Supreme Court Hears False Claims Act Case With Huge Implications

qui tam lawsuitsSince the passing of Supreme Court Justice Antonin Scalia, the disarray on the nation’s highest court has become one of the top political stories of the year. That’s not an easy thing to do when Donald Trump is running for president.

Because of several other high-profile cases before the eight-member court, Universal Health Services, Inc. v. Escobar has passed almost entirely under the radar. Yet this False Claims Act case has massive implications for every federal contractor in the country, from construction contractors to Medicaid providers.

The business community is terrified of the case, and 25 amicus briefs have been filed by esteemed organizations like the U.S. Chamber of Commerce. Meanwhile, many whistleblower policy organizations are supporting Escobar, the whistleblower.

Explaining Universal Health Services, Inc. v. Escobar

The Supreme Court heard oral arguments about this case on April 19, 2016, and whistleblower attorneys expect a ruling in June. It’s a complex case, with huge implications for any future qui tam lawsuits and False Claims Act cases.

Julio Escobar is the father of a teenager who received counseling from Arbour Counseling Services, part of Universal Health Services. According to the Illinois Institute of Technology Chicago Kent College of Law’s Oyez Project, the teen “was eventually diagnosed with bipolar disorder and prescribed a medicine by a ‘doctor’ who was later discovered to be a nurse under the supervision of a non-board-certified psychiatrist.” The teen suffered an adverse reaction and eventually suffered a fatal seizure.

The Oyez Project writes:

Escobar and Correa filed complaints with several state agencies and eventually sued UHS under both the federal and state False Claims Acts. The district court dismissed the complaint and held that the plaintiffs did not sufficiently plead the elements of falsity that claims under the False Claims Act require. The U.S. Court of Appeals reversed and held that the plaintiffs had sufficiently pled the elements of falsity by applying an “implied certification” test, which states that falsity has been sufficiently pled when there is evidence that the defendant did not comply with a condition of payment.

Major Implications for the Qui Tam Lawsuit Process
Essentially, whistleblower attorneys say that Universal Health Services submitted a false claim because their providers were not credentialed. So why is the case so controversial? If the court rules for Escobar, then any federal contractor who provides any false information could be sued under the False Claims Act, even if there were no actual damages.

It’s easy to see why the business community opposes expanding the reach of the False Claims Act and the qui tam lawsuit process: because they work.

Whistleblower law firms and U.S. Department of Justice Statistics show that since 1987 the federal government has recovered $39 billion from False Claims Act cases and qui tam lawsuits, because violators of the False Claims Act can be held liable for three times the amount they defrauded the government, plus civil penalties ranging from $5,000 to $10,000. Since the FCA was amended in 1986, the number of qui tam lawsuits has increased every year. In total, about 7,200 qui tam lawsuits have been filed since 1987.

Depending on how the Supreme Court decides this case, that number could go even higher. While federal contractors might fear an outcome in favor of Escobar, many whistleblower lawyers disagree.

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