Laboratory Corporation of America Holdings D/B/A Laboratory Corporation of America v. the State of Texas and Npt Associates

Supreme Court of Texas

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No. 25-0127

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Laboratory Corporation of America Holdings d/b/a Laboratory

Corporation of America,

Petitioner,

v.

The State of Texas and NPT Associates,

Respondents

═══════════════════════════════════════

On Petition for Review from the

Court of Appeals for the First District of Texas

═══════════════════════════════════════

Argued February 12, 2026

JUSTICE HAWKINS delivered the opinion of the Court, in which

Justice Lehrmann, Justice Devine, Justice Bland, Justice Huddle,

Justice Young, and Justice Sullivan joined.

CHIEF JUSTICE BLACKLOCK filed a dissenting opinion, in which

Justice Busby joined.

JUSTICE BUSBY filed a dissenting opinion.

The State asserts that LabCorp—a laboratory testing services

company and Texas Medicaid participant—violated Texas

administrative regulations by failing to offer the Medicaid program the

same pricing and discounts that it offered other payors. According to the

State, LabCorp made false statements, misrepresentations, and

omissions regarding its compliance with these regulations. Invoking

what once was called the Texas Medicaid Fraud Prevention Act (and

today is called the Texas Health Care Program Fraud Prevention Act),

the State now seeks to impose civil penalties on LabCorp in connection

with transactions reaching back over twenty years.

This dispute requires us to decide whether the relevant provision

of the Act forbids all omissions, or only those that actually matter to the

government’s payment decision. Put differently, does the Act require the

government (or qui tam relator) to show materiality in order to impose

liability for an omission?

We hold yes. In banning fraud against the State, the Act taps into

a deep set of background common-law principles that have always

required a showing of materiality in order to render a falsehood or

omission actionable. Our Legislature was well familiar with that

historical pedigree, and nothing in the statutory text indicates a desire

to depart from the traditional understanding of fraud.

We further find no materiality in this record. LabCorp opened its

books, records, and practices to the State in 2014. Through a series of

document productions, presentations, and other communications,

LabCorp demonstrated the ambiguities in the relevant administrative

regulations and explained its position on their proper interpretation.

For seven years thereafter, through 2021, the State paid each of

LabCorp’s claims without a word of objection. The State never withheld

payment, never lodged any protest, and never advised LabCorp that its

2

interpretation of these regulations was incorrect. No documents—no

internal analyses, no external communications—suggest that any

alleged regulatory violation had any bearing on the millions of dollars

the State paid LabCorp for countless medical services to indigent

patients over the course of many years.

This record is incompatible with materiality. The trial court

therefore correctly awarded LabCorp summary judgment. We reinstate

that judgment and reverse the contrary judgment of the court of appeals.

I

We begin by unfurling the complex administrative labyrinth out

of which the State’s fraud claim arises.

A

1

The Medicaid program was created in 1965 “to subsidize state

efforts to provide healthcare to families and individuals ‘whose income

and resources are insufficient to meet the costs of necessary medical

services.’ ” Medina v. Planned Parenthood S. Atl., 606 U.S. 357, 363

(2025) (quoting Armstrong v. Exceptional Child Ctr., Inc., 575 U.S. 320,

323 (2015)). Unfortunately, since its inception, Texas’s Medicaid

program has experienced “fraud, abuse, and waste” that “divert funds

that could otherwise be used to provide essential health-care services.”

In re Xerox Corp., 555 S.W.3d 518, 524 (Tex. 2018). In 1995, the Texas

Legislature passed the Texas Medicaid Fraud Prevention Act to serve

as a “powerful tool for targeting fraud against the Texas Medicaid

program and securing the program’s integrity.” Id. at 525; see generally

Act of May 26, 1995, 74th Leg., R.S., ch. 824, 1995 Tex. Gen. Laws 4202-

3

08 (current version at TEX. HUM. RES. CODE §§ 36.001-.132). The Act

provides that “a person who commits an unlawful act is liable to the

state for” potentially vast civil penalties. TEX. HUM. RES. CODE

§ 36.052(a). In addition to authorizing enforcement by state officials, the

Act deputizes private citizens, known as qui tam relators, to “bring a

civil action for a violation of Section 36.002 for the person and for the

state.” Id. § 36.101(a). 1

Section 36.002 lists unlawful acts. Id. § 36.002. Relevant here, the

statute prohibits false statements, misrepresentations, and omissions

that permit an unauthorized benefit or payment. As the statute says:

A person commits an unlawful act if the person:

(1) knowingly makes or causes to be made a false statement

or misrepresentation of a material fact to permit a person

to receive a benefit or payment under a health care

program that is not authorized or that is greater than the

benefit or payment that is authorized;

(2) knowingly conceals or fails to disclose information that

permits a person to receive a benefit or payment under a

health care program that is not authorized or that is

greater than the benefit or payment that is authorized;

...

(4) knowingly makes, causes to be made, induces, or seeks

to induce the making of a false statement or

misrepresentation of material fact concerning: . . .

(B) information required to be provided by a federal or

1 The Act was amended in 2023 to include two additional healthcare

programs. It is now referred to as the Texas Health Care Program Fraud

Prevention Act. See Act of May 16, 2023, 88th Leg., R.S., ch. 273, §§ 2-12, 2023

Tex. Gen. Laws 584, 584-88. For simplicity, we refer to the statute as “the Act.”

4

state law, rule, regulation, or provider agreement

pertaining to a health care program . . . .

Id. § 36.002(1), (2), (4)(B).

2

Through its administrative agencies, the State has promulgated

a forest of regulations governing the Medicaid program and the

healthcare providers with whom it partners. We now chart the ones that

give rise to this dispute.

First there is the Texas Administrative Code. Chapter 371

concerns “Medicaid and Other Health and Human Services Fraud and

Abuse Program Integrity.” See 1 TEX. ADMIN. CODE §§ 371.1-.1723. One

of its provisions regulates the invoicing and pricing of services by

invoking “usual and customary” fees:

A person is subject to administrative actions or sanctions if

the person submits, or causes to be submitted, a claim for

payment by the Medicaid or other HHS program: . . . (9) for

an item or service where the charges for that item or

service exceed the usual and customary fee the person

charges to the public, privately insured persons, or

private-pay persons for the same item or service . . . .

Id. § 371.1653(9).

Immediately after that provision comes one governing “charges or

costs” that were “discounted” for certain other payors:

A person is subject to administrative actions or sanctions if

the person submits, or causes to be submitted, a claim for

payment by the Medicaid or other HHS program: . . .

(10) for an item or service where the charges or costs for

that item or service were discounted for the public,

privately insured persons, or private-pay persons for the

same item or service . . . .

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Id. § 371.1653(10).

Chapter 371 includes a “Definitions” section that defines some 96

terms ranging from “Abuse” to “Waste.” Id. § 371.1. Some of the terms

in the above provisions are defined, including “claim,” “[d]elivery of a

health care item or service,” “person,” and “sanction.” Id. But

Chapter 371 defines neither “discounted” nor “usual and customary fee.”

On top of those administrative provisions, Medicaid providers are

subject to two additional sets of regulations found in program-specific

documents. One is the Texas Health and Human Services Commission

Medicaid Provider Agreement. Among its several dozen requirements is

a “Nondiscrimination” clause, under which providers agree “to grant

Medicaid recipients all discounts and promotional offers provided to the

general public.” That clause further provides that:

Provider agrees and understands that free services to the

general public must not be billed to the Medicaid program

for Medicaid recipients and discounted services to the

general public must not be billed to Medicaid for a

Medicaid recipient as a full price, but rather the Provider

agrees to bill only the discounted amount that would be

billed to the general public.

The Agreement explains that “falsifying entries, concealment of a

material fact, or pertinent omissions may constitute fraud and may be

prosecuted under applicable federal and state law.” In signing the

Agreement, providers agree to comply with Title I, Part 15, Chapter 371

of the Texas Administrative Code.

Still more requirements are set out in the Texas Medicaid

Provider and Procedures Manual, to which all Texas Medicaid providers

must consent as a condition for participation in the program. The

6

Manual contains similar, but not identical, requirements to those found

in the Provider Agreement:

After submitting a signed claim . . . , the provider certifies

[that]:

...

