Court takes “holistic approach” to materiality, rejecting strict focus on the ultimate “payment decision” in significant win for qui tam whistleblowers and the government
A few weeks ago, I blogged about United States v. Strock. There, the Second Circuit Court of Appeals determined that the Supreme Court’s decision in Universal Health Services v. Escobar—which held that misrepresentations regarding compliance with a statutory, regulatory, or contractual requirements “must be material to the Government’s payment decision” to be actionable under the False Claims Act—did not invalidate the “fraudulent inducement” theory of False Claims Act liability. Under that theory, which predates Escobar, a violation of the False Claims Act can be established by showing that the defendant submitted claims for payment under a contract obtained by fraud—even if the subsequent claims for payment under the contract were themselves entirely truthful. The focus in a such a case, the Second Circuit confirmed, still includes the fraudulent statements’ impact on the government’s initial decision to award the contract. Any subsequent payments are “tainted” by that original fraud.
Now—in another key victory for whistleblowers and the government—the Eleventh Circuit has taken a similarly broad view of Escobar’s materiality requirement. In United States ex rel. Bibby v. Mortg. Inv’rs Corp., the court adopted a “holistic approach” to the assessment of materiality under the False Claims Act, rejecting a “strict focus” on the ultimate “payment decision.”