The US Supreme Court [official website] ruled [opinion, PDF] unanimously Thursday in Universal Health Services v. United States ex rel. Escobar [SCOTUSblog materials], a case dealing with fraud claims against federal contractors. The question before the court was whether the “implied certification test” under the False Claims Act [text] is valid and if so whether the relevant statute has to state explicitly the conditions of payment that the defendant allegedly failed to meet. Justice Clarence Thomas wrote for the court:

We first hold that, at least in certain circumstances, the implied false certification theory can be a basis for liability. Specifically, liability can attach when the defendant submits a claim for payment that makes specific representations about the goods or services provided, but knowingly fails to disclose the defendant’s noncompliance with a statutory, regulatory, or contractual requirement. In these circumstances, liability may attach if the omission renders those representations misleading. We further hold that False Claims Act liability for failing to disclose violations of legal requirements does not turn upon whether those requirements were expressly designated as conditions of payment. Defendants can be liable for violating requirements even if they were not expressly designated as conditions of payment. Conversely, even when a requirement is expressly designated a condition of payment, not every violation of such a requirement gives rise to liability. What matters is not the label the Government attaches to a requirement, but whether the defendant knowingly violated a requirement that the defendant knows is material to the Government’s payment decision.

The court remanded the case the the lower court for further proceedings.

The case arose when a young girl, Yarushka Rivera, visited Arbour Counseling Services, a counseling center for mental illnesses run by United Health Services. After receiving a diagnosis and being prescribed medicine for bipolar disorder from unlicensed practitioners, Yarushka died. The parents filed complaints against state agencies and then sued UHS under both the federal and state False Claims Acts. The district court held that they did not sufficiently plead the elements of falsity that claims under the False Claims Act require. The court of appeals reversed and held that they did. The Supreme Court heard oral arguments in the case in April.