• All billed charges are usual and customary for the

services provided. . . .

• The provider will not bill the [Texas] Medicaid program

for services that are provided or offered to non-Medicaid

patients, without charge, discounted or reduced in any

fashion including, but not limited to, sliding scales or

advertised specials. Any reduced, discounted, free, or

special fee advertised to the public also must be offered

to [Texas] Medicaid clients.

As this language shows, the Manual twice ties “discounted” fees to

advertising.

B

Petitioner Laboratory Corporation of America Holdings provides

a variety of lab testing services to the general public nationwide,

including to Texas Medicaid enrollees. As a participant in the Texas

Medicaid program, LabCorp is required to comply with all of the

authorities discussed above, including the Act, Chapter 371 of the

Administrative Code, the Agreement, and the Manual.

In 2013, NPT Associates sued LabCorp under the Act’s qui tam

provisions. That filing prompted the Office of the Attorney General of

Texas to investigate LabCorp’s billing practices. In 2013, OAG served a

civil investigative demand (called CID for short) on LabCorp seeking

information on the alleged fraudulent conduct NPT Associates

identified. See TEX. HUM. RES. CODE § 36.053(a), (b)(3) (conferring OAG’s

investigative authority). This CID is not included in the record before

7

our Court, but the parties agree that it directed LabCorp to provide OAG

extensive information about its billing practices. 2

In response, LabCorp submitted to OAG three principal

categories of information that will be relevant today. We will review

LabCorp’s disclosures in some detail over the next few pages, but the

important takeaway is that these materials put the State on notice in

2014 of the following: LabCorp has a two-tier pricing structure; LabCorp

bills all third-party payors (private insurance companies, managed-care

companies, and government payors, including Medicaid) the same

Patient Fee Schedule rate; LabCorp accepts lower payments from

private insurers through negotiated arrangements; and LabCorp does

not consider these arrangements to be “discounts” within the meaning

of the billing regulations because the State’s own guidance suggests the

“discount” rules are focused only on “advertised” and “promotional” rates

available to “the general public.”

First came LabCorp’s records production. Within a year of

receiving the 2013 CID, LabCorp turned over some 250,000 pages of

2 Neither the 2013 CID nor a subsequent 2018 CID, which is discussed

further below, is in the record before us. The record contains certain documents

produced in response to the CIDs—such as internal LabCorp communications

and documents—as well as letters and discovery requests referencing the

CIDs. A reviewing court would be better positioned to understand these

materials if it could review for itself the CID language that prompted their

submission. As we recently emphasized, “[p]arties should . . . ensure that

materials they themselves recognize as essential to their dispute are included

in the record so that appellate courts can more readily perform their function

of reviewing trial-court judgments.” MV Transp., Inc. v. GDS Transp., LLC,

___ S.W.3d ___, 2026 WL 1261443, at *2 (Tex. May 8, 2026).

8

documents, including nearly seven years of billing data reflecting

specific tests performed, how other payors were billed for those tests,

and what those payors ultimately paid. The records also included

related communications, electronically stored information, and

compliance materials.

Then, in 2014, LabCorp met in person with OAG decisionmakers,

including the then-Deputy Chief of OAG’s Civil Medicaid Fraud

Division. In that meeting, LabCorp presented the details of its billing

practices and discussed how they fit with the State’s billing regulations.

Afterwards, LabCorp provided OAG with a slide-deck summary. The

slide deck highlights LabCorp’s efforts to cooperate with the State’s 2013

CID and its compliance practices generally, and it summarizes in detail

LabCorp’s relevant billing practices.

There is no transcription of what was said at this in-person

meeting, but all sides agree that the slide deck is a fair encapsulation of

the discussion. First is a slide setting out “Charging and Billing

Processes.” The slides highlighted that Medicaid is one of several payors

with whom LabCorp partners, along with hospitals, clinics, doctors,

patients, managed-care companies, and Medicare. LabCorp explained

that these payors are billed according to different practices. Within the

category of third-party payors, there are two billing arrangements:

“fee-for-service” and “capitated agreements.” The former are billed

according to a patient fee schedule, which is “negotiat[ed] by physicians

on behalf of their patients.” The slide added that “Medicaid billings are

based on government-set fee schedules and reimbursement rules.” By

contrast, capitated agreements “are billed ‘based on a negotiated

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monthly contractual rate.’ ” A later slide clarified that LabCorp applies

its “Usual & Customary” charge to all payors on the Patient Fee

Schedule, including Medicaid.

The slide deck then explained that “[l]ike most health care

providers, LabCorp distinguishes between charges and payments.”

(Emphases in original.). LabCorp elaborated that on the front end, it

“charges patients and all third-party payors the amounts set forth in the

Patient Fee Schedule.” But on the back end, it “may accept from some

third-party payors amounts based on” multiple factors, including

privately negotiated rates and “fee schedules set by Medicare or

Medicaid.” In other words, when a privately insured patient receives lab

services, LabCorp bills the insurer the full Patient Fee Schedule rate,

but LabCorp may accept a lower payment on that bill depending on

different considerations, including private contractual obligations.

Outside those scenarios, “LabCorp expects patients and their insurers

to pay the charges set forth in the Patient Fee Schedule.”

A few months later, in 2015, LabCorp prepared and submitted a

supplemental “white paper” to “outline[ ] LabCorp’s billing practices and

how those industry-standard practices comply with Texas Medicaid’s

billing requirements.” The white paper reiterated, consistent with the

slide deck, that there are situations in which LabCorp accepts payment

reductions from non-Medicaid payors. It explained:

LabCorp does sometimes agree to accept payments lower

than its usual and customary charge from certain

third-party payors. But Texas law does not require a

provider to charge Texas Medicaid what the provider

sometimes accepts as payment from others. Texas law

requires a “usual and customary charge,” and a “charge”

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and a “payment” are not the same thing. A “charge” is what

a provider bills, while a “payment” is what the provider is

ultimately paid.

(Emphases in original.). It further elaborated on how LabCorp’s two fee

schedules create differential pricing. In particular, clients (including

hospitals, clinics, and doctors) are billed the Client List Price, while

third-party payors, including Medicaid, get billed the same Patient Fee

Schedule.

The white paper expressly acknowledged Texas’s administrative

regulations regarding usual-and-customary charges, best pricing, and

discounts, but explained why LabCorp believed its practices comply fully

with each. LabCorp noted, “Texas law also requires that independent

laboratories like LabCorp offer to Texas Medicaid any discounted prices

that were advertised to the public or billed to the general public.”

However, “LabCorp neither advertises discounts to the public nor bills

discounted prices to the general public.” In this situation, “Texas law

requires only that LabCorp bill its ‘usual and customary’ charge to Texas

Medicaid.” That view draws support from the Manual, which (as

discussed above) twice describes the “discount” requirement in

connection with advertising and mandates that “[a]ny reduced,

discounted, free, or special fee advertised to the public also must be

offered to [Texas] Medicaid clients.” Similarly, the Provider Agreement

prohibits LabCorp from providing discounts or free services to the

“general public.” To be sure, the white paper acknowledged that the

“discount requirement is not a model of clarity.” But LabCorp

maintained that the regulations are “focused only [on] discounted prices

that are advertised to the public or billed to the general public. With no

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such discounts, LabCorp correctly bills its usual and customary charge

to Texas Medicaid.”

In 2018—three years after receiving the white paper and four

years after receiving extensive documentation responsive to the first

CID—the State issued a second CID. LabCorp again provided ample

documentation, and by 2019, it had produced over 800,000 pages of

documents. Among the documents produced in response to the second

CID were agreements between LabCorp and private health-insurance

companies, updated pricing policies, internal email exchanges regarding

pricing policies, and various fee schedules.

