregard of whether the prices it was charging schools
and libraries were above the prices charged to similarly situ-
ated customers. We therefore cannot aﬃrm summary judg-
ment on the issue of scienter.
   C. Materiality
    The district court’s decision on summary judgment did
not reach the issue of materiality, but Wisconsin Bell asks us
to aﬃrm on that alternative basis, which was briefed in the
district court. Wisconsin Bell argues that Heath failed to
demonstrate a factual dispute over whether the alleged falsity
of the claims was material to the government’s payment deci-
sions for two reasons. The ﬁrst is that the lowest-correspond-
ing-price rule is not expressly identiﬁed as a condition of pay-
ment on relevant forms. The second is that the government
has continued to pay E-rate claims in Wisconsin while aware
of Heath’s allegations. We reject both arguments.
16                                                 No. 22-1515

    First, the False Claims Act deﬁnes “material” as “having a
natural tendency to inﬂuence, or be capable of inﬂuencing,
the payment or receipt of money or property.” 31 U.S.C.
§ 3729(b)(4). The materiality analysis is not controlled by
whether the government expressly designated the legal re-
quirement at issue as a condition of payment. “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 pay-
ment decision.” Escobar, 579 U.S. at 181. A defendant can be
liable for “submit[ting] a claim for payment that makes spe-
ciﬁc representations about the goods or services provided, but
knowingly fails to disclose … noncompliance with a statu-
tory, regulatory, or contractual requirement … if the omission
renders those representations misleading.” Id.
   Wisconsin Bell argues that materiality is not satisﬁed be-
cause “the government has never required E-rate program
participants to expressly certify their compliance with the
[lowest-corresponding-price] rule.” Relying on Escobar, Wis-
consin Bell asserts that this fact shows a lack of materiality.
But Escobar taught clearly that “the Government’s decision to
expressly identify a provision as a condition of payment is rel-
evant, but not automatically dispositive.” 579 U.S. at 194. Es-
cobar warned against an expansive view of the False Claims
Act that would impose liability, for example, where a com-
pany providing health services failed to comply with a ran-
dom hypothetical provision of the U.S. Code requiring all
government contractors to use American-made staplers. Id. at
195–96. That example involved compliance with a require-
ment not directly related to the claim or the underlying ser-
vices.
No. 22-1515                                                 17

   Here, the subsidies for school and library communications
costs are tied directly to the lowest-corresponding-price rule.
Escobar does not suggest that violating such a relevant re-
quirement of a government subsidy program should be found
immaterial under the False Claims Act. The government cre-
ated the E-rate program to keep these services aﬀordable for
schools and libraries. The lowest-corresponding-price rule is
one mechanism to accomplish that purpose and to control the
cost of government subsidies. Express certiﬁcation of compli-
ance should not have been necessary for a provider to under-
stand that the rule is important to the program’s functioning
and thus that noncompliance could inﬂuence reimbursement
decisions. A jury might also reasonably infer that the im-
portance of this rule was in fact understood by those who
wanted to leave it undisturbed as a “sleeping dog,” anticipat-
ing that if this dog woke up, it might bark or even bite.
    Second, Wisconsin Bell argues that “the company’s sup-
posed misstatements made no diﬀerence to any payment de-
cision” because E-rate program payments have been “consist-
ently made … despite the government’s … full awareness of
Heath’s allegations.” Wisconsin Bell does not come close to
mustering the kind of evidence that would defeat a False
Claims Act case at summary judgment on such a theory re-
garding materiality. The argument seeks to erase the diﬀer-
ence between allegations and conclusive proof. None of Wis-
consin Bell’s evidence suggests that the government has rou-
tinely paid claims “in full despite actual knowledge” that E-
rate pricing rules were violated. See Escobar, 579 U.S. at 195
(noting that such evidence would be “strong evidence that the
requirements are not material”).
18                                                 No. 22-1515

     The government’s knowledge of a pending lawsuit mak-
ing allegations simply does not indicate actual knowledge of
actual violations. The entire purpose of the E-rate program is
to keep costs low. Draining the program’s resources through
higher prices for services aﬀects the government’s ability to
subsidize services for schools and libraries across the country.
It is reasonable to infer that if the government knew of actual
overcharges, it would not approve claims. At the very least, a
genuine question of material fact exists on this issue. It does
not oﬀer an alternative basis for aﬃrming summary judg-
ment.
     D. Government Funds
    Finally, Wisconsin Bell argues that we should aﬃrm sum-
mary judgment on another issue the district court did not
reach. Wisconsin Bell argues that Heath has not oﬀered evi-
dence that the relevant claims were paid using funds pro-
vided by the federal government. The United States govern-
ment submitted a statement of interest and declarations to the
district court in this case, however, saying that the federal
government does provide funds to the E-rate program. There
is suﬃcient evidence in the record from which a reasonable
jury could ﬁnd that government funds were involved in the
payments at issue. We decline to aﬃrm the grant of summary
judgment on this ground.
   The judgment of the district court is REVERSED and the
case is REMANDED to the district court for further proceed-
ings consistent with this opinion.