U.S. Supreme Court Rules in Favor of Implied Certification Using a Fact-Intensive Materiality Standard

The legal landscape for False Claim Act (“FCA”) cases recently shifted when the United States Supreme Court announced its decision in Universal Health Services, Inc. v. U.S. ex rel Escobar, No. 15-7, 2016 WL 3317565 (U.S. June 16, 2016) (“Escobar”).  Whistleblowers (also known as relators) and health care providers alike have been eagerly awaiting this decision.  Although each side hoped for a bright-line ruling, what they got was something of a mixed bag.  In Escobar, the Court resolved a split in the U.S. Circuit Courts of Appeals over the application of the “implied certification theory” of False Claims Act liability.Read More

Annette K. Ebright & James C. Lesnett Jr.

Annette Ebright is a litigator practicing in the areas of Complex Civil Litigation, Government Investigations, White Collar Criminal Defense and Criminal and Regulatory Compliance. Jamie Lesnett focuses his practice on complex business litigation and government investigations. Mr. Lesnett has extensive experience litigating complex business disputes in federal and state courts throughout the United States, including litigation involving contract disputes, business torts, unfair competition and trade secret misappropriation.

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False Claims Act Update: A Statistical Review of 2015 and Key Events for 2016

2015 proved to be another banner year for the federal government as it relates to False Claims Act (FCA) recovery.  In 2015, the DOJ recovered $3.583 billion in FCA actions, the fourth year in a row that such recoveries have exceeded $3.5 billion.  As in the past,  the majority of these recoveries were related to healthcare and defense-related government contracts (respectively, $1.9 billion and $1.1 billion).

Perhaps the most notable conclusions to be drawn from the DOJ’s recent report, however, relate to the role of whistleblowers in bringing and prosecuting FCA claims.  As the Department of Justice noted: “Most (FCA) actions are filed under the Act’s whistleblower, or qui tam, provisions that allow individuals to file lawsuits alleging false claims on behalf of the government.  If the government prevails in the action, the whistleblower, also known as the relator, receives up to 30 percent of the recovery.”  In 2015, the government recovered $2.9 billion from whistleblower-initiated lawsuits, and whistleblowers received a record-setting $597 million for their share.

Even more notable is the fact that in 2015, for the first time, whistleblower recoveries in cases where the government declined to intervene ($334.6 million) exceeded whistleblower recoveries in cases where the government intervened ($262.9 million) – e.g., the government made a formal appearance in the case and took the lead in litigating it.  This statistic is contrary to a prior commonly held belief that a government decision not to intervene was the “kiss of death” to the relator’s chances for recovery, and reflects the growing sophistication of the FCA plaintiff’s bar.  Notably, the total amount recovered in declined cases during 2015 ($1.149 billion) exceeded the amount recovered in declined cases for all prior years combined (approximately $1 billion during 1987-2014), and it remains to be seen whether 2015 is an outlier year for whistleblower recoveries.

Looking ahead, 2016 promises several notable developments relating to the False Claims Act:

•    Increased Civil Penalties – Due to the recent passage of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, the per claim civil penalties for the FCA (currently $5,500 to $11,000) will be adjusted to account for inflation by August 1, 2016, and again on January 15 of each subsequent year.  Agencies are allowed some discretion in reducing the penalty adjustment so long as certain procedures are followed and the Office of Management and Budget consents.

•    Anticipated Supreme Court Decision – In order to resolve a long-standing split among the Federal Circuit courts, the U.S. Supreme Court has granted certiorari in U.S. ex rel. Escobar v. Universal Health Services (1st Cir. 2015).  The issues to be resolved focus on whether the “implied certification” theory of FCA liability – which establishes an FCA violation for presenting a claim to the government while in violation of a legal/contractual obligation, regardless of whether the claimant has expressly verified their compliance with that obligation – is valid.  If so, the Court will be presented with the question of whether implied certification requires that the legal or contractual obligation that was not complied with to expressly state that it is a condition of payment.  A ruling that implied certification need not be based on an express condition of payment arguably opens the door wide to a variety of FCA claims that have been since been denied by several circuits. Therefore, this decision will be closely watched.