C

1

At no point after receiving the extensive documentation and

information laid out above did the State express any objection regarding

the lawfulness of LabCorp’s billing practices. The State never expressed

disapproval of LabCorp’s understanding of the regulations. It never

corrected LabCorp’s approach to billing or pricing, or its view of the term

“discounted.” It never disputed LabCorp’s position, grounded in the

Manual and Provider Agreement, that the “discount” requirement is

best understood as applying only to “advertised” and “promotional”

front-end pricing for “the general public,” not back-end negotiated

payment reductions for certain payors. The State never pushed back on

LabCorp’s billing structure that separates payors into categories. It

never contested LabCorp’s practice, like that of “most health care

providers,” which “distinguishes between charges and payments.”

(Emphases in original.). The record contains no documents—internal or

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external—doubting LabCorp’s compliance with the law, suggesting that

LabCorp’s certifications were improper, or suspecting LabCorp omitted

material information.

Instead, the State continued to pay LabCorp’s claims

uninterrupted, over the course of seven years, in amounts reaching

millions of dollars.

2

That changed in early 2021, when the State concluded that

LabCorp had been violating the billing regulations since 2005.

In January 2021, the State intervened in the pending NPT

Associates action and filed the operative petition. The State alleges that

LabCorp violated Texas’s administrative regulations, as set out above,

when it submitted reimbursement claims to Texas Medicaid at higher

rates than it was entitled to charge. Specifically, LabCorp allegedly

failed to offer to Texas Medicaid “discounts” that it had offered to

non-Medicaid payors, including Humana, Cigna, and United

HealthCare, for the same services. LabCorp further provided

“across-the-board” and “special price” discounts to certain health care

providers. “As a result of LabCorp’s conduct,” the State alleges, “the

State reimbursed LabCorp millions of dollars more for lab testing

services than it should have.”

According to the State, LabCorp’s repeated certifications that it

complied with Texas law on reimbursement claims and more than one

hundred Provider Agreements—as well as its failure to disclose its

unlawful conduct—constituted false statements, misrepresentations,

and omissions in violation of the Act. See TEX. HUM. RES. CODE

13

§ 36.002(1), (2), (4)(B). Specifically, the State asserts that LabCorp made

false statements or misrepresentations on reimbursement claims and

Provider Agreements in violation of Sections 36.002(1) and 36.002(4)(B),

and concealed or failed to disclose that it was not in compliance with

Texas laws and regulations in violation of Section 36.002(2). Id.

LabCorp’s conduct thereby permitted it to receive reimbursements to

which it was not entitled. 3

LabCorp filed a traditional motion for partial summary judgment,

arguing the State failed to establish the materiality of the allegedly

unlawful acts. According to LabCorp, any false statements,

misrepresentations, or omissions were not material because they had no

impact at all on the State’s payment decisions. The State knew of

LabCorp’s billing practices—specifically, its alleged failure to provide

discounts to Texas Medicaid—yet routinely paid each claim without

objection for seven years. The trial court granted the motion, denied the

State’s motion for reconsideration, and, after the remaining claims were

nonsuited, rendered judgment for LabCorp. The court of appeals

reversed and remanded, holding that (1) Section 36.002(2), the Act’s

omissions provision, did not require a showing of materiality; and

(2) there were material fact issues as to the materiality of LabCorp’s

alleged false statements and misrepresentations. 714 S.W.3d 677, 684,

688 (Tex. App.—Houston [1st Dist.] 2024).

We granted LabCorp’s petition for review.

3 The State initially alleged other misconduct, including anti-kickback

violations, but it nonsuited those claims, and they are not relevant to our

decision today.

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II

While no party has raised any jurisdictional concerns, we are

“duty-bound to determine [our] jurisdiction regardless of whether the

parties have questioned it.” In re City of Dallas, 501 S.W.3d 71, 73 (Tex.

2016).

In recent days, Justices of this Court have identified jurisdictional

concerns arising from qui tam actions brought under the Act. See

generally In re Novartis Pharms. Corp., 722 S.W.3d 720 (Tex. 2025)

(statement of Young and Sullivan, JJ., respecting denial of petition for

writ of mandamus). We recently considered a mandamus petition

involving a civil-remedy action brought by a private relator under the

Act without the State’s intervention. Id. The defendant argued that the

qui tam relator lacked constitutional standing because it was not injured

by the alleged unlawful acts. Id. at 721; see Heckman v. Williamson

County, 369 S.W.3d 137, 154 (Tex. 2012). We denied mandamus relief

without resolving that argument, though two Justices wrote separately

to urge that in an appropriate case, we “ought to take up this important

subject.” Novartis, 722 S.W.3d at 722 (statement of Young and Sullivan,

JJ.).

Here, by contrast, the State has intervened. The State seeks to

recoup a classic pocketbook injury—the loss of funds—caused by the

defendant’s allegedly unlawful conduct. See Busse v. S. Tex. Indep. Sch.

Dist., ___ S.W.3d ___, 2026 WL 1279764, at *4 (Tex. May 8, 2026)

(“Indeed, we have recognized the type of pocketbook injury complained

of here as a quintessential form of injury-in-fact sufficient to confer

standing.”). This is enough to assure us that “at least one named

15

plaintiff has standing,” and so we need not consider the qui tam relator’s

standing. Heckman, 369 S.W.3d at 152. We may proceed to the merits.

III

The first issue we must decide is whether Section 36.002(2) of the

Act imposes liability for only material concealments and omissions. As

its title implies, the statutory scheme concerns itself with the prevention

of fraud, a legal term of art related to but distinct from mere dishonesty.

Section 36.002(2) makes it unlawful to “knowingly conceal[ ] or fail[ ] to

disclose information that permits a person to receive a benefit or

payment.” TEX. HUM. RES. CODE § 36.002(2). Does that language refer to

any information at all, or only information important enough to impact

the State’s payment decision—information that actually matters? Text

and context require us to choose the latter.

A

1

We first restate the core principles that guide our analysis. As

always, the statutory text controls, City of San Antonio v. Realme, 731

S.W.3d 342, 349-50 (Tex. 2026), and “our primary objective is to give

effect to the Legislature’s intent as manifested in the enacted language,”

Am. Nat’l Ins. Co. v. Arce, 672 S.W.3d 347, 354 (Tex. 2023). Critical here

is the bedrock directive that statutory text “must always be read ‘in

context—not isolation.’ ” Pub. Util. Comm’n of Tex. v. Luminant Energy

Co., 691 S.W.3d 448, 460 (Tex. 2024) (quoting State v. Hollins, 620

S.W.3d 400, 407 (Tex. 2020)). Statutory text should not be read in a

vacuum. Instead, “[w]e ‘give meaning to every word in a statute,

harmonizing each provision’, while ‘consider[ing] the context and

16

framework of the entire statute’, in order to ‘meld its words into a

cohesive reflection of legislative intent.’ ” Id. (second alteration in

original) (footnote omitted) (first quoting Hogan v. Zoanni, 627 S.W.3d

163, 175 (Tex. 2021); and then quoting Cadena Comercial USA Corp. v.

Tex. Alcoholic Beverage Comm’n, 518 S.W.3d 318, 326 (Tex. 2017)).

Those principles have special force here, where we confront a

statute focused on the prevention of fraud—one of the oldest wrongs

known to our law. When statutes draw from areas of law with rich

common-law pedigrees, they “are to be interpreted and applied

according to their common-law meanings.” ANTONIN SCALIA & BRYAN A.

GARNER, READING LAW: THE INTERPRETATION OF LEGAL TEXTS 320

(describing this “age-old principle”). Courts often describe this concept

with an analogy to gardening: “a common-law term . . . when

transplanted into the statutory law, ‘brings the old soil with it.’ ” Paxton

v. Am. Oversight, 716 S.W.3d 535, 540 (Tex. 2025) (citation omitted); see

also United States v. Hansen, 599 U.S. 762, 778 (2023) (explaining that

when statutory text invokes a common-law term, the term brings the

“old soil” of its common-law origins). Accordingly, a statutory reference

to fraud generally must be construed “against the backdrop of common

law” fraud. Marino v. Lenoir, 526 S.W.3d 403, 409 (Tex. 2017).

We set aside that principle only when the Legislature has clearly

directed us to do so. Our precedents require “the Legislature’s clear

repudiation” in order to depart from a statutory term’s common-law

origins. Taylor v. Tolbert, 644 S.W.3d 637, 650 (Tex. 2022); see also City

of Houston v. Manning, 714 S.W.3d 592, 596 n.8 (Tex. 2025)

(“Abrogating common-law claims is disfavored and requires a clear

17

repugnance between the common law and statutory causes of action.”

