When a government agency pays claims despite actual awareness of widespread noncompliance with certain regulatory requirements, whether evidence of agency actions apart from that payment decision may create a dispute of fact regarding materiality

QUESTION PRESENTED The Court recently explained that “a misrepresentation about compliance with a statutory, regulatory, or contractual requirement must be material to the Government’s payment decision in order to be actionable under the False Claims Act.” Universal Health Serus., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 1996 (2016). And, “if the Government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated, * * * that is strong evidence that the requirements are not material.” Jd. at 2003-2004. Here, Mortgage Investors Corporation (MIC) originated mortgage loans guaranteed by the U.S. Department of Veterans Affairs (VA). Relators assert that MIC charged certain fees disallowed by governing regulations, resulting in False Claims Act violations. But the lower courts found as a factual matter that the VA knew that MIC charged allegedly noncompliant fees, yet continued to issue guaranties for MIC’s loans—that is, it continued to pay MIC’s claims. The district court granted summary judgment for MIC, concluding that the VA’s knowing conduct prevented relators from establishing that the alleged regulatory noncompliance was material to the government’s decision to pay. The court of appeals reversed, reasoning that other regulatory actions—including form letters instructing MIC to comply with the regulatory requirements—create a dispute of fact regarding materiality. The question presented is: When a government agency pays claims despite actual awareness of widespread noncompliance with certain regulatory requirements, whether evidence of agency actions apart from that payment decision may create a dispute of fact regarding materiality.