The U.S. Supreme Court rejected two petitions urging it to clarify the impact of its 2016 decision of Universal Health Servs., Inc. v. United States ex rel. Escobar, which interpreted the U.S. False Claims Act, an Act that allows whistleblowers to sue companies and individuals that defraud the government.

In Escobar, the Court emphasized that frauds alleged by whistleblowers and/or the government under the False Claims Act must be “material” to the government’s decision to pay claims for payment. It also held that the question of whether an alleged fraud is “material” to the government must be looked at holistically, in light of all of the specific facts of any particular case.

However, the Escobar decision also noted that “strong evidence” of materiality exists when the government pays a defendant money even though it has full knowledge that the defendant is engaging in false or fraudulent conduct in connection with the payment.

In the wake of the Escobar decision, Defendants have asked the Supreme Court to revisit Escobar and disallow cases where the government paid a defendant money while knowing of the defendant’s related fraudulent conduct. Plaintiffs have, to the contrary, pointed out that the government might have reasons to pay claims even if it has knowledge of such fraudulent conduct, and that such payments do not mean that the frauds are immaterial to the government’s payment decision.

On April 1, the Supreme Court rejected two petitions by defendants to overturn Ninth Circuit decisions involving False Claims Act cases that involved the government paying claims in spite of it having knowledge of related fraudulent conduct. The cases are United States ex rel. Berg v. Honeywell Int’l and Stephens Inst. v. U.S. ex rel. Rose. They involve, respectively, a case involving alleging frauds in connection with a military supply contract, and a case involving alleged frauds in connection with student loan programs.

Click here to read an article about these cases and the denial of the petitions.