(quoting Cash Am. Int’l, Inc. v. Bennett, 35 S.W.3d 12, 16 (Tex. 2000)));

cf. READING LAW at 318 (“[S]tatutes will not be interpreted as changing

the common law unless they effect the change with clarity.”). That is,

the text must “expressly or effectively foreclose[ ] the common law”

before we will forgo its consideration. Arce, 672 S.W.3d at 355. But

absent such an unmistakable signal, the duty to interpret statutory text

in context means we must consider the text’s traditional common-law

origin, meaning, and application. See Paxton, 716 S.W.3d at 540.

The principal dissent faults our reliance on common-law

principles in this context, arguing that because “[t]he common law

developed to govern and guide the private economy, not to govern and

guide the sovereign,” it exerts little interpretive force over a statutory

scheme that protects taxpayers and the State from misuse of public

funds. Post at 2 (Blacklock, C.J., dissenting). But courts frequently rely

on the common law to interpret federal statutes that implicate both

private and governmental interests—including criminal statutes

involving fraud against the government. As far back as 1952, for

example, the U.S. Supreme Court held that criminal intent is an

element of the crime of knowing conversion of government property,

despite the omission of “intent” from the statutory provision. Morissette

v. United States, 342 U.S. 246, 263 (1952). The Court reasoned that

“where Congress borrows terms of art”—like “knowing”—that have

“accumulated the legal tradition and meaning of centuries of practice, it

presumably knows and adopts the cluster of ideas that were attached to

each borrowed word in the body of learning from which it was taken.”

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Id. That is no less true merely because a statute’s subject matter

involves the protection of public funds.

Courts have done the same in more recent times. In Sekhar v.

United States, the U.S. Supreme Court held that attempting to compel

the Comptroller Office’s general counsel to recommend investment in a

fund was not “extortion”—i.e., “obtaining of property from another”—

under the Hobbs Act, 18 U.S.C. § 1951(b)(2). 570 U.S. 729, 731-33

(2013). In reaching this conclusion, the Court invoked the common-law

understanding of extortion. Id. at 733. The Court explained that, at

common law, the crime of extortion involved obtaining an item of value

from a victim—not, as alleged against Sekhar, mere coercion to act. Id.

at 733. Similarly, in Neder v. United States, the U.S. Supreme Court

relied on common-law fraud principles to hold that materiality is an

element of a “scheme to defraud” in the mail fraud, wire fraud, and bank

fraud context. 527 U.S. 1, 20 (1999). The Court imported the “well-

settled” common-law meaning of “fraud,” which “required a

misrepresentation or concealment of material fact.” Id. at 22. And in

United States v. Hansen, the Court held that a federal law prohibiting

the “encourage[ment] or induce[ment]” of illegal immigration carries a

mens rea requirement because “encourage” and “induce” bring in the old

soil of common-law solicitation and facilitation, including the intent

element. 599 U.S. at 778-79. Each of these cases implicated important

sovereign interests, and in each, the U.S. Supreme Court construed the

19

statutory scheme according to its common-law origins. We follow the

practice here. 4

2

We now discuss the origins of common-law fraud that form the

backdrop of the Act before concluding that no “clear repudiation” of the

common law is present here.

Fraud-based claims have roots in the English common law that

long predate our Nation’s founding. See 1 WILLIAM BLACKSTONE, AN

ANALYSIS OF THE LAWS OF ENGLAND 102 (5th ed. 1766). In the 18th

century, Sir William Blackstone described the legal principle that deeds

“must [not] be founded upon . . . fraud or collusion.” 2 WILLIAM

BLACKSTONE, THE COMMENTARIES ON THE LAWS OF ENGLAND 252 (4th ed.

1876). Our Nation’s earliest legal scholars, including Justice Story, have

described at length the common-law origins of fraud claims. 1 JOSEPH

STORY, COMMENTARIES ON EQUITY JURISPRUDENCE 213-14 (5th ed. 1849)

(“Fraud . . . includes all acts, omissions, and concealments, which

involve a breach of . . . duty, trust, or confidence, justly reposed, and are

injurious to another.”).

Early sources confirm that materiality has always been a critical

component of a viable common-law fraud claim. In the 17th century, Sir

4 Texas courts have done the same. See, e.g., Taylor, 644 S.W.3d at

649-51 (holding that Texas’s wiretap statute did not preclude an attorney from

asserting a common-law immunity defense because the statute did not

explicitly or impliedly repudiate common-law defenses); State v. Broadmoor

Austin Assocs., No. 15-25-00013-CV, 2026 WL 668284, at *4 (Tex. App.—15th

Dist. Mar. 10, 2026, no pet. h.) (holding that the Texas Facilities Commission

could not be sued for entering into a lease as the State’s agent because the

relevant statute did not abrogate the common-law principle that agents are not

liable for a principal’s contract).

20

Edward Coke observed that in order to be actionable, a perjurious

statement must be made “in a matter material[ ] to the issue, or cause

in question.” EDWARD COKE, THE THIRD PART OF THE INSTITUTES OF THE

LAWS OF ENGLAND 167 (1644). Similarly, Blackstone reiterated that

perjury is “a crime committed when a lawful oath is administered, in

some judicial proceeding, to a person who swears willfully, absolutely

and falsely, in a matter material to the issue or point in question.”

4 WILLIAM BLACKSTONE, COMMENTARIES ON THE LAWS OF ENGLAND 77

(1769). His Commentaries emphasize the materiality component: “The

perjury must also be . . . material to the question in dispute.” Id. at 78.

A century later, Oliver Wendell Holmes Jr., in his treatise The Common

Law, explained that “a fraudulent representation must be material” in

order to be actionable. OLIVER WENDELL HOLMES, THE COMMON LAW 326

(1881). He elaborated that “[i]f the belief would not naturally have had

such an effect, either in general or under the known circumstances of

the particular case, the fraud is immaterial.” Id.

Ample authority from the U.S. Supreme Court and our Court

agree that misrepresentations and false statements must be material in

order to create an actionable fraud claim. As early as 1813, the U.S.

Supreme Court explained that “[a] false representation, though no

breach of the contract, if material, avoids the policy on the ground of

fraud.” Livingston v. Md. Ins. Co., 11 U.S. 506, 535 (1813) (emphasis

added). In its early years, this Court confirmed the same. Indeed, our

earliest pronouncements define fraud with reference to “a material fact.”

See Mitchell v. Zimmerman, 4 Tex. 75, 75 (1849) (“Where a party

intentionally misrepresents a material fact or produces a false

21

impression by words or acts, in order to mislead or to obtain an undue

advantage, it is a case of manifest fraud.”); see also Henderson v. S.A. &

Mexican Gulf R.R. Co., 17 Tex. 560, 561 (1856) (“If a material

misrepresentation be made, although it be not embodied in the contract,

it is considered a constructive or legal fraud.”).

The same is true for fraud claims based on omissions. As the U.S.

Supreme Court observed in recent years, “[c]ommon-law fraud has long

encompassed certain misrepresentations by omission.” Universal Health

Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176, 187 (2016).

We, too, have framed fraud claims in terms of “material omissions.” E.g.,

Eagle Props., Ltd. v. Scharbauer, 807 S.W.2d 714, 723 (Tex. 1990). And

in discussing the elements of a claim of fraud by nondisclosure, we have

emphasized that the defendant must have “deliberately failed to disclose

material facts.” Bombardier Aerospace Corp. v. SPEP Aircraft Holdings,

LLC, 572 S.W.3d 213, 219-20 (Tex. 2019). 5

All this venerable jurisprudence led the U.S. Supreme Court to

conclude in more recent times that “the common law could not have

conceived of ‘fraud’ without proof of materiality.” Neder, 527 U.S. at 22.

