Court Opinion

ID: 4092162
Source: CourtListenerOpinion
Date Created: 2016-10-24 21:01:20.541034+00
Date Added: 2024-06-11T14:36:04.334463
License: Public Domain

In the

    United States Court of Appeals
                 For the Seventh Circuit
                     ____________________
No. 14-2506
UNITED STATES OF AMERICA,
                                                                Plaintiff,

                                 v.

SANFORD-BROWN, LIMITED, et al.,
                                               Defendants-Appellees.

APPEAL OF: BRENT M. NELSON
                     ____________________

         Appeal from the United States District Court for the
                   Eastern District of Wisconsin.
            No. 12-cv-00775 — J. P. Stadtmueller, Judge.
                     ____________________

   ARGUED JANUARY 8, 2015 — DECIDED OCTOBER 24, 2016
                ____________________

   Before BAUER, MANION, and ROVNER, Circuit Judges.
    MANION, Circuit Judge. This matter is before us on remand
from the United States Supreme Court for reconsideration in
light of its recent decision in Universal Health Services, Inc. v.
United States, 136 S. Ct. 1989 (2016). See U.S. ex rel. Nelson v.
Sanford-Brown, Ltd., 136 S. Ct. 2506 (2016). The only part of our
previous opinion, United States v. Sanford-Brown, Ltd., 788 F.3d
2                                                    No. 14-2506

696 (7th Cir. 2015), that is affected by the holding in Universal
Health is part IV(B)(2), which addressed the plaintiff-relator’s
false presentment claim under 31 U.S.C. § 3729(a)(1)(A) of the
False Claims Act. We readdress that claim here in light of Uni-
versal Health and substitute the following discussion for part
IV(B)(2) of our earlier opinion. The remainder of our previous
opinion is reinstated, and we once again affirm the district
court in all respects.
                                I.
    The plaintiff-relator’s false presentment claim is based on
a theory of “implied false certification.” In Universal Health,
the Court held that the implied false certification theory can
be a basis for liability where two conditions are met: “first, the
claim does not merely request payment, but also makes spe-
cific representations about the goods or services provided;
and second, the defendant’s failure to disclose noncompliance
with material statutory, regulatory, or contractual require-
ments makes those representations misleading half-truths.”
Universal Health Servs., Inc., 136 S. Ct. at 2001 (footnote omit-
ted).
    Neither condition is met here. Nelson (the plaintiff-rela-
tor) offered no evidence that defendant Sanford-Brown Col-
lege (SBC) made any representations at all in connection with
its claims for payment, much less false or misleading repre-
sentations. Nelson’s bare speculation that SBC made mislead-
ing representations is insufficient to survive summary judg-
ment. See Bass v. Joliet Pub. Sch. Dist. No. 86, 746 F.3d 835, 841
(7th Cir. 2014) (“Speculation is no substitute for evidence at
the summary judgment stage.”).
No. 14-2506                                                      3

    SBC is also entitled to summary judgment because Nelson
failed to establish the independent element of materiality. As
the Universal Health Court explained, “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.”
Universal Health Servs., Inc., 136 S. Ct. at 2002 (emphasis
added). The Act’s materiality requirement is “rigorous” and
“demanding.” Id. at 2002–03 & n.6 at 2004. To establish mate-
riality, it is not enough to show that “the Government would
have the option to decline to pay if it knew of the defendant’s
noncompliance.” Id. at 2003. Instead, “materiality looks to the
effect on the likely or actual behavior of the recipient of the al-
leged misrepresentation.” Id. at 2002 (emphasis added) (inter-
nal marks omitted).
    Here, Nelson has offered no evidence that the govern-
ment’s decision to pay SBC would likely or actually have been
different had it known of SBC’s alleged noncompliance with
Title IV regulations. On the contrary, as we previously noted,
the subsidizing agency and other federal agencies in this case
“have already examined SBC multiple times over and con-
cluded that neither administrative penalties nor termination
was warranted.” Sanford-Brown, Ltd., 788 F.3d at 712; see also
Universal Health Servs., Inc., 136 S. Ct. at 2003 (“[I]f the Gov-
ernment 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 mate-
rial.”). At bottom, even assuming Nelson’s allegations are
true, the most he has shown is that SBC’s supposed noncom-
pliance and misrepresentations would have entitled the gov-
ernment to decline payment. Under Universal Health, that is
not enough. See Universal Health Servs., Inc., 136 S. Ct. at 2004
4                                                       No. 14-2506

(explicitly rejecting the view that “any statutory, regulatory,
or contractual violation is material so long as the defendant
knows that the Government would be entitled to refuse pay-
ment were it aware of the violation”).
                                 II.
    Having reconsidered our previous opinion in light of Uni-
versal Health Services, Inc. v. United States, 136 S. Ct. 1989 (2016),
we once again affirm the district court in all respects. With the
exception of part IV(B)(2), the vacated opinion of June 8, 2015,
is reinstated.
                                                          AFFIRMED.