Universal Health Services, Inc. v. United States (15-7)

argument 15-7

Universal Health Services, Inc. v. United States

Supreme Court of the United States 1h 0m 4 speakers 8 chapters transcribed 7 days ago official recording ↗

▲ 0

Transcript

jump: chapters · speakers · find in transcript

Transcript

Transcript generated automatically by AI and may contain errors.

What four key words does the case turn on and why are they important?

John G. Roberts 0:00

We'll hear argument next in Case 15-7, universal health services versus the United States and Massachusetts, Exrel, Escobar, and Correa. Mr. Englert.

Michael S. Englert 0:12

MR. Thank you, Mr. Chief Justice, and may it please the Court. This entire case turns on four words of the statute, false or fraudulent claim. False and fraudulent have been unchanged since 1863 in this statute. Claim is defined by statute. I'll come back to those words. Three separate state agencies investigated the facts of this case in detail. All three agencies produced lengthy reports and proposed remedial measures for certain alleged regulatory violations. No agency asked for any money back. No sanction at all was imposed on the company. One individual was fined $1,000, and the clinic director was given two years of supervision. Through the magic of the implied certification theory under the False Claims Act, the very same facts have now been re-characterized as fraud on the government.

Michael S. Englert 1:08

The First Circuit focused on a single alleged regulatory violation involving a regulation not cited in the complaint, not cited in the appellate brief, not cited in the amicus brief of the Commonwealth of Massachusetts. That is not what fraud means. Now, coming back to the four words that matter, false or fraudulent claim. False means false. This Court construed that word in Williams v. United States. Footnote 13 of Respondent's Brief unsuccessfully tries to distinguish Williams. The Solicitor General ignores Williams.

Unknown 1:42

It can't mean misleading. False can only mean false. It can't mean deceptive, misleading.

Michael S. Englert 1:52

It cannot, Justice Ginsburg, because the body of law that covers deceptive and misleading statements is not falsity. It's the law of fraud. And the law of fraud is stated in Section 551 of the Restatement Second of Torts.

Stephen G. Breyer 2:08

I suppose you have a private contract. In the private contract, it's for medical services. The written part does not actually use the word doctor, but the circumstances are such that any reasonable person would— would believe that the parties contracted for medical services provided by a doctor. This is an ordinary contract case. Could not a jury or the judge find that that implicit term of the contract, that the services would be provided by a doctor, was breached, it was a material breach, and therefore the implicit statement was false? Two responses, if I may, Justice Breyer.

Michael S. Englert 2:52

First, the whole problem here is the tortification of contract. Yes, that's a good contract case, but it's not automatically a good tort case. The second — No, no, no. All right. What's the second? Section 551.2.E of the restatement deals with that exact situation, facts basic to the transaction. So the common law has developed a meaning of fraud that will accommodate the cases in which liability makes sense because every reasonable person, as Your Honor said, would assume. something to be true. Comments J and K and illustrations 3, 4, 5, and 6 of the restatement — rather, 3, 4, 5, 6, 7, and 8 — give one example of facts basic to the transaction and five examples of facts not basic to the transaction.

Michael S. Englert 3:39

It is a very, very, very narrow duty of disclosure. Oh,

Stephen G. Breyer 3:42

well, fine. But now let's go a step further. We have our contract. The facts are such that any reasonable person would assume there is an implicit statement that the services will be provided by a doctor. You say that could be a breach of contract. Now it turns out that this company that has that contract is also sold the shares over the SEC. And the SEC says, you know, it's so obvious. that that implicit statement in the contract meant that they had a doctor who was a doctor. That's so obvious that we think in selling shares in this company where, indeed, this contract was absolutely critical, millions of dollars was at stake, without a doctor violating the implicit statement that there was a doctor, we think that's fraud under Rule 10b-5.

Michael S. Englert 4:43

I'm glad Your Honor brought that up.

Stephen G. Breyer 4:44

All right.

Michael S. Englert 4:45

The SEC has a habit of construing fraud under 10b-5 broadly, and this Court has a habit of reining the SEC in.