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False Claims Act Statistics, News & Analysis

Eighth Circuit Decision Suggests Supreme Court's Rejection of "Objectively Reckless" Test in Patent Case Leaves Intact Safeco's "Objectively Reasonable" Test for False Claims Act Knowledge

Courts finding that FCA defendants lacked knowledge sufficient to impose liability have frequently cited the Supreme Court’s holding in Safeco Insurance Company of America v. Burr, that where there is more than one objectively reasonable interpretation of a statute, regulation, etc., a defendant cannot be found to have acted knowingly or recklessly.

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Posner Prods, But 7th Circuit Saves Implied Cert. Analysis for Another Day

In the few months since the Supreme Court’s Escobar decision, there have been a handful of judicial decisions exploring its impact. One particular example – and potentially lost opportunity – came in the Seventh Circuit’s decision in United States ex rel. Sheet Metal Workers Int’l Assoc., Local Union 20 v. Horning Investments, LLC, which affirmed summary judgment for the defendants based on scant evidence of knowledge, over a dissent from Judge Posner who believed the case to present the classic implied certification scenario so recently sanctioned by Escobar. In Horning Investments, the defendant had allegedly violated the Davis-Bacon Act, which requires contractors to pay “prevailing wages” on federally funded construction contracts. The relator, a metal workers union, argued that Horning had made false statements material to the government’s payment decision by incorrectly calculating the wages paid to its employees in certified payroll reports (by deducting a fee for certain fringe benefits allegedly inadequately tied to the insurance benefits received by the payors).

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Materiality Matters: Supreme Court Strengthens Materiality in Escobar

The Supreme Court decided Universal Health Services, Inc. v. United States ex rel. Escobar, (No. 15-7) on June 16, 2016, and held that the implied false certification theory can be a basis for False Claims Act (FCA) liability, expanding implied certification into circuits that had not yet embraced it. But the Court snatched victory from the hands of the government and relator’s bar by articulating a “demanding” materiality standard.

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