Recently three circuit courts have considered when opinions can be false under the False Claims Act ("FCA"). Although the circuits disagree regarding whether plaintiff must establish "objective falsity" to assert an FCA violation, they agree that the common law provides guidance regarding when an opinion can be false under the FCA. In this first part of a two-part article, the author discusses the background of the issue and U.S. Supreme Court precedent. In the second part of the article, which will appear in an upcoming issue of Pratt's Government Contracting Law Report, the author explains the circuit split and offers key takeaways.
Although the False Claims Act ("FCA"), as its title indicates, requires that claims be "false," the FCA contains no definition of falsity. Rather than define exactly what renders a claim false, courts have applied a specific analytical framework to determine whether claims are false. That is, depending upon context, a claim can be factually false or legally false. If it is legally false, it may be false because of either an express or implied false certification. Courts may also find that claims are false under a fraud in the inducement theory of FCA liability1
THE PROBLEM WITH THE FRAMEWORK
However, this framework does not provide guidance to determine when, if ever, opinions can be false. Congress's failure to provide a statutory definition of falsity creates a statutory gap because representations on claims frequently call for an exercise of discretion or for representations that cannot be adjudged as true or false. For example, in one case the government contended that claims for health care services were false because the physician's documentation to support the claim was insufficient when there was, in fact, no published standard to assess what level of documentation was sufficient.2 In another, the plaintiff asserted that the defendant contractor falsely certified that it maintained vehicles in "good appearance" when there was no indication of what constituted a good appearance.3 In these cases, and multiple others, courts ultimately addressed this statutory gap by ruling that the FCA required an objective falsehood and dismissed plaintiff's claim because plaintiff did not establish that defendant's representation was objectively false.4
THE CIRCUIT SPLIT
Recently courts have had the opportunity to reexamine—and have split— regarding whether the FCA requires an objective falsehood. Specifically, the
1 For a detailed discussion regarding how courts have distinguished legally and factually false claims and express and implied false certification cases and the standard applied in fraudulent inducement cases, see False Claims Act & the Health Care Industry: Counseling & Litigation at 2:03 (3d ed. American Health Law Ass'n 2018).
2 United States v. Prabhu, 442 F. Supp. 2d 1008, 1032–33 (D. Nev. 2006) (defendant's "claims are not false . . . because his documentation practices would fall within the range of reasonable medical and scientific judgment regarding how to document the medical necessity of pulmonary rehabilitation services. . . . To establish falsity under the FCA, it is not sufficient to demonstrate that the person's practices could have or should have been better. Instead, plaintiff must demonstrate that an objective gap exists between what the Defendant represented and what the Defendant would have stated had the Defendant told the truth. . . . Accordingly, because, at a minimum, reasonable minds may differ regarding whether the documentation underlying [defendant's] claims satisfied some undefined standard, the Government has not establish[ed] falsity as a matter of law") (citations and footnote omitted).
3 U.S. ex rel. Wilson v. Kellogg Brown & Root, 525 F.3d 370, 377–78 (4th Cir. 2008).
4 See, e.g., U.S. ex rel. Thomas v. Siemens AG, 593 Fed. Appx. 139, 143 (3d Cir. 2014) (holding that a "statement is 'false' when it is objectively untrue" and finding that the relator did not demonstrate an objectively untrue statement when the relator contended that the defendant had failed to disclose accurately on a form the discounts it provides to other customers because the government forms were ambiguous and the government itself accepted different interpretations of how those forms should be completed, including what kinds of discounts needed to be disclosed); U.S. ex rel. Hill v. Univ. of Med. & Dentistry, 448 Fed. Appx. 314, 316 (3d Cir. 2011) ("Because [e]xpressions of opinion, scientific judgments or statements as to conclusions which reasonable minds may differ cannot be false, . . . FCA liability will not attach") (internal quotation marks and citation omitted); U.S. ex rel. Yannacopoulos v. Gen. Dynamics, 652 F.3d 818, 836 (7th Cir. 2011) ("A statement may be deemed 'false' for purposes of the False Claims Act only if the statement represents 'an objective falsehood' ") (citations omitted); Kellogg Brown & Root, 525 F.3d at 377–78 (to prove falsity, plaintiffs must show that the "statement or conduct alleged . . . represent[s] an objective falsehood" and plaintiffs could not satisfy this standard when defendant allegedly breached general maintenance standards in contract—such as keeping vehicles in "safe operating condition and good appearance"—and did not specify a specific maintenance program or require specific acts of maintenance and holding that an "FCA relator cannot base a fraud claim on nothing more than his own interpretation of an imprecise contractual provision" but instead must show an expression of fact "which (1) admit[s] to being adjudged true or false in a way that (2) admit[s] of empirical verification") (citations and internal quotations omitted); U.S. ex rel. Will v. A Plus Benefits, Inc., 139 Fed. Appx. 980, 982 (10th Cir. 2005) ("At a minimum the FCA requires proof of an objective falsehood") (citations omitted).
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