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Ten years after Universal Health Services v. Escobar was decided, one of the Supreme Court’s most important recent False Claims Act (FCA) decisions continues to baffle litigants and courts alike. What was billed as a case that could have killed the implied false certification theory of FCA liability did no such thing. Instead, the Supreme Court breathed a new but confounding life into the theory. In doing so, the Court also elevated scienter and materiality as “demanding” requirements designed to balance out the expanded way for qui tam plaintiffs and the government to prove falsity when claims for payment themselves did not present literal falsity. Ten years later, the result of the Escobar decision is that FCA liability often turns on jurisdiction-specific approaches to the FCA’s core elements of falsity, materiality, and scienter—creating meaningful litigation, compliance, and reputational risks for companies that do business with the government.
This uncertainty matters because Escobar did not narrow the FCA battleground so much as shift the theater of war. Before Esco bar, the principal debate was whether implied false certification was a viable theory of falsity at all. After Escobar, the focus shifted to where that theory begins and ends, how demanding material ity really is, and what a defendant must know to have acted with scienter. Ten years of lower-court litigation have produced a more developed body of law, but not a uniform one. This article explores how Escobar reshaped FCA litigation in three areas—falsity, mate riality, and scienter—and examines why the questions the Court left open remain important.
Falsity: What Escobar Resolved—And What It Did Not
A wartime measure enacted to prevent contractors from bilking the Union Army at the Civil War’s nadir, the FCA would become the United States’ most powerful civil weapon to combat fraud against the government.1 It authorizes private citizens, called relators, to bring qui tam actions on the government’s behalf and provides for extraordinary remedies, including treble damages and mandatory civil penalties. Today, the FCA is the government’s primary civil fraud enforcement tool. Although historically its causes of action have been brought most frequently against companies and indi viduals in the healthcare and defense-contracting industries, the statute has a broad reach, imposing liability on any person who knowingly submits, or causes the submission of, a materially false or fraudulent claim for payment to the government.2
The central question in any FCA case is whether the defendant submitted a false claim for payment. This is straightforward when a claim contains an express falsehood—as when a contractor bills the government for gunpowder but delivers only sawdust. But fraud is not always so blatant. By the time Escobar reached the Supreme Court, the circuits were divided on the viability and scope of another, more complicated theory of falsity called an “implied false certification.” That theory treats a claim for payment to the govern ment as an implicit assurance that the contractor has complied with all the material legal requirements to be entitled to payment, and holds that the failure to disclose a knowing violation of a material legal requirement renders the claim misleading—and therefore false under the FCA—even when the claim itself is facially truthful.
The Seventh Circuit had rejected implied false certification entirely, holding that the theory lacked support in the FCA’s text.3 The First, Fourth, and D.C. Circuits, by contrast, applied the the ory—but disagreed among themselves about a critical secondary question: Could a claim be legally false if the violated provision was not expressly designated a condition of the government’s pay ment? The Second and Sixth Circuits said no, requiring an express designation.4 The First, Fourth, and D.C. Circuits said yes, reason ing that a rigid express-designation requirement would allow the government to unwittingly immunize fraud simply by failing to use magic words in their contracts.5
On December 4, 2015, the Supreme Court granted certiorari to resolve these questions. Legal commentators framed the case in precisely those terms at the time, portraying Escobar as a referen dum on the future of implied false certification.6
In a unanimous opinion, the Court held that an implied false certification can support FCA liability “at least” where two condi tions are satisfied: (1) the claim makes “specific representations” about goods or services provided, and (2) the defendant’s failure to disclose violations of material legal requirements makes those representations “misleading half-truths.”7
Escobar thus confirmed the validity of the implied false certifica tion theory, but the opinion’s carefully hedged language—especially its repeated use of the qualifier “at least”—has generated subsequent litigation over what counts as an implied false certification in the varied contexts to which the FCA applies.
In Escobar, the relators (the Escobars) were the parents of a teenage patient who received treatment at a Massachusetts mental health clinic operated by the defendant (Universal Health Services) that provided counseling services reimbursed by Medicaid.8 The patient died after suffering adverse reactions to medication pre scribed during her treatment at the clinic.9 An investigation showed that the clinic had failed to comply with state regulations governing the supervision and qualifications of its staff, and state regulators imposed modest sanctions.10 The Escobars filed a qui tam action under the FCA alleging that the clinic’s reimbursement requests were false claims because they implicitly represented compliance with those regulations.11
In affirming the viability of the implied false certification theory, the Court held that payment codes corresponding to spe cific types of mental health services governed by Massachusetts regulations, such as individual therapy or group therapy, were “specific representations.”12 Those codes, the Court reasoned, were affirmative representations about the nature of the services pro vided. And when the provider used those codes while concealing that the personnel delivering the services lacked required licenses and supervision under MassHealth regulations, the codes became “misleading half-truths”—“representations that state the truth only so far as it goes, while omitting critical qualifying information.”13
On the second certified question, the Court held that liability does not turn on whether the legal requirements violated by the defendant were “expressly designated as conditions of payment.”14
Footnotes
1. See United States v. McNinch, 356 U.S. 595, 599 (1958) (“Testimony before the Congress painted a sordid picture of how the United States had been billed for nonexistent or worthless goods, charged exorbitant prices for goods delivered, and generally robbed in purchasing the necessities of war.”).
2. 31 U.S.C. § 3729; see, e.g., United States v. Centra Health, Inc., 724 F. Supp. 3d 549 (W.D. Va. 2024) (healthcare); U.S. ex rel. Longhi v. United States, 575 F.3d 458 (5th Cir. 2009) (federally funded research program for small businesses); U.S. ex rel. Hendow v. Univ. of Phoenix, 461 F.3d 1166 (9th Cir. 2006) (university’s eligibility for Title IV funds); Harrison v. Westinghouse Savannah River Co., 176 F.3d 776 (4th Cir. 1999) (Department of Energy contract); Hendrix ex rel. United States v. J-M Mfg. Co., Inc., 76 F.4th 1164 (9th Cir. 2023) (public works project).
3. United States v. Sanford-Brown, Ltd., 788 F.3d 696, 711-12 (7th Cir. 2015).
4. Mikes v. Straus, 274 F.3d 687, 700 (2d Cir. 2001); United States ex rel. Hobbs v. MedQuest Associates, Inc., 711 F.3d 707, 714 (6th Cir. 2013).
5. See, e.g., United States ex rel. Escobar v. Universal Health Services, Inc., 780 F.3d 504, 512-13 (1st Cir. 2015); United States ex rel. Badr v. Triple Canopy, Inc.., 775 F.3d 628, 636-37 & n.5 (4th Cir. 2015); United States v. Science Applications Int’l Corp., 626 F.3d 1257, 1268 (D.C. Cir. 2010).
6. See, e.g., Ronald Mann, “Argument preview: Justices to consider whether False Claims Act Permits Qui Tam Suits for ‘Implied’ Falsehood,” SCOTUSblog (Apr. 12, 2016), https://www.scotusblog.com/2016/04/argu ment-preview-justices-to-consider-whether-false-claims-act-permits-qui tam-suits-for-implied-falsehood/.
7. Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U.S. 176, 190 (2016).
8. Id. at 183.
9. Id.
10. Id. at 184.
11. Id. at 185.
12. Id. at 189.
13. Id. at 187.
14. Id. at 190.
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