‘Implied Certification’ Theory and the False Claims Act

Implied certification is an oftentimes confounding legal theory under the False Claims Act.
Image source: Wikimedia Commons

Implied certification is an oftentimes confounding legal theory under the False Claims Act.
Image source: Wikimedia Commons

Over the next two posts, we will examine a concept known as “implied certification.” This legal theory has been a part of the False Claims Act landscape for several years and has caused considerable discussion among the circuit courts as to the extent an implied theory works to hold a false claims defendant liable.

In today’s post, we will examine the concept of the implied certification theory under the False Claims Act. In tomorrow’s follow-up, we will review a recent holding by the District of Columbia Circuit Court reversing a summary judgment in favor of the relator and setting a clearer threshold for an implied certification theory lawsuit to succeed.[1. “The DC Circuit Speaks – Proving Condition of Payment is Key To Implied Certification False Claims Act Cases.” The National Law Review, July 18, 2015. http://www.natlawreview.com/article/dc-circuit-speaks-proving-condition-payment-key-to-implied-certification-false-claim]

Basics of the implied certification theory under the False Claims Act

As a foundational principle, the False Claims Act requires knowing acts or acts conducted in reckless disregard of the truth or falsity that are fraudulent in nature and result in financial harm to the government (i.e., its taxpayers). The FCA does not pertain to accidents, negligence, or unintentional oversights, making the requisite “intent” element a hot-button issue in many FCA cases.

As explained by the Fourth Circuit in a case earlier this year (in which it upheld the concept as viable), an actionable false claim can occur when a contractor fails to reveal noncompliance with a government contract, or allows problematic activity to occur despite having the knowledge that it probably shouldn’t be occurring – or likely does not comport to the terms of the contract with the government. In other words, the contractor is impliedly certifying, through inaction or failure to correct the issue, that its conduct is valid and legal, and certifies as such by sending an invoice to the government for repayment. Essentially, commission conduct may be a violation of the FCA even if a defendant does not explicitly certify that it will abide by the terms of a law, contract provision, or other condition of payment to receive federal funds.

Critics of the implied certification theory

In a 2008 article published by the Public Contract Law Journal, the author questioned whether “the FCA [should] reach not just false statements (its traditional target), but also false implied statements?…. If implied statements are fair game, how should courts determine which unspoken words should be attributed to the defendant for purposes of FCA liability?”[2. Levy, Susan C.; Winters, Daniel J.; and Richards, John R. “The Implied Certification Theory: When Should the False Claims Act Reach Statements Never Spoken or Communicated, But Only Implied?” Public Contract Law Journal, Vol. 38, No. 1. https://jenner.com/system/assets/publications/595/original/PCLJ_38-1_04Levy-Winters-Richards.pdf?1313696494]

These questions, and many more, have given rise to a split among the Circuit courts as to whether an implied certification theory is actionable under a statute explicitly requiring purposeful conduct to impart liability (and treble damages).[3. Crane, Thomas S. and Dunphy, Brian P. “Will the Supreme Court Weigh In? Implied Certification Theory Under The False Claims Act.” October 17, 2011. http://www.mintz.com/newsletter/2011/Advisories/1428-1011-NAT-HCED/web.htm] Nonetheless, several courts have upheld the concept, including the Fourth Circuit, which recently held that the government or whistleblower can successfully plead implied certification when “it alleges that the contractor, with the requisite [intent], ma[kes] a request for payment under a contract and ‘withheld information about its noncompliance with material contractual requirements.’”[4. Barnett, Brett and Gold, Matt, “The Fourth Circuit Expands the Implied Certification Theory to Anti-Retaliation Claims.” July 16, 2015. http://www.thefcainsider.com/2015/07/the-fourth-circuit-expands-the-implied-certification-theory-to-anti-retaliation-claims/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheFCAInsider+%28The+FCA+Insider%29?utm_source=Mondaq&utm_medium=syndication&utm_campaign=LinkedIn-integration]

In tomorrow’s post, we will look at a case decided very recently in the D.C. Circuit Court addressing the issue of implied certification within the healthcare fraud context.

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By | 2018-03-25T09:47:35+00:00 August 17th, 2015|False Claims Act Information|