The Restatement (Second) of Torts confirms the same. Section 538 of the

Restatement, “Materiality of Misrepresentation”—confirms the

5 See also, e.g., Ins. Co. of N. Am. v. Morris, 981 S.W.2d 667, 674 (Tex.

1998) (“[T]he jury’s finding of fraud can only be maintained if INA made an

affirmative misrepresentation or a material omission of a fact about the

investment product.”); Formosa Plastics Corp. USA v. Presidio Eng’rs &

Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998) (listing the elements of a

common-law fraud claim); Escobar, 579 U.S. at 190 (holding that “the implied

certification theory can be a basis for liability” under the False Claims Act

where the failure to disclose noncompliance with “material” requirements

makes representations “misleading half-truths”).

22

common-law rule that “[r]eliance upon a fraudulent misrepresentation

is not justifiable unless the matter misrepresented is material.”

RESTATEMENT (SECOND) OF TORTS § 538(1) (A.L.I. 1977). That

materiality requirement, the Restatement explains, means that “a

reasonable man would attach importance to its existence or

nonexistence in determining his choice of action in the transaction in

question.” Id. § 538(2)(a). These early Restatements are evidence of “the

general common law” understandings. Kansas v. Nebraska, 574 U.S.

445, 475 (Scalia, J., concurring in part and dissenting in part) (quoting

RESTATEMENT OF CONFLICT OF LAWS, Introduction, p. viii (A.L.I. 1934)).

B

In its efforts to combat fraud against the government, the Act—

which, we remind the reader, was previously known as the Texas

Medicaid Fraud Prevention Act, and now is called the Texas Health Care

Program Fraud Prevention Act—taps into the rich common-law

tradition discussed above. We therefore must interpret its text

consistent with “the backdrop of common law,” Marino, 526 S.W.3d at

409, unless there is a clear legislative directive otherwise, Taylor, 644

S.W.3d at 650. And because that backdrop includes and has always

required a showing of materiality, we must conclude that absent

legislative repudiation, Section 36.002(2) requires the government or

relator to prove that an omission was material. 6

6 In objecting to our approach, the principal dissent appears to place

significant weight on its observation that Section 36.002(2) never uses the word

“fraud.” Post at 10 (Blacklock, C.J., dissenting). But the substance of the

statutory scheme unmistakably addresses fraud against the government; as

we said in Xerox, it “target[s] fraud.” 555 S.W.3d at 525. As such, it is simply

23

In arguing that Section 36.002(2) rejects a materiality

requirement, the State makes two principal textual arguments. Neither

persuades us.

1

First, the State notes that nothing in Section 36.002(2) expressly

references materiality. But silence is not repudiation. We cannot “infer

from the absence of an express reference to materiality” that the

Legislature “intended to drop that element from” fraud claims brought

under the Act. Neder, 527 U.S. at 23; Taylor, 644 S.W.3d at 650. More is

required to repudiate the centuries-old principle that fraud claims carry

a materiality requirement. See Neder, 527 U.S. at 23.

Moreover, the Legislature’s reliance on the verb “permits”

suggests the Legislature did not disclaim a materiality requirement.

Under Section 36.002(2), a concealment or failure to disclose

information is only actionable if it “permits” an improper payment. See

TEX. HUM. RES. CODE § 36.002(2). That phrasing typically denotes the

concepts of “giv[ing] opportunity for” or “allow[ing].” See Permit, BLACK’S

LAW DICTIONARY (7th ed. 1999); Permit, OXFORD ENGLISH DICTIONARY

Texas’s version of the same type of fraud-prevention statute ubiquitous among

other States and the federal government, as the statutory title indicates. We

respectfully disagree with our dissenting colleagues’ view that the Legislature

twice decided to use “fraud prevention” in Chapter 36’s title as a mere

“promotional political slogan.” Post at 10 (Blacklock, C.J., dissenting). Our

Legislature itself has declared, in the Code Construction Act, that “[i]n

construing a statute, whether or not the statute is considered ambiguous on its

face, a court may consider among other matters the . . . title.” TEX. GOV’T CODE

§ 311.023(7). And it is long settled that “[t]he title and headings are

permissible indicators of meaning.” READING LAW at 221.

24

(2d ed. 1989). Inherent in the concept that A “permits” B is the

suggestion that A must carry some importance—or else it would not

“allow” B or create an “opportunity” for B to occur. See id. As a matter

of common usage, we struggle to see how an immaterial omission would

be understood to “permit” an improper payment.

2

The State and the principal dissent next argue that because other

parts of Section 36.002 expressly reference materiality,

Section 36.002(2)’s failure to do the same must imply the Legislature

rejected a materiality requirement for omissions. See TEX. HUM. RES.

CODE § 36.002(1), (4), (12). This argument has some force because, as a

general matter, when a statute uses a particular term in one provision,

its absence from another provision often (but not always) creates a

negative inference. E.g., Ineos USA, LLC v. Elmgren, 505 S.W.3d 555,

564 (Tex. 2016); Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 540

(Tex. 1981) (“[W]e believe every word excluded from a statute must also

be presumed to have been excluded for a purpose.”). But this

interpretive principle is not an inexorable rule, and for multiple reasons,

it does not carry the day here.

First, the principle is strongest when the two provisions are

otherwise identical, so as to make the omission conspicuous. See, e.g.,

Ineos USA, 505 S.W.3d at 564 (applying presumption when the first

statutory list included “a property owner, contractor, or subcontractor”

and the second included “an owner, a contractor, or a subcontractor or

an employee of a contractor or subcontractor” (emphasis added)). Such

parallelism is lacking here. Paragraph (1) describes “a false statement

25

or misrepresentation of a material fact,” TEX. HUM. RES. CODE

§ 36.002(1) (emphasis added), and Paragraph (4) is nearly identical, see

id. § 36.002(4). Paragraph (2), by contrast, uses a different and more

abstract structure: “knowingly conceals or fails to disclose information.”

Id. § 36.002(2). So does Paragraph (12): “a false record or statement

material to an obligation.” Id. § 36.002(12). If Paragraph (2) were

structured identically to a neighbor but for the missing word

“material”—e.g., “knowingly conceals or fails to disclose a fact”—the

negative inference would be stronger. See Ineos USA, 505 S.W.3d at 564.

But as we find the statute, the syntactical differences do not convince us

that the Legislature clearly repudiated the common-law materiality

requirement for omissions.

Moreover, our duty to “harmoniz[e]” Paragraph (2) with its

statutory neighbors strongly counsels in favor of finding a materiality

requirement. Luminant, 691 S.W.3d at 460; READING LAW at 167

(discussing the “whole-text canon”), 180 (discussing the “harmonious-

reading canon”). The State’s view would require us to accept that the

Legislature treated an affirmative but immaterial lie more leniently

than an equally immaterial omission. That is implausible. The statute,

after all, exists to “target[ ] fraud against the Texas Medicaid program,”

Xerox Corp., 555 S.W.3d at 525, and it would make little sense to

conclude, based on nothing more than a negative inference, that the

Legislature sought to condemn omissions more strenuously than

falsehoods.

On top of that, the ease with which an omission can be recast as

a misrepresentation—and vice versa—strongly suggests they should be

26

treated alike. The Definitions section of Administrative Code

Chapter 371 admits as much. It defines “[f]alse statement or

misrepresentation” as, among other things, “[a]ny statement or

representation that is . . . incomplete.” 1 TEX. ADMIN. CODE § 371.1(27).

In other words, an omission is a misrepresentation. The Provider

Agreement proclaims much the same: “Provider understands that

falsifying entries, concealment of a material fact, or pertinent omissions

may constitute fraud and may be prosecuted under applicable federal

and state law.” (Emphases added.). Under these circumstances, it is

implausible that the Legislature would treat omissions and

misrepresentations as differently as the State claims. And it is notable

that the Agreement insists that only “pertinent”—i.e., material—

omissions are unlawful.

We thus find little force in the State’s insistence in its briefing

that the categories are demarcated clearly and distinguished easily. All

of the alleged unlawful acts here—LabCorp’s false statements,

misrepresentations, and omissions—are bound up in the same

underlying conduct. For example, the State alleges that LabCorp made

misrepresentations by certifying it would comply with the law and

unlawful omissions by failing to disclose its unlawful conduct. The State

does not explain what meaningful difference separates the two.

