HOW THE JUDICIALLY CREATED “ CERTIFICATION ” REQUIREMENT IS POISED TO ENGULF THE FALSE CLAIMS ACT ( FCA )
by Joel D . Hesch 1
The Supreme Court will be deciding this year 2 whether courts may imply that a government contractor certified that it complied with all of the provisions in a contract or regulation in order to be liable under the False Claims Act ( FCA ). 3 The Court accepted the case because the lower courts are hopelessly split on setting the boundaries of the so-called “ implied certification ” exception . The problem , however , is not with the judge-made exception to the rule , but the fact that judges created the certification requirement in the first place . Although not found in the FCA itself , courts have added a so-called “ certification ” requirement to the statute , which requires either that the allegedly violated contract provision or regulation actually state that it is a “ condition of payment ” or the contractor certify that it complied with such provisions . This article demonstrates that there are five safeguards already built into the FCA , which make it both unnecessary and inappropriate for courts to have created a certification requirement . Accordingly , the Supreme Court should strike down the judicially added certification element instead of simply selecting the best judge-made implied certification exception .
Ten percent of all government spending is lost to fraud , which adds up to over $ 350 billion a year . 4 As a result , Congress enacted the False Claims Act , which is the government ’ s primary tool in combating fraud against the government . 5 The FCA is unique and effective because it enlists whistleblowers 6 and requires treble damages for knowingly submitting false claims for payment . Recently , however , courts have injected a judicially created “ certification ” requirement to the otherwise unambiguous FCA statute , which threatens both its effectiveness and viability . Courts have essentially determined that a claim that is otherwise “ factually ” false ( i . e ., the contractor is not entitled to payment ) nevertheless cannot be deemed “ legally ” false unless a contractor either certified that it complied with the particular provision or the regulation itself stated that the requirement was a “ condition of payment .” For instance , if a company wins a small business set-aside contract but is not really a small business , all of its invoices are false because it was not eligible . Many courts would not impose liability , however , unless the regulation itself stated that this particular requirement was a condition of payment or the contractor certified in the invoice that it was a small business . The problem with this judicially created requirement is that few , if any , invoices or regulations would satisfy this added judicial requirement . The certification rule therefore effectively shields contractors from liability when they submit claims they know to be false .
Because this fictitious certification requirement has the potential to swallow up the FCA , most courts have created some form of a so-called “ implied certification ” exception . Essentially , judges have identified situations in which they would imply that there was a certification when none exists . Not surprisingly , the judge-made exception to the judge-made rule has resulted in widely varying implied certification rulings . The Supreme Court has granted review to resolve the circuit split and determine the parameters of implying a certification . 7 Rather than address the proper parameters of the judicially created “ implied certification ” exception , the Court should instead be deciding whether the underlying “ certification ” requirement is even appropriate in the first place .
There is no proper judicial basis for the courts to have created the certification theory because the statute is clear and unambiguous . The FCA is straightforward . The most common liability provisions state that a person is liable if he or she either ( a ) “ knowingly presents … a false or fraudulent claim for payment or approval ,” or ( b ) “ knowingly makes [ or ] uses … a false record or statement material to a false or fraudulent claim .” 8 Courts generally agree that there are four elements required by the FCA : “( 1 ) a false statement or fraudulent course of conduct ; ( 2 ) made with the requisite scienter ; ( 3 ) that is material ; and ( 4 ) that results in a claim to the Government .” 9 In short , the FCA merely requires proof that the contractor is not entitled to payment because it satisfied the requirements and knew it was false , i . e ., acted with either actual knowledge , deliberate ignorance , or reckless disregard of the truth . The only limitation allowed by the FCA is that the breached condition be material to the contract or program . page 20 | LIBERTY LEGAL JOURNAL | SPRING / SUMMER 2016