# Lab. Corp. of Am. Holdings v. State

Supreme Court of Texas, No. 25-0127

**Lab. Corp. of Am. Holdings v. State, No. 25-0127 (Tex. June 19, 2026). Holding: Section 36.002(2) of the Act imposes liability only for concealments and omissions that are material to the State's payment decision, and on this record no alleged omission, false statement, or misrepresentation was material, so LabCorp was entitled to summary judgment.**

Practice areas: fraud, administrative law

## Key issues

- The Texas Health Care Program Fraud Prevention Act imposes liability for an omission only if the omission is material to the government's payment decision, because the Act incorporates the common-law materiality requirement for fraud.
- LabCorp's alleged omissions and misstatements were immaterial as a matter of law because it disclosed its billing practices to the State in 2014 and the State kept paying its claims for seven years without objection, so summary judgment for LabCorp was reinstated.

## Factual History
The State of Texas says Laboratory Corporation of America Holdings (LabCorp), a lab testing company and Texas Medicaid provider, violated Medicaid billing regulations by not giving Medicaid the same pricing and discounts it gave other payors, and made false statements, misrepresentations, and omissions about its compliance (Opinion, PDF pp. 1-2). The regulations at issue are an Administrative Code provision on charges exceeding the "usual and customary" fee, one on charges that were "discounted" for other payors, a Provider Agreement clause on granting Medicaid recipients the discounts offered to the public, and a Provider Manual that ties "discounted" fees to advertising (Opinion, PDF pp. 5-7). In 2013 NPT Associates sued LabCorp as a qui tam relator, and the Attorney General's investigation led LabCorp to produce about 250,000 pages of records and billing data and, in 2014, to meet with the Attorney General's Medicaid fraud decisionmakers and give them a slide deck describing its two-tier pricing and its view that the regulations' "discount" rules reach only advertised rates (Opinion, PDF pp. 7-9). The State kept paying LabCorp's claims without objection through 2021 (Opinion, PDF pp. 2-3, 13). In January 2021 the State intervened and alleged that LabCorp had violated the billing regulations since 2005 and that its claim certifications and more than one hundred Provider Agreements were false statements, misrepresentations, and omissions (Opinion, PDF pp. 13-14).

## Procedural History
LabCorp moved for partial summary judgment on the ground that the State could not establish materiality; the trial court granted the motion, denied reconsideration, and after the remaining claims were nonsuited rendered judgment for LabCorp (Opinion, PDF p. 14). The First Court of Appeals (Houston) reversed and remanded, holding that Section 36.002(2) of the Human Resources Code, the omissions provision, has no materiality requirement and that fact issues existed on the materiality of the alleged false statements and misrepresentations (Opinion, PDF p. 14). The vehicle in this Court is a petition for review, which LabCorp filed; the Court granted it in January 2026, heard argument on February 12, 2026, and decided the case on June 19, 2026 (Opinion, PDF pp. 1, 14, 44). Because the State had intervened and has a pocketbook injury, the Court did not need to decide whether the qui tam relator has standing (Opinion, PDF pp. 15-16).

## Issues Presented
The Court framed two issues (Opinion, PDF pp. 2, 16, 28):
1. Whether Section 36.002(2) of the Texas Medicaid Fraud Prevention Act (now the Texas Health Care Program Fraud Prevention Act) imposes liability only for concealments and omissions that are material to the State's payment decision.
2. Whether the trial court correctly granted LabCorp summary judgment because any false statements, misrepresentations, or omissions were immaterial as a matter of law.

## Standard(s) of Review
The Court did not name a standard of review. It construed the statute from its text in context (Opinion, PDF p. 16), applied the Act's definition of "material" and the materiality considerations it drew from *Escobar* and *Xerox* (Opinion, PDF pp. 28, 32), and said that once the movant carries its summary-judgment burden the nonmovant must present evidence raising a fact issue (Opinion, PDF pp. 38, 42).