Finally, for the reasons noted above, the verb “permits” naturally

bakes in some component of materiality. This substantially downgrades

27

any interpretive force that may have come from the Legislature’s failure

to include the word “material” in Paragraph (2). 7

***

For the above reasons, properly interpreting statutory text and

context against the backdrop of the common law, we conclude that

Section 36.002(2) requires a showing of materiality. A plaintiff bringing

a suit under the Act must demonstrate that a “conceal[ment] or fail[ure]

to disclose information” mattered to the State’s payment decision in

order for its Section 36.002(2) claim to be actionable. TEX. HUM. RES.

CODE § 36.002(2). Because the court of appeals concluded the opposite,

we must reverse its judgment.

IV

We next decide whether the trial court correctly granted LabCorp

summary judgment by concluding that any false statements,

misrepresentations, or omissions were immaterial as a matter of law.

The Act defines “[m]aterial” as “having a natural tendency to influence

or to be capable of influencing,” id. § 36.001(5-a), and we have previously

explained that “[a] representation is material if the representation was

important to the plaintiff in making a decision, such that a reasonable

person would be induced to act on and attach importance to the

representation in making the decision.” Barrow-Shaver Res. Co. v.

7 The U.S. Supreme Court’s interpretation of the analogous federal

False Claims Act further supports our view. In Escobar—which we discuss

further below—the Court observed that Section 3729(a)(1)(A) of the False

Claims Act requires materiality, despite that subsection’s omission of

“material” and the inclusion of the term elsewhere in Section 3729. 579 U.S. at

193 (citing 31 U.S.C. § 3729).

28

Carrizo Oil & Gas, Inc., 590 S.W.3d 471, 496 (Tex. 2019); see also

Escobar, 579 U.S. at 193 (“Under any understanding of the concept,

materiality ‘look[s] to the effect on the likely or actual behavior of the

recipient of the alleged misrepresentation.’ ” (alteration in original)

(quoting 26 RICHARD A. LORD, WILLISTON ON CONTRACTS § 69:12 (4th ed.

2003))).

On this record, we conclude that LabCorp’s alleged false

statements, misrepresentations, and omissions were not material. 8

A

We first must assess how this type of claim fits with the

summary-judgment standard.

1

LabCorp sought traditional summary judgment and thereby took

on a burden to establish that no genuine issue of material fact exists and

that it is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a.

8 Aside from a passing comment by the State, the parties have not

briefed whether the materiality requirement, properly understood,

incorporates an objective or subjective standard. We dispense with an

extensive discussion on that question today, because it is unnecessary to the

resolution of this case: LabCorp is entitled to judgment under either

formulation. For its part, the principal dissent would adopt a “subjective

causation” standard. Post at 9 (Blacklock, C.J., dissenting). In our view,

though, the definition of “material”—that is, “having a natural tendency to

influence or be capable of influencing”—uses language that typically implicates

an objective inquiry. It asks about the inherent capacity of the information, not

whether it happened to register with a particular official on a particular day.

Still, we note that in the False Claims Act context, at least one federal

appellate court has adopted a “holistic” approach blending subjective and

objective considerations. United States ex rel. Janssen v. Lawrence Mem’l

Hosp., 949 F.3d 533, 541 (10th Cir. 2020). In the absence of adversarial

presentation, we reserve further analysis on this issue for another day

following appropriate percolation in the lower courts.

29

We have long held that a “defendant as movant must disprove at least

one of the essential elements of the plaintiff’s causes of action to prevail

on summary judgment.” Elliott-Williams Co. v. Diaz, 9 S.W.3d 801, 803

(Tex. 1999). We have framed this as a requirement to “conclusively

negate[ ]” one element of the claim. Cathey v. Booth, 900 S.W.2d 339, 341

(Tex. 1995); see Renaissance Med. Found. v. Lugo, 719 S.W.3d 505, 517

n.19 (Tex. 2025) (noting that “it was the [defendant’s] burden to

conclusively disprove an essential element of” the plaintiff’s claim in its

motion for summary judgment); cf. Draughon v. Johnson, 631 S.W.3d

81, 87 (Tex. 2021) (discussing the conclusively-negate standard in the

context of affirmative defenses). A defendant’s showing is “conclusive

only if reasonable people could not differ in their conclusions.” City of

Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005).

When mapped onto the Act, this standard poses a conceptual

challenge. Section 36.002 requires a showing of materiality, and

LabCorp therefore must show that its alleged unlawful acts—false

statements, misrepresentations, and omissions regarding its compliance

with the law—were immaterial to the State’s payment decisions. But

how can one conclusively establish that alleged actions and inactions

were not material? Courts have always recognized the inherent

difficulty in proving a negative. E.g., State Farm Mut. Auto. Ins. Co. v.

Matlock, 462 S.W.2d 277, 278 (Tex. 1970) (mentioning “[t]he difficulty

in proving a negative”); 20801, Inc. v. Parker, 249 S.W.3d 392, 397 (Tex.

2008) (“As a practical matter, proving a negative is always difficult and

frequently impossible.”). The task is all the more daunting here, where

30

“materiality” is itself an abstract concept, generally inferred from

circumstantial conduct.

At the same time, there must be some way a defendant can

conclusively establish that the alleged unlawful acts did not have a

natural tendency to influence the State’s payment decisions. We hold

today that the defendant can do so by offering competent evidence of

undisputed facts that, when viewed as a whole, are incompatible with

materiality. Cf. TEX. HUM. RES. CODE § 36.001(5-a) (defining “material”

as “having a natural tendency to influence or to be capable of

influencing”).

When the defendant does so, the burden then “shifts to the

non-movant”—here, the State—to present evidence “disprov[ing] or

rais[ing] an issue of fact as to at least one of” the elements of the claim

or defense on which the movant seeks judgment: here, the materiality

of the unlawful acts. Amedisys, Inc. v. Kingwood Home Health Care,

LLC, 437 S.W.3d 507, 511 (Tex. 2014); Walker v. Harris, 924 S.W.2d 375,

377 (Tex. 1996). The State (or qui tam relator) must create a fact issue

with evidence, not arguments, sufficient to permit a reasonable

factfinder to conclude that the alleged unlawful acts had a natural

tendency to influence the State’s payment decision. TEX. HUM. RES.

CODE § 36.001(5-a); see Draughon, 631 S.W.3d at 87; Stanfield v.

Neubaum, 494 S.W.3d 90, 97 (Tex. 2016).

2

Our Court has not had occasion to elaborate on the types of

evidence that bear on this analysis, but we find substantial guidance in

31

our common-law precedents and our federal colleagues’ approach to the

substantially similar materiality standard in the False Claims Act.

One time-honored principle of fraud holds that a party may

“deprive himself of all right to relief” if he knows of allegedly fraudulent

conduct yet continues to deal with the other party. STORY, supra, at 230;

see id. at 230-31 (explaining that a party may “lose all title to legal and

equitable relief” if “he knew all the facts, and with such full information

he continued to deal with the party”). This is because if a party knows a

representation is false, “it cannot be said to influence his conduct.” Id.

at 230. We believe that principle informs Section 36.002’s materiality

analysis.

So too does the federal courts’ approach to the False Claims Act,

which defines “material” much the same as the Act: “having a natural

tendency to influence, or be capable of influencing, the payment or

receipt of money or property.” 31 U.S.C. § 3729(b)(4). We of course

should not invoke federal precedent to interpret Texas statutes without

first confirming that the underlying text is sufficiently analogous. See

Tex. Tech Univ. Health Scis. Ctr.–El Paso v. Flores, 709 S.W.3d 500,

511-12 (Tex. 2024) (Blacklock, J., concurring). And we noted in Xerox

that the Act, the federal FCA, and other “analogous federal and state

fraud-prevention acts,” “while similar in aim and tactic, employ

materially different language.” 555 S.W.3d at 535. However, when it

comes to defining materiality, the Act and the FCA statutory regimes

bear sufficient similarity to render federal caselaw on the FCA’s

materiality requirement persuasive.

