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

> Texas Supreme Court · June 19, 2026

URL: https://www.frixlaw.com/law-library/cases/11345118

## Case

- **Court:** Texas Supreme Court
- **Decided:** June 19, 2026
- **Precedential status:** Published
- **Opinion:** Opinion of the court by Hawkins
- **Judges:** Hawkins; Lehrmann; Devine; Bland; Huddle; Young; Sullivan; Blacklock; Busby; Busby
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/11345118

## How later opinions describe it (automated extraction)

- 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”

## Opinion text

Supreme Court of Texas
══════════
No. 25-0127
══════════

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 . . . .

5
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

9
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”

10
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

11
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

12
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.

14
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.”

18
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,

37
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

38
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

39
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

40
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

41
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.

42
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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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/11345118. Public record. Not legal advice.