Reining in Lincoln’s Law: A Call to Limit the Implied Certification Theory of Liability Under the False Claims Act
The False Claims Act is widely considered the nation’s preeminent civil litigation weapon against fraud by federal contractors. Under the Act’s newest theory of liability known as implied certification, a contractor is liable for civil penalties and treble damages if it knowingly presents a claim for payment to the government and fails to disclose its violation of a contract provision, statute, or regulation material to the government’s decision to pay the claim. While a majority of federal courts of appeals have embraced the implied certification theory, they have struggled to define the scope of a contractor’s duty to disclose in the absence of an agreement between the contracting parties. Under the default rule developed by the Second Circuit in Mikes v. Straus, liability attaches only when a contractor submits a claim and fails to disclose its violation of a material contractual, statutory, or regulatory provision that the government has expressly identified as a condition of payment. A broader default rule, enunciated by the First Circuit in United States ex rel. Hutcheson v. Blackstone Medical, Inc., imposes liability when a contractor submits a claim and fails to disclose its violation of a material contractual, statutory, or regulatory provision, regardless of whether the provision was an express condition of payment.
Because the choice between these two default rules can be outcome determinative in cases with hundreds of millions of dollars at stake, there is an urgent need to resolve the split of authority and ensure uniformity across the federal courts. This Comment argues that the U.S. Supreme Court should resolve the circuit split by recognizing the implied certification theory and adopting the express condition-of-payment requirement set forth by the Second Circuit in Mikes. The Court should recognize the implied certification theory because the language and structure of the False Claims Act support liability for at least some undisclosed contractual, statutory, and regulatory violations; Congress has emphasized that the Act broadly targets fraud against the government; and the theory comports with the common-law recognition of fraud by omission. At the same time, neither the statutory language nor legislative history authorizes the use of the implied certification theory to police garden-variety contractual breaches or statutory or regulatory violations. Accordingly, the Court should adopt theMikes express condition-of-payment requirement, which confines liability to cases of clear fraud. In addition to enforcing the proper limits of implied certification liability, theMikes rule has two distinct advantages over the Blackstonealternative: it provides federal contractors with fair notice of punitive antifraud liability, and it reduces their compliance and litigation costs.