32

In Escobar, the U.S. Supreme Court considered how courts should

“evaluat[e] materiality under” the FCA. 579 U.S. at 194-95. In its

unanimous decision, the Court observed that “if the Government pays a

particular claim in full despite its actual knowledge that certain

requirements were violated, that is very strong evidence that those

requirements are not material.” Id. at 195; see also D’Agostino v. ev3,

Inc., 845 F.3d 1, 7 (1st Cir. 2016) (“The fact that [the government] has

not denied reimbursement for [the device] in the wake of [the relator’s]

allegations casts serious doubt on the materiality of the fraudulent

representations that [the relator] alleges.”). Likewise, “if the

Government regularly pays a particular type of claim in full despite

actual knowledge that certain requirements were violated, and has

signaled no change in position, that is strong evidence that the

requirements are not material.” Escobar, 579 U.S. at 195. And the Court

emphatically rejected the “view of materiality” pressed by the federal

government whereby “any statutory, regulatory, or contractual violation

is material so long as the defendant knows that the Government would

be entitled to refuse payment were it aware of the violation.” Id. The

Court explained that “[t]he False Claims Act does not adopt such an

extraordinarily expansive view of liability.” Id. at 196. Neither does the

Act. 9

9 Other federal authority fleshes out Escobar’s insights and provides

further guidance on the materiality inquiry. See, e.g., Janssen, 949 F.3d at 542;

Abbott v. BP Expl. & Prod., Inc., 851 F.3d 384, 388 (5th Cir. 2017); United

States ex rel. McBride v. Halliburton Co., 848 F.3d 1027, 1033-34 (D.C. Cir.

2017); United States ex rel. Spay v. CVS Caremark Corp., 875 F.3d 746, 764-65

(3d Cir. 2017); United States ex rel. Harman v. Trinity Indus. Inc., 872 F.3d

645, 664-65 (5th Cir. 2017). The Fifth Circuit’s approach in Harman is

33

Drawing on that analysis, our own caselaw, and the background

common-law fraud principles discussed above, we see several categories

of evidence that a defendant might marshal to negate materiality. The

first, and most critical, involves what the government knew and how it

acted in light of that knowledge. We agree with Escobar: the

government’s continued payment despite its actual or imputed

knowledge of a violation is at least “very strong evidence” of

immateriality, and in some cases may be conclusive. Id. at 195. The

evidence in this category would include proof that the defendant

disclosed its practices to the government; that the government had

access to the relevant data; and that the government continued paying

claims, renewing contracts, and maintaining the defendant’s enrollment

in the program. The longer the period of knowing payment and the more

complete the government’s knowledge, the stronger the inference of

immateriality.

Relatedly, the authority of the state officials made aware of the

potential wrongdoing may bear on the materiality analysis. If the

defendant has disclosed the potential regulatory violation to low-level

government employees, who exert no meaningful control over policy or

enforcement, and who in turn take no action, the inference of

immateriality is weaker. But when the defendant’s actions are made

especially illustrative. That decision reversed a jury verdict and granted

judgment as a matter of law to the defendant on materiality grounds, where

“the ‘very strong evidence’ . . . of [the government’s] continued payment

remain[ed] unrebutted.” 872 F.3d at 665-70. As the Fifth Circuit noted,

“continued payment by the federal government after it learns of the alleged

fraud substantially increases the burden on the relator in establishing

materiality.” Id. at 663.

34

known to senior officials and other decisionmakers, their response is

more probative of materiality. See Harman, 872 F.3d at 665 (recognizing

“that the decision to continue approving and purchasing the product was

not made by a low-level bureaucrat, but rather by [the agency] itself,

and thus has special force”).

Another evidentiary category may be the government’s treatment

of similar violations by other providers. Again, we agree with Escobar:

whether the government “consistently refuses to pay claims” based on

similar noncompliance or instead “regularly pays” them informs

materiality. 579 U.S. at 195. If the State has a pattern of paying claims

from other providers who engage in the same practices, that suggests

the requirement at issue is immaterial to payment decisions. See id.

Other relevant considerations include whether the requirement

was a formal condition of payment, or merely a general regulatory

obligation. Violations of the former are more likely material; violations

of the latter are less so. See id. at 194. Was the violation substantial or

minor? Noncompliance that goes to the very essence of the bargain is

more likely material than “minor or insubstantial” noncompliance. Id.

And violations of a statute duly ratified by elected officials in the Texas

Legislature are more likely material than noncompliance with one of

thousands of ambiguous administrative pronouncements promulgated

by regulatory agencies. 10

10 Still other considerations may be relevant, and we do not purport

today to document them all. We trust that litigants and the lower courts,

drawing from our discussion in this opinion and the authorities we cite, will

appropriately assess other proper considerations in future cases.

35

Guided by these principles, we turn now to the record. We first

conclude that LabCorp offered sufficient evidence that the State’s

conduct was incompatible with materiality. We then conclude that the

State did not offer sufficient evidence to create a fact issue.

B

The crux of LabCorp’s summary-judgment motion is that the

State knew the relevant aspects of LabCorp’s billing practices in 2014,

yet continued to pay LabCorp’s claims without objection for seven years.

According to LabCorp, the State’s conduct over this extended period

demonstrates that any alleged false statements, misrepresentations,

and omissions regarding LabCorp’s legal compliance were not material

to the State’s payment decisions.

To support that argument, LabCorp offered several categories of

competent summary-judgment evidence. First, it provided two

declarations from LabCorp employees that further explained LabCorp’s

billing practices; confirmed that the State did not deny a claim on any

basis related to the billing regulations, including the “discount”

requirement; and confirmed that billing data produced to the State

reflects that United HealthCare “paid lower rates in certain

circumstances for a [LabCorp] test than the retail price” charged to

Medicaid. LabCorp further submitted the slide deck that formed the

basis of its discussion with OAG decisionmakers in 2014, and the 2015

white paper elaborating on that discussion, both of which we discussed

in detail above. See supra Part I.B. LabCorp also provided the trial court

with the State’s Objections and Responses to LabCorp’s Requests for

36

Admission and Interrogatories, which reference, among other things,

the billing data that LabCorp produced to the State in 2014.

The slide deck and white paper discuss LabCorp’s billing

practices in detail and highlight the exact practices that, seven years

later, would form the basis of the State’s fraud claim. To summarize the

above discussion: In 2014, the State knew that LabCorp maintains a

two-tier pricing structure; that LabCorp bills all third-party payors

(including Medicaid) the same Patient Fee Schedule rate; that LabCorp

accepts lower payments from private insurers through negotiated

arrangements; and that LabCorp does not consider these arrangements

to be “discounts” within the meaning of the billing regulations because

the State’s own guidance suggests the “discount” rules are focused only

on “advertised” rates available to “the general public.” That information

was presented to OAG decisionmakers, including the then-Deputy Chief

of OAG’s Civil Medicaid Fraud Division. LabCorp further established

with competent (and undisputed) evidence that the State continued to

pay each of LabCorp’s claims for years without objection.

As this evidence shows, the alleged infractions here turn not on

the purported violation of a statute enacted by the Legislature, but on

noncompliance with administrative billing regulations that address

“usual and customary fees” and “discounted” charges without defining

those terms. Invoking the Manual’s and Agreement’s guidance, LabCorp

argues that these regulations speak to rates “advertised to the public”

or “promotional offers provided to the general public.” LabCorp asserts,

and the State does not dispute, that it bills all third-party payors the

same usual and customary fees; any differential comes on the back end,

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when LabCorp accepts lower payments in certain cases that it does not

“advertise” and that are not available “to the general public.” Assuming

this conduct violates the billing regulations would mean that anytime a

provider agrees—in the name of charity—to accept a lower payment

from an indigent uninsured customer, that provider is forevermore

locked into that one-off charity rate for millions of Medicaid claims. If

that view is the law, the State could have said so long ago. Echoing

Escobar, we believe that the alleged violation of unclear general

administrative regulations, left unchallenged for many years, casts

substantial doubt on materiality. 579 U.S. at 195-96.

Viewing this evidence as a whole, LabCorp carried its initial

summary-judgment burden of conclusively establishing that its alleged

unlawful acts did not have a “tendency to influence or to be capable of

influencing” the State’s payment decision. TEX. HUM. RES. CODE

§ 36.001(5-a).

