On December 4, 2015, the Supreme Court granted certiorari to review the viability of the “implied certification” theory under the federal False Claims Act (“FCA”). The FCA provides that any person who knowingly presents to the government a false or fraudulent claim for payment, or who knowingly makes a falsified record or statement in support of such a false claim, is liable for civil penalties between $5,000 and $10,000, plus three times the amount of any false claims actually paid by the government. 31 U.S.C. §§ 3729-3733. Under the theory of implied certification, contractors who have submitted otherwise valid claims for payment have been unwittingly subject to FCA liability because they requested payment while in violation of one of the myriad of rules or regulations governing their contract. Critics of implied certification have complained that the theory has turned the FCA into a regulatory enforcement mechanism, rather than a tool to eliminate fraud and abuse.


The Supreme Court’s decision will have an enormous impact on contractors’ exposure under the FCA and will clarify a major point of contention among the courts. Currently, the majority of federal circuit courts have adopted some version of the implied certification theory, while the Seventh and Fifth Circuits have rejected it. Even among circuits that have adopted the theory, the courts are split on whether the violation must represent an express condition of payment, or whether any violation can trigger liability. The Supreme Court’s review of these questions will hopefully help clarify the outer bounds of liability under the FCA.

Express Certification vs. Implied Certification


In the typical case, FCA liability arises when a contractor submits to the government a claim for payment containing misrepresentations about the goods or services provided. For example, a contractor providing bulletproof vests to the government would likely certify in its payment request that it delivered a certain number of vests. This is known as an express certification. If the contractor actually delivered fewer vests than it certified, it could be liable under the FCA for knowingly submitting a false claim for payment.


If that same contractor accurately certified the number of vests provided, but nevertheless violated a contractual requirement that it use a particular material supplier, it could still be subject to FCA liability under an implied certification theory. This is true even if the contractor never certified in its request for payment that it complied with that particular requirement. Circuits adopting an implied certification theory find that the mere act of submitting a claim for payment impliedly certifies the contractor’s compliance with all applicable laws, regulations, and contract terms.


To prevent any violation, no matter how small, from becoming a false claim, some circuits have required that the violation be an express condition of payment. Under this approach, a contractor is only liable under the FCA if the underlying statute, regulation, or contract term expressly states that the contractor must comply in order to be paid. Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001). Other courts, however, have taken a much broader approach. For example, the D.C. Circuit held that non-compliance with contract terms may give rise to false or fraudulent claims, even if the contract does not specify that compliance with the contract term is a condition of payment. United States v. Sci Apps. Int’l Corp, 626 F.3d 1257, 1269 (D.C. Cir. 2010). The First Circuit has also followed this approach, finding that FCA liability arises whenever the violation is deemed material. United States ex rel. Hutcheson v. Blackstone Medical, Inc., 647 F.3d 377 (1st Cir. 2011). This obviously requires contractors to guess in advance which terms might be material enough to trigger FCA liability. Considering contractors are governed by hundreds of pages of contract terms and countless obscure regulatory requirements, this is no small task.


Recent Circuit Split On Implied Certification


The Supreme Court’s decision to review implied certification was no doubt motivated by the increasing split among circuits on this topic. Just this past year, two circuit courts reached different conclusions regarding implied certification.


In January 2015, the Fourth Circuit in United States ex rel. Badr v. Triple Canopy, Inc., 775 F.3d 628 (4th Cir. 2015) adopted implied certification, noting that it represented one of the “variety of ways” in which a claim can be false. In Triple Canopy, the government awarded a contract to a security firm, Triple Canopy, to provide security services at an Iraq airbase. Upon arriving at the base, Triple Canopy’s guards were unable to obtain a qualifying marksmanship score, as required by the contract. To remedy this problem, a Triple Canopy supervisor directed that false scorecards be created for the guards.


Over the course of a year, Triple Canopy submitted invoices and was paid over $4.4 million for its work. After a whistleblower revealed the scheme, the government pursued an FCA claim. The Fourth Circuit found Triple Canopy liable under the FCA through its adoption of implied certification. While the court noted that the theory may be abused “by parties seeking ‘to turn the violation of minor contractual provisions into an FCA action,’” it believed that any potential abuse could be curbed by ensuring such violations are material and accompanied by the requisite finding of fraudulent intent. This is in sharp contrast to the Fourth Circuit’s prior comments which cast doubt on implied certification and suggested that liability could only attach through an express certification. Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 786 n.8 (4th Cir. 1999).


Following the Fourth Circuit’s adoption of implied certification, the Seventh Circuit in June 2015 rejected the theory in United States v. Sanford-Brown, Limited, 788 F.3d 696 (7th Cir. 2015). This case involved a college that had entered into a Program Participation Agreement (“PPA”) with the Department of Education, a pre-requisite to obtaining federal subsidies. PPAs require colleges to comply with a variety of statutes and regulations under Title IV of the Higher Education Act. The college’s former director alleged that the school had violated the PPA by using recruiting and retention practices that violated Title IV, thereby making it ineligible to receive subsidies. He argued that the college’s initial certification upon entry into the PPA that it would comply with Title IV created an implied certification that the college would remain in compliance with the statute. Thus, FCA liability would be triggered any time the college received funds while in violation of Title IV.


The Seventh Circuit rejected this argument, explaining that it would be unreasonable to find that the thousands of pages of federal statutes and regulations incorporated by reference into the PPA were conditions of payment for purposes of FCA liability. The court also reasoned the FCA was an inappropriate avenue to enforce regulatory violations. Acknowledging that other circuits had adopted “this so-called doctrine of implied false certification,” the Seventh Circuit flatly rejected it.


Supreme Court To Weigh-In On Implied Certification


The Supreme Court’s decision to review implied certification has generated significant attention as it will no doubt impact the landscape of liability for many contractors. This issue was placed before the Court in United States & Commonwealth of Mass. ex rel. Julio Escobar, 780 F.3d 504 (1st Cir. 2015), which involved an FCA claim brought by parents after their daughter died while under the care of a mental health clinic. The parents claimed that the clinic failed to comply with state regulations governing qualifications and supervision of staff members. The First Circuit found that the clinic fraudulently misrepresented its compliance with regulations requiring mental-health clinics to employ at least one board-certified psychiatrist at all times. Notably, the clinic never expressly certified its compliance with these regulations. Instead, the court found that compliance was a “material condition of payment,” explaining that each time the clinic submitted a claim for payment, it implicitly communicated that it had conformed to the relevant program requirements.


In granting certiorari, the Supreme Court will decide two issues. First, the Court will decide whether the implied certification theory is viable. If it is viable, the Court will determine whether a contractor’s reimbursement claim can be false under the theory if it failed to comply with a particular statute, regulation, or contract provision that does not expressly state that it is a condition of payment. Therefore, even if the Court does not indirectly invalidate implied certification, it may significantly curb its application by requiring the underlying law or contract provision to expressly state that compliance is a condition of payment. This would undoubtedly provide contractors more notice as to what violations might expose them to liability.




Considering the variations in approaches to FCA liability, the Supreme Court’s decision to review implied certification has been welcomed by many. Oral argument will likely be scheduled for March or April 2016 with a decision following in June or July 2016. In the meantime, contractors in jurisdictions that have adopted implied certification should remain vigilant in ensuring their compliance with all applicable requirements.