## Legal Arguments
**Whether Section 36.002(2) requires materiality.**

**LabCorp (Petitioner):** Subsection (2) limits liability to omissions that matter to the State's payment decisions, because materiality has been a requirement of fraud at common law for centuries and the Act does not override it; the subsection reaches only conduct that "permits" an improper payment, which an immaterial omission cannot do; the State took that position in the *Xerox* case; and it makes no sense to prohibit immaterial omissions while prohibiting only material misrepresentations (Brief on the Merits (Petitioner), PDF p. 29). At minimum the subsection is ambiguous, and the rule of lenity calls for requiring proof of materiality (Brief on the Merits (Petitioner), PDF pp. 29-30).

**State and NPT (Respondents):** Plain text, context, and statutory history show the Legislature did not intend Subsection (2) to require materiality, because the word "material" does not appear in it as it does in other subsections of Section 36.002; a common-law materiality requirement should not be implied from "permits," the rule of lenity does not apply, and reading the text as written creates no absurd result (Brief on the Merits (Respondent), PDF pp. 30-31).

**LabCorp (reply):** The State cannot dispute that common-law fraud requires materiality, so it prevails only by showing the Legislature clearly repudiated that rule, and silence on materiality does not; the State has also changed its reading of "permits" from the one it gave this Court before, and requiring causation does not foreclose materiality (Reply Brief (Petitioner), PDF pp. 7-8).

**Whether summary judgment was proper on materiality.**

**LabCorp (Petitioner):** The State cannot prove materiality when, after learning of LabCorp's billing practices, it kept paying its claims for about seven years without complaint, and it offered no evidence that the alleged false statements affected its payment decisions (Brief on the Merits (Petitioner), PDF p. 30). In reply, LabCorp adds that the State's knowing continued payment is "very strong evidence" of immateriality and that the State submitted no evidence of materiality (Reply Brief (Petitioner), PDF p. 8).

**State and NPT (Respondents):** LabCorp's presentation and white paper obfuscate rather than reveal the conduct that violates the best-price regulation, and continued payment under Medicaid's "pay-and-chase" system is not dispositive on its own, so at least a fact issue on materiality remains (Brief on the Merits (Respondent), PDF p. 31).

## Stated Reasons the Court Should Take the Case
LabCorp argued that the court of appeals resolved questions of first impression in a way that departs from the plain statutory text, ignores this Court's prior decisions, and would undermine Texas's Medicaid program (Brief on the Merits (Petitioner), PDF p. 13).

## Oral Argument

- **But-for causation.** Asked whether subsection two lacks a materiality term, the State's counsel said "permits" imposes a but-for causation requirement, not a materiality requirement. (Oral Argument, 0:19:14)
- **Materiality as common law.** Asked why materiality language elsewhere in the Act is not enough, LabCorp's counsel said it at most implies materiality is omitted here, which does not repudiate the common law. (Oral Argument, 0:02:28; 0:04:10)
- **Immaterial omission.** Asked whether an immaterial omission can cause an unauthorized payment, the State's counsel called it metaphysical but said but-for causation would satisfy materiality. (Oral Argument, 0:27:19)
- **Meaning of "permits."** Asked if a synonym such as "allows" would change the argument, LabCorp's counsel said no; any such word would not clearly repudiate the common law. (Oral Argument, 0:06:49; 0:09:05)
- **Middle initial.** Asked about omitting a middle initial on a claim form, the State's counsel agreed that would not lead to an unauthorized payment. (Oral Argument, 0:11:12; 0:18:20)
- **Misleading disclosure.** Asked whether anything in the 2014 meeting or 2015 white paper was false, the State's counsel said it was probably true but misleading for omitting lower prices given to others. (Oral Argument, 0:31:43)
- **Standing concern.** A Justice asked about standing concerns flagged earlier; LabCorp's counsel saw no clear angle, and the State's counsel said the State intervened and so has standing. (Oral Argument, 0:16:00; 0:30:20)
- **Disclosure on rebuttal.** Asked how it conclusively showed non-materiality, LabCorp's counsel said it disclosed the challenged practices, pointing to supplemental clerk's record 63, the white paper. (Oral Argument, 0:39:58; 0:43:44)

## Practice Area Tags
fraud, administrative-law

## Procedural Posture/Vehicle
Petition for review from the First Court of Appeals (Houston) after a summary judgment for the defendant; argued February 12, 2026, and decided June 19, 2026 (Opinion, PDF pp. 1, 14, 44).

