Federal courts uniformly accept that "[v]iolations of laws, rules or regulations alone do not create a cause of action under the FCA." [FN108] The same can be said for violations of contractual or other terms that govern the relationship between the government and its contractors. Liability under the FCA requires that the violated rule or term is a condition to payment and that the defendant knowingly submits a demand for payment notwithstanding the violation. In other words, liability under the FCA does not exist without*133 both scienter and materiality with respect to the violated rule or term. [FN109]
To assist in the analysis of the materiality requirement, courts developed the judicial constructs of express and implied certification. Despite good intentions, these judicial constructs have proven inadequate and should be abandoned.
The initial construct was express certification. This construct failed because it became overly mechanized and brought about decisions inconsistent with the remedial purpose of capturing all government fraud, rather than fraud packaged or pled by an "express certification." [FN110] Although mechanization initially may have resulted in efficiencies and a certain level of predictability, it became problematic in the long run because it rendered the construct too rigid to address evolving modalities of fraud that should have been actionable given the remedial purposes of the FCA but which fell outside of the construct's parameters. The foregoing problem led the courts to modify the express certification theory, to create the new construct of implied certification, and to continuously "improve" on these judicial constructs in order to capture the frauds that were escaping from enforcement and shield contractors from inappropriate over-reaching liability. Unfortunately, courts *134 continued to develop various bells and whistles to modify these constructs, which eventually took on a meaning independent from the text of the Act and which varied from jurisdiction to jurisdiction. The end result has been confusion, a lack of unified jurisprudence for the FCA, and a lack of predictable enforcement under the FCA.In sum, the judicial constructs of express and implied certification have not created a workable framework that could reliably strike a balance between the dangers of over-reaching and under-reaching under the Act. They should, therefore, be retired in favor of a straightforward application of the text of the FCA. Under the text of the Act, what constitutes "falsity" or a ""false claim" hinges exclusively on scienter [FN111] and materiality, rather than certification. [FN112] To borrow Judge Easterbrook's words, "[i]f a false statement is integral to a causal chain leading to [government] payment, it is irrelevant how the federal bureaucracy has apportioned the statements among layers of paperwork." [FN113] This concept of materiality is sufficiently developed in the FCA jurisprudence to allow for the thoughtful, reliable, and un-mechanized analysis of "falsity" under the Act. Thus, courts should rely exclusively on materiality, rather than certification, as the cornerstone of falsity under the FCA.
[FN108]. United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266 (9th Cir. 1996) (emphasis added) (standing for the proposition that violation of a regulatory provision, in the absence of a knowingly false or misleading representation, does not amount to fraud); see also United States ex rel. Fallon v. Accudyne Corp., 880 F. Supp. 636, 638 (W.D. Wis. 1995); X Corp. v. Doe, 816 F. Supp. 1086, 1093 (E.D. Va. 1993).
[FN109]. The requirement of materiality rests on "the longstanding and broadly accepted principle that a plaintiff making a tort claim based on a statutory violation must have suffered an injury of the type the statute was designed to prevent." United States v. Kellogg Brown & Root Servs., Inc., 800 F. Supp. 2d 143, 156 (D.D.C. 2011). Fraud under the FCA is just such a tort and the injury, that the FCA seeks to prevent is the knowing submission of claims for goods or services that are tainted by violations of terms important to the government's decision to contract or pay for such goods or services.
[FN110]. The FCA has always been considered remedial. See, e.g., United States ex rel. Colucci v. Beth Israel Med. Ctr., 603 F. Supp. 2d 677, 680 (S.D.N.Y. 2009) (finding that False Claims Act actions survive death of relator because they are primarily remedial); United States v. Island Park, No. 90 CV 992(ILG), 2008 WL 4790724, at *6 (E.D.N.Y. Nov. 3, 2008) (stating that the Excessive Fines Clause did not apply because the False Claims Act is remedial). Further, Congress referred to FERA as "one of the most potent civil tools" to stop fraud. S. Rep. No. 111-10, at 4 (2009); see also S. Rep. No. 99-345, at 11 (1986) ("The statute is a remedial one. It is intended to protect the Treasury against the hungry and unscrupulous host that encompasses it on every side . . . ." (quoting United States v. Griswold, 24 F. 361, 366 (D. Or. 1885))), reprinted in 1986 U.S.C.C.A.N. 5266, 5276.
[FN111]. Scienter is not an issue under certification theory.
[FN112]. See 31 U.S.C. ss 3729-33 (2006 & Supp. V 2011).
[FN113]. United States ex rel. Main v. Oakland City Univ., 426 F.3d 914, 916 (7th Cir. 2005).