Second Circuit Cites Escobar, Vacates and Remands FCA Suit
On September 7, the Second Circuit Court of Appeals issued an order concerning a False Claims Act (FCA) case on remand from the United States Supreme Court. In its order, the three-judge panel determined that the FCA complaint should be reviewed under the higher court’s Escobar standard, which “set out a materiality standard for FCA claims that has not been applied in the present case.” See Universal Health Servs., Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989 (2016). As previously discussed in InfoBytes, Escobar holds that a misrepresentation must be material to the government’s payment decision to be actionable under the FCA and that the implied false certification theory can be a basis for liability under the FCA.
In issuing the order, the appellate court vacated the district court’s dismissal of the relators’ complaint (which it had affirmed the first time around) and remanded for further proceedings to determine whether the bank’s certification was materially false. At issue is a qui tam suit filed against a national bank, in which plaintiffs claimed the bank violated the FCA when it certified to the Federal Reserve that the bank and its predecessors were obeying the law in order to “borrow money at favorable rates” during the financial crisis. The decision originally relied upon two requirements cited in a case overturned by Escobar—“the express-designation requirement for implied false certification claims and the particularity requirement for express false certification claims.”