Brookdale Senior Living Communities, Inc., et al. v. United States, ex rel. Marjorie Prather

This Court has affirmed False Claims Act (FCA) liability, 31 U.S.C. § 3729 et seq., under a theory of “implied false certification.” See Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 1995 (2016). For that expanded theory of fraud liability to apply, however, the contractor’s violation must be material to the government’s decision to pay the claim, and the contractor must know it is material. Id. at 1996, 2002. Despite that holding, the Sixth Circuit held that a relator’s failure to plead any facts regarding an alleged regulatory violation’s effect on the government’s past payment of claims “has no bearing on the materiality analysis” and that scienter can be established even where the relator does not allege that the defendant knew that the regulatory violation was material to the government’s decision to pay claims. That decision directly conflicts with published decisions in other circuits regarding the proper enforcement of the FCA’s materiality and scienter elements. The questions presented are:

1. Whether the failure to plead facts relating to past government practices in an FCA action can weigh against a finding of materiality.

2. Whether an FCA allegation fails when the pleadings make no reference to the defendant’s knowledge that the alleged violation was material to the government’s payment decision.