Implied Certification, Take Two: A Look at the California False Claims Act and Fraud on State Governments

Last week, we wrote about the upcoming Supreme Court case that will decide if the implied certification theory is a valid interpretation of the Federal False Claims Act (“FCA”).  It is a decision that could substantially empower government fraud whistleblowers.  However, it is worth remembering that the federal false claims act is only relevant to cases involving alleged fraud on the federal government, including Medicare fraud.  State false claims acts, which in many cases are relatively similar to their federal counterpart, are a key tool for fighting fraud on the state government including state-level government contract fraud and Medicaid fraud (a joint state/federal program).  Our government fraud law firm supports whistleblowers nationwide, including in our home state of California.  The case law specifically supports implied certification under the California False Claims Act (“CFCA”) and we believe other states may accept the theory as well.

Courts Hold Implied Certification Theory Valid Under California False Claims Act

lawbooksIn San Francisco Unified School Dist. ex rel. Contreras v. Laidlaw Transit Inc., 182 Cal. App. 4th 438 (Cal. App. 1st Dist. 2010) and again in a 2014 decision, the Court of Appeals for the State of California considered a suit brought by a group of whistleblowers on behalf of the San Francisco Unified School District (“District”) under the CFCA.  The Plaintiffs alleged that the Defendant submitted payment claims to the District despite knowing it was in breach of assorted contract terms relating to student transportation services.  These violations allegedly rendered the Defendant’s buses unsafe and unhealthy.  The Plaintiffs also alleged that the Defendants knowingly falsified records and/or statements.

The 2014 Appeals Court reiterated its previous ruling, finding that the

“defendant’s invoices were ‘claims’ within the meaning of the CFCA; the invoices did not need to contain an expressly false statement to be actionable; and defendant’s requests for payment under the Contract included an implied certification of compliance with contractual requirements that, if false and fraudulent, can form the basis for a CFCA action” (internal quotations removed). 

Thus, a material undisclosed violation of a contractual obligation can, if made knowingly or with reckless disregard for the truth, support a CFCA claim.  In the 2014 appeal, the court found triable issues of fact as to whether the specific claims in the Contreras case met the materiality and knowledge requirements, sending the case back to the lower court for trial.

The Importance of State False Claims Acts

Whether or not the Supreme Court finds in favor of the implied certification theory, the California courts have clearly spoken.  The implied certification theory is valid in California’s state courts for claims under the state’s own false claims act.  The theory may prove valid in other states as well.

Back in 2012, citing the first Contreras appeal, an article on Law360 cautioned government contractors that they might face liability pursuant to the implied certification theory under state FCAs.  The author wrote:

To limit potential state false claims act liability and as a matter of sound business policy, companies marketing to both the federal and state sectors would be well advised to apply the same robust contractual and statutory compliance protocols used in their federal contracts to their state contracts.”

Sadly, it seems many contractors have failed to heed this warning because government fraud continues to run rampant at both the state and federal level.

A Whistleblowers’ Law Firm Committed to Fighting Fraud

We are committed to fighting these misdeeds in California and across the country using all the tools the law provides, including both federal and state statutes.  If you believe you have witnessed government fraud at any level, our False Claims Act law firm can help you pursue justice.  Call us at (800) 427-7020 to learn more.

See Related Blog Posts:

The Implied Certification Debate: A Major Issue in False Claims Act Litigation Pending Before the U.S. Supreme Court

Decision Expands Reach of the False Claims Act and Helps Fight Government Fraud

(Image by Eric E. Johnson)