One District Court Finds Limits to Express Certification

By on October 13, 2015
Posted In Uncategorized

We have previously written about recent challenges to the “implied certification” theory of the False Claims Act. One district court has also recently addressed express certification. In an express certification case, plaintiffs allege that as a condition of receiving funds from the government, defendants were required to explicitly certify compliance with certain enumerated statutes, regulations or contracts. These cases typically involve less pleading-stage litigation about the viability of the relator’s legal theory of falsity under the FCA. Rather, the dispute in such cases is more often whether defendants’ certifications were actually false, that is, defendants will challenge plaintiffs’ contentions that they failed to comply with whichever legal obligations with which they expressly certified compliance.

Last month, however, one district court dismissed an express certification case at the pleading stage, holding that the relator’s express certification theory was not viable. In United States ex rel. Hanna v. City of Chicago, No. 11-04885, 2015 WL 5461664 (N.D. Ill. Sept. 16, 2015), the relator alleged that the City of Chicago (City) received federal funds from the U.S. Department of Housing and Urban Development, and that to receive federal funds, the City was required to certify compliance with federal fair housing laws including the Civil Rights Act of 1964 and the Fair Housing Act. These provisions required the City to “affirmatively further fair housing.” For a variety of reasons, the relator alleged that the City failed to adopt programs to undo segregation, and thus the City’s express certifications of compliance with federal law were allegedly false.

The district court noted that the alleged false statements certified “forward-looking” commitments. For example, federal law provides that a recipient of federal funds “will” conform to the Civil Rights Act and Fair Housing Act and “shall” certify that it “will” affirmatively further fair housing policies. Because these statements were “forward-looking,” the court concluded that the City could only be liable if it knew at the time of the certification that it had no intention of making good on its promise to comply. Because the relator only pled that the City did not comply with the statutes in question—and not that it had lied about its honest intent to comply with said statutes)—the relator failed to meet his pleading burden. Because the court had previously granted the relator an opportunity to address the pleading deficiencies of his complaint and the relator failed to do so, the court dismissed the relator’s complaint with prejudice without granting the relator further leave to amend.

Defendants in express certification cases should carefully examine the legal obligation with which they have allegedly certified compliance. If defendants have only allegedly certified their intent to comply with certain legal obligations, they may be able to achieve dismissal on the pleadings.