C

We turn now to the State’s burden “to present evidence

“disprov[ing] or rais[ing] an issue of fact as to at least one of” the

elements of the claim or defense on which LabCorp seeks judgment:

materiality. Amedisys, Inc., 437 S.W.3d at 511. As we read the record,

the State’s summary-judgment showing consisted of several forms of

evidence and related arguments. We discuss each.

First, in its summary-judgment motion and in this Court, the

State argues that LabCorp’s disclosures do not negate materiality

because LabCorp did not expressly confess in the 2014 presentation and

2015 white paper that it was violating Texas law. We disagree. LabCorp

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told the State of its practices, explained its view that its practices were

lawful under the best reading of the applicable regulations, and opened

its relevant records to the State’s inspection. See supra Part I.B.

LabCorp bemoaned to OAG decisionmakers that the billing regulations

are “not a model of clarity,” and it put forward a good-faith and plainly

plausible interpretation of those regulations. As we read the record, the

State was made aware of the critical conduct it now claims is illegal,

including violations of the regulations governing usual and customary

charges, best pricing, and discounts. It is conduct that matters, not the

legal conclusion a party attaches to it.

Second, and relatedly, the State argues that LabCorp never fully

disclosed the extent of its allegedly unlawful conduct. The State

acknowledges the evidence LabCorp proffered, but suggests it did not

actually put the State on notice of all of LabCorp’s alleged regulatory

violations. The State dismisses LabCorp’s disclosures as “deliberately

muddy” and claims that nothing LabCorp provided allowed the State to

determine whether LabCorp actually complied with the billing

regulations.

But the State does not meaningfully dispute that it knew about

LabCorp’s two-tier pricing system and that LabCorp accepts lower

payments from some payors pursuant to various considerations,

including contractual obligations. Nor could it: LabCorp expressly said

as much in the 2014 presentation and the 2015 white paper. That the

State did not know which private insurers remitted individualized

payments does not matter. The State’s core theory of liability turns on

the same practices LabCorp disclosed. The State did not deny a claim on

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the basis of fraud, nor express any complaint regarding those practices.

These facts are incompatible with materiality.

Notably, the State does not base its materiality theory on the

dollar value of the alleged wrongdoing. This is not a case where the State

knew of violations of the billing regulations but reasonably believed they

were de minimis, only to later uncover the full extent of wrongdoing and

realize with surprise that its financial losses were substantial. The

magnitude of a violation is certainly a proper consideration in the

materiality analysis. See Escobar, 579 U.S. at 194. Here, while the State

may not have known the full details of which payments LabCorp

accepted from which payors, nothing in the record suggests the State

reasonably believed that the practices it now labels unlawful carried

insignificant monetary value.

Third, the State highlights in this Court that compliance with the

billing regulations is a condition of payment. Similarly, it argued at

summary judgment that as a matter of law, because noncompliance with

the Provider Agreement is a basis to deny a claim, LabCorp’s violations

are necessarily material. The U.S. Supreme Court rejected that exact

argument in connection with the federal FCA’s materiality requirement,

and we do the same here. Escobar, 579 U.S. at 181. In Escobar, the

federal government urged, just as the State does here, that “any

statutory, regulatory, or contractual violation is material so long as the

defendant knows that the Government would be entitled to refuse

payment were it aware of the violation.” Id. at 195. Yet the unanimous

U.S. Supreme Court explained that “even when a requirement is

expressly designated a condition of payment, not every violation of such

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a requirement gives rise to liability.” Id. at 181. We agree. The Act “does

not adopt such an extraordinarily expansive view of liability.” Id. at 196.

Fourth, the State’s summary-judgment motion wrongly conflates

evidence of a violation with evidence of materiality. For example, the

State’s summary-judgment evidence includes LabCorp’s Facility

Participation Agreement with United HealthCare, and other evidence

showing that LabCorp offered “fee-matching” to a former LabCorp

account. But evidence of an alleged regulatory violation is not evidence

of materiality. As discussed further below, it neither creates a fact issue

as to LabCorp’s awareness of the purportedly unlawful conduct, nor

explains why the State continued to pay LabCorp’s claims. Likewise, the

State’s summary-judgment evidence about a different State’s settlement

with LabCorp and various proposed amendments to federal law do not

bear on whether these alleged unlawful acts mattered to the State.

Finally, we emphasize what the State did not show. The State’s

summary-judgment evidence does not explain why the State continued

to pay LabCorp’s claims, if not because the alleged unlawful acts were

immaterial. For example, the evidence does not show the State

continued paying because it was concerned about disruption of patient

care. And the evidence does not point to any enforcement action by the

State or any disapproval of LabCorp’s billing practices after it conducted

its investigations. Finally, to the extent the State falls back on

arguments about the “muddy” nature of LabCorp’s disclosures, such

“arguments are not evidence,” Aerotek, Inc. v. Boyd, 624 S.W.3d 199, 208

(Tex. 2021), and cannot create a fact issue precluding summary

judgment. See Walker, 924 S.W.2d at 377 (“After the defendant produces

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evidence entitling it to summary judgment, the burden shifts to the

plaintiff to present evidence creating a fact issue.” (emphasis added)). 11

D

Before concluding, we pause to offer some words of caution about

today’s decision.

First, we do not hold—in fact, we expressly disclaim—that

anytime the State becomes aware of a potential regulatory violation, it

must immediately cease payment, or else forevermore forfeit a claim

under the Act. To the contrary, the Administrative Code allows the State

to continue payment while disapproving of the practice at issue by

levying any of many administrative enforcement actions, including

“prepayment review of all claims or certain specific claims,” 1 TEX.

ADMIN. CODE § 371.1701(c)(4), “requiring submission of additional

documentation or justification for a claim . . . as a condition precedent

to payment of the claim,” id. § 371.1701(c)(7), or “post-payment review

of all claims or certain specific claims or services of a person after

payment,” id. § 371.1701(c)(5). Other remedies include transferring the

company to a probationary contract, id. § 371.1701(c)(1), or a

requirement for prior authorization of certain services, id.

§ 371.1701(c)(3). Still other prepayment and postpayment remedies may

be available, and we do not purport to document them all. See generally

11 The State argues that a second CID it issued to LabCorp in 2018

reflects suspicions about the lawfulness of LabCorp’s conduct. In the abstract,

the government’s decision to ask for information may inform the materiality of

the underlying subject matter. But on this record, follow-up requests for more

details do not overcome the undisputed evidence that the State knew in 2014

about what it now calls obvious regulatory violations and offered no objection

until 2021.

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id. § 371.1701. We merely note that in true cases of material misconduct,

we are confident that the State has ample tools to protect its interests,

alert the offending party, and preserve its ability to seek redress under

the Act and other statutory schemes.

We likewise emphasize that the State is entitled to a reasonable

time to investigate suspected potential regulatory violations. As a

federal court has observed as to the False Claims Act, “[t]he Government

must be given time to investigate and determine whether the

accusations have merit and whether to intervene in the action.” United

States ex rel. Longo v. Wheeling Hosp., Inc., No. 5:19-CV-192, 2019 WL

4478843, at *7 (N.D. W. Va. Sept. 18, 2019). The same is true here—but

the State must perform any investigation with diligence, and it must

make regulated parties aware of its concerns. At some point, following

extended government inaction, there must come a time when a court

necessarily concludes that the alleged misconduct at issue is not

material. Cf. Escobar, 579 U.S. at 195.

Finally, nothing in our opinion today should be misconstrued to

suggest that estoppel runs against the government in this context. City

of Hutchins v. Prasifka, 450 S.W.2d 829, 835 (Tex. 1970) (“[W]hen a unit

of government is exercising its governmental powers, it is not subject to

estoppel.”). And we agree with our dissenting colleagues that “HHSC

employees do not have the power to authorize LabCorp to overcharge

the State of Texas.” Post at 4 (Blacklock, C.J., dissenting). Nothing in

our decision today constrains the State’s ability to enforce actual

regulatory violations going forward.

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V

For the foregoing reasons, we reverse the court of appeals’

judgment and reinstate the trial court’s judgment.

Kyle D. Hawkins

Justice

OPINION DELIVERED: June 19, 2026

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