First Circuit: Statement that Relies on False Data Potentially Triggers FCA Liability

The First Circuit has led the change in rejecting the rigid divisions between factual and legal falsity, and express and implied certification, noting that the text of the False Claims Act (FCA) does not make such distinctions.  Specifically, in Hutcheson, the First Circuit declared that such distinctions “may do more to obscure than clarify the issues…” United States ex rel. Hutcheson v. Blackstone Medical, Inc., 647 F.3d 377, 385-86 (1st Cir. 2011). Instead, the First Circuit has taken a broad view of what may constitute “false or fraudulent” statement to avoid “foreclose[ing] FCA liability in situations that Congress intended to fall within the Act’s scope.” Id. at 387 (quoting United States v. Sci. Applications Int’l Corp., 626 F.3d 1257, 1268 (D.C. Cir. 2010)) (internal quotation marks omitted).

Recently, the First Circuit had an opportunity to apply its renewed reading of “false or fraudulent” statements, in United States ex rel. Jones v. Brigham and Women’s Hospital, No. 10-2301 (1st Cir. May 7, 2012). In this NIH grant case, the defendants allegedly violated the False Claims Act by including false statements in a grant application that was submitted to the NIH. Importantly, at least from the defendants’ point of view, the application did not include the supposed false data that formed the basis of their study proposal.

In reversing the lower court’s decision, the First Circuit ruled that the statements in the grant application were still sufficiently “false” to trigger FCA liability. According to the Court, “Although it is true that the allegedly false [ ] data was not itself included in the Application, that fact is not determinative of the false claim allegation. The statute makes it a violation to ‘use . . . a false record or statement to get a false or fraudulent claim paid or approved by the Government.’ 31 U.SC. § 3729(a)(2).”

In a sense, the underlying false data tainted the subsequent statements in the grant application. The court noted, “These statements rel[ied] on the data challenged by [the Relator] as false. In the language of the FCA, they ‘use[d] . . . a false record.’ Thus premised, the statements would not be ‘true, complete and accurate’ as required by the certifications signed” by the Defendants.

The Court stressed that the relator would still need to clear two other FCA elements—materiality and knowledge. However, the “falsity” element was sufficiently pled, even if the allegations did not neatly fit into an “express certification” or “implied certification” box.

More information for whistleblowers is located at the Nolan & Auerbach, P.A. website.

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