•    Fourth Circuit to Rule on Extrapolation in FCA cases – The Fourth Circuit Court of Appeals will hear an appeal in U.S. ex rel. Michaels et al. v. Agape Senior Community, Inc. (D.S.C. 2015)  regarding, among other issues, the reliance on statistical sampling to prove liability and damages.  The District court in Michaels held that while some cases may be suited for statistical sampling, the fact intensive nature of the claims before it rendered sampling unreliable.  Given the extent to which whistleblowers (and the government) rely upon statistical sampling in healthcare cases and the conflicting way in which lower courts have treated this methodology, this case may ultimately end up at the Supreme Court as well .

Given the potential liability associated with the False Claims Act (i.e., treble damages and significant statutory fines) and the growing likelihood of success for whistleblower-initiated lawsuits, health care providers should take care that their internal compliance programs are well-designed and that  internal reports and complaints are promptly investigated.

If you are interested in learning more about the False Claims Act or believe you may be the subject of a FCA investigation please feel free to contact a member of our health care practice group.

Eric Cottrell

Eric Cottrell

Eric Cottrell leads the firm’s Antitrust, Business Torts & White Collar Practice Group. He is a seasoned litigator in both civil and criminal matters and has been lead counsel in multiple jury trials. He divides his practice between white collar criminal matters and commercial litigation. Mr. Cottrell is also a member of the Public Company Growth & Compliance group.

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Safeguarding a Whistleblower’s Identity

Everyone knows that the Sarbanes-Oxley Act prohibits retaliation against whistleblowers. It may be less obvious, however, that merely disclosing a whistleblower’s identity can constitute prohibited retaliation. Nevertheless, the Fifth Circuit Court of Appeals recently held exactly that in Halliburton, Inc. v. Administrative Review Board, United States Department of Labor.

In Halliburton, an employee submitted a complaint about the company’s accounting practices through its internal procedures and to the SEC. When the SEC notified Halliburton of its decision to investigate that complaint, the company was able to determine the whistleblower’s identity. An internal email related to the investigation revealed the whistleblower’s identity, after which he was ostracized socially and professionally by his colleagues.

The Administrative Review Board determined that Halliburton was liable to the whistleblower for retaliation. After Halliburton challenged that conclusion, the Court of Appeals upheld the Board’s determination, saying that the “undesirable consequences” of being revealed to one’s colleagues of having accused them of fraud were “obvious.”

The court also rejected Halliburton’s contention that there be a “wrongfully-motivated causal connection” between the whistleblower’s protected conduct and the company’s adverse action. Rather, it is sufficient that the employee prove that his or her protected conduct was a “contributing factor” to the company’s adverse action.

The takeaway…

It’s fair to say that most companies would not intentionally retaliate against a whistleblower, particularly in light of Sarbanes-Oxley’s widely known prohibition. It seems quite plausible, however, that a company might inadvertently or innocently reveal the whistleblower’s identity without being aware that such an action could be deemed to be retaliation.


  • Any company personnel who might be involved in an internal whistleblower investigation should be informed about this potential pitfall, and
  • Consider modifying your whistleblower policy and procedures to specifically prohibit such actions in order to heighten awareness and minimize inadvertent violations.


Doug Harmon heads Parker Poe’s Securities & Corporate Governance Group. With more than 30 years of experience, he represents domestic and international public and private entities in a full array of securities and corporate governance matters.

Doug Harmon

Doug Harmon

Doug Harmon heads the firm’s Securities & Corporate Governance Group. With more than 30 years of experience, he represents domestic and international public and private entities in a full array of securities and corporate governance matters. Mr. Harmon’s practice also includes executive compensation, risk management, mergers and acquisitions and general corporate matters. He has worked with clients from a wide range of industries, including energy, financial services, manufacturing, retail, sports and entertainment and technology.

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