The U.S. Supreme Court issued a decision in June establishing a new False Claims Act materiality standard. Appellate courts will have a substantial impact on the future of false claims litigation, as they have been given the task of defining "materiality."
In Universal Health Services v. Escobar, the high court imposed limitations on when liability under the False Claims Act is triggered. First, for liability to be imposed, the claims must make a request for payment and also make specific representations about the goods or services provided. Second, the defendant's failure to disclose noncompliance with material statutory, regulatory or contractual requirements would make those representations half-truths.
Writing for the Supreme Court, Justice Clarence Thomas noted the materiality standard is "demanding." Justice Thomas continued, "A misrepresentation cannot be deemed material merely because the government designates compliance with a particular statutory, regulatory or contractual requirement as a condition of payment." Materiality is also not established just because the government would have the option to decline to pay if it knew of the noncompliance or when noncompliance is "minor" or "insubstantial," according to Justice Thomas.
In a friend-of-the-court brief submitted in U.S. ex. rel. Marsteller v. Tilton, the federal government recently urged the Eleventh Circuit Court of Appeals to adopt a materiality requirement that is less demanding than the one outlined by the Supreme Court in Escobar, according to a Lexologyreport.
In its brief, the government asks the court to use the "natural tendency" test codified in the False Claims Act.
"The government's new amicus brief appears to be a request that the Eleventh Circuit Court of Appeals disregard the clear language of Escobar in favor of its preferred interpretation of the statute," David. B. Honig, lawyer with Hall Render Killian Heath & Lyman, said in the report.
The less stringent test proposed by the government would increase the scope of potential false claims liability, according to Mr. Honig.
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