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August 18, 2015 False Claims Act Legal News

D.C. Circuit Court Upholds ‘Implied Certification Theory’ in Recent False Claims Act Case

In yesterday’s post, we explored the concept of implied certification under the False Claims Act – a theory which somewhat eliminates the requirement for explicit false claims activity, but requires evidence that the defendant knew or should have known his activity did not comply with a government contract, but continued to submit invoices nonetheless.

The concept has proven especially problematic for those who opine that the notion may expand the FCA farther than it was intended to go, essentially punishing defendants for conduct they didn’t actually commit. However, courts and litigants have recognized the need to address the “head in the sand” mentality under the FCA, which is not exactly overt fraud, but is not a mere accident or oversight either.

Today, we will look at a case recently decided in the D.C. Circuit Court known as United States ex rel. Davis v. District of Columbia, which upheld the implied certification theory as a viable option under the False Claims Act.[1. Breen, George B. and Ryan, Kevin J.,”The DC Circuit Speaks – Proving Condition of Payment is Key To Implied Certification False Claims Act Cases,” The National Law Review. July 18, 2015.]

Procedurally, the matter has just moved past the summary judgment phase and no actual determination of liability has been made. However, it presents an interesting look into the level of evidence this particular court would need for a case to continue under this concept, which has proven to be more difficult than the traditional cause of action.

Details of United States ex rel. Davis v. District of Columbia

The Davis case involves allegations that the District of Columbia failed to maintain required documentation and records to support costs it submitted to the District of Columbia Medical Assistance Administration (the D.C. Medicaid agency). Under the law, all submissions for reimbursement on behalf of Medicaid patients must be supported by thorough documentation of the costs of service in order to ensure the agency is not being overbilled or financially burdened.

In response to the allegations, the District of Columbia asserted that its recordkeeping issues were mere accidents and oversights, and did not meet the required “intentional” standard required by the FCA. However, the relator asserted that the defendant impliedly violated the FCA by submitting unsupported invoices for reimbursement despite knowing that those invoices did not contain the required cost documentation.

In its opinion, the Court concentrated on whether the accompanying documentation was considered a “condition of payment.” In other words, was each invoice reimbursable even without the documentation? If not – and the documentation was an essential component to reimbursement – the FCA claim under the implied certification theory could be viable. More specifically, the court held that “not all failures to comply with a federal statute or regulation expose a provider to liability under the False Claims Act. However, false certification of compliance with a statute or regulation cannot serve as the basis for a qui tam action… unless payment is conditioned on that certification.”

In other words, if a defendant sticks their head in the sand with regard to a government regulation, and knows that the regulation is in place as a prerequisite to reimbursement, such conduct could amount to implied certification of compliance, and may be actionable under the False Claims Act.

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