Condition of Payment Limitation on Implied Certification Cases is Alive and Well in the D.C. Circuit

By on July 14, 2015

To the extent there was ever any doubt about the vitality the “condition of payment” limitation on “implied certification” False Claims Act (FCA) cases in the D.C. Circuit, the court put that doubt to rest on Friday, July 10 in United States ex rel. Davis v. District of Columbia, No. 14-7060, 2015 WL 4153919 (D.C. Cir. Jul. 10, 2015).

Davis involved a relator’s allegations that the District of Columbia failed to maintain records to support the cost reports it submitted to the D.C. Medical Assistance Administration, in violation of recordkeeping regulations. The court reversed the district court’s award of summary judgment for the relator, on the grounds that the relator had not shown a “knowing” violation of the regulations. However, in doing so, it took the opportunity to clarify its stance on implied certification cases under the FCA:

To establish knowledge on the basis of an implied certification, Davis had to prove that the District… knew both that it violated a legal obligation and that its compliance was a condition of payment (emphasis added).

The court went on:

Not all failures to comply with a federal statute or regulation expose a provider to liability under the False Claims Act. “[A] false certification of compliance with a statute or regulation cannot serve as the basis for a qui tam action under the [False Claims Act] unless payment is conditioned on that certification.” United States ex rel. Siewick v. Jamieson Sci. & Eng’g, Inc., 214 F.3d 1372, 1376 (D.C. Cir. 2000).  In other words, a defendant may be held liable under the False Claims Act for falsely certifying it complied with a statute or regulation only if “certification was a prerequisite to the government action sought.” Id. The parties dispute whether the regulations the District allegedly violated are conditions of payment, rather than conditions of participation in the Medicaid program. Several of our sister circuits have recognized the difference and cautioned against treating all Medicare and Medicaid regulations as conditions of payment.

The D.C. Circuit chose not to decide whether the regulations at issue were, in fact, conditions of payment, grounding its decision in resolution of the knowledge question. Accordingly, it did not need to say all that it did about the necessity of a condition of payment in an implied certification case.  But the fact that it addressed this issue—and answered it in the affirmative—is a welcome development for FCA defendants, given the court’s decision several years ago in United States v. Sci. Applications International Corp., 626 F.3d 1257, 1266 (D.C. Cir. 2010) (“SAIC”). SAIC contained expansive language onto which some relators have seized, interpreting that case as a rejection of the condition of payment requirement in favor of a more amorphous and fact-driven materiality standard. Davis silences those erroneous interpretations.

Laura McLane
Laura McLane serves as head of McDermott's Boston Litigation Practice Group. Laura represents national and international clients in health care, securities and other government enforcement matters, both civil and criminal. She also represents clients in professional and products liability cases and in complex commercial disputes. A significant part of Laura's practice is devoted to representing health care and other companies, as well as individuals, in government investigations and qui tam litigation based on the False Claims Act (FCA) and related statutes, including the Anti-Kickback Statute and the Stark Law. Read Laura McLane's full bio.