## Amicus Involvement
- [The Chamber of Commerce of the United States of America](https://search.txcourts.gov/SearchMedia.aspx?MediaVersionID=036873c9-17b4-4440-8318-c92aaeea1c11&coa=cossup&DT=BRIEFS&MediaID=2fdda00d-0b35-4aff-a6e8-a7c291e5f72d) supports LabCorp: the court of appeals' reading threatens Medicaid providers with ruinous sanctions for minor lapses the State already knew about.
- [Pharmaceutical Research and Manufacturers of America](https://search.txcourts.gov/SearchMedia.aspx?MediaVersionID=a27b5c30-eb70-40dc-b88c-0f66b4f318f8&coa=cossup&DT=BRIEFS&MediaID=c0bd4cf4-eb9c-4a73-8b3d-f9b8766441a0) supports LabCorp: Texas courts should keep applying settled legal principles to the Act, given its members' stake in Medicaid.

## Holding
Section 36.002(2) of the Act imposes liability only for concealments and omissions that are material to the State's payment decision, and on this record no alleged omission, false statement, or misrepresentation was material, so LabCorp was entitled to summary judgment (Opinion, PDF pp. 2-3, 28, 38, 44).

## Court's Reasoning
**Common-law fraud requires materiality, and the Act did not repudiate that.** Because the Act is aimed at fraud, a legal term of art with a long common-law pedigree, the Court read it against that backdrop and required a clear statutory repudiation before dropping a common-law element (Opinion, PDF pp. 16-20). Materiality has long been part of common-law fraud, including fraud by omission (Opinion, PDF pp. 20-23). The Chief Justice's dissent argues that the common law developed to govern the private economy, not the sovereign (Blacklock, C.J., dissenting, PDF p. 2).

**The State's textual arguments fail.** The absence of the word "material" from Subsection (2) is silence, not repudiation, and its verb "permits" suggests importance, because an immaterial omission would not "permit" an improper payment (Opinion, PDF pp. 24-25). The negative inference from other paragraphs that use "material" is weak because those paragraphs are structured differently, harmonizing the paragraphs favors materiality, and it would be implausible for the Legislature to treat an immaterial lie more leniently than an immaterial omission (Opinion, PDF pp. 25-27). The Court also noted that the Administrative Code treats an incomplete statement as a misrepresentation (Opinion, PDF p. 27).

**LabCorp conclusively showed immateriality.** The materiality considerations include how decisionmakers responded after learning of the violation, how the government treats similar violations by other providers, whether the requirement is a formal condition of payment, and whether the violation is substantial (Opinion, PDF p. 35). LabCorp's declarations, records, slide deck, and white paper showed that the State knew the relevant billing practices in 2014 and kept paying for seven years without objection, and the Court said it believed a violation of unclear general regulations left unchallenged for years casts substantial doubt on materiality (Opinion, PDF pp. 36-38). The State did not raise a fact issue: it was on notice of the conduct itself, not just the legal label LabCorp gave it; it did not rest its theory on the dollar value; the condition-of-payment point does not by itself establish materiality; and evidence of a violation is not evidence of materiality (Opinion, PDF pp. 39-41).

**Limits of the decision.** The Court disclaimed any rule that the State must stop paying the moment it learns of a possible violation, noted the Administrative Code lets it keep paying while using prepayment or post-payment review, and said the State is entitled to a reasonable time to investigate but must act with diligence (Opinion, PDF pp. 42-43).

## Disposition
Court of appeals' judgment reversed and the trial court's summary judgment for LabCorp reinstated (Opinion, PDF p. 44).

## Vote Breakdown
Justice Hawkins delivered the opinion of the Court, joined by Justices Lehrmann, Devine, Bland, Huddle, Young, and Sullivan (Opinion, PDF p. 1). Chief Justice Blacklock, joined by Justice Busby, dissented, reading the text as imposing materiality in two nearby provisions but not the one at issue (Blacklock, C.J., dissenting, PDF p. 1). Justice Busby also dissented separately, joining the Chief Justice's reasoning, agreeing the result does not bind the State to pay fraudulent claims in the future, and stating that the Court does not endorse LabCorp's reading of the billing regulations (Busby, J., dissenting, PDF pp. 1-2).


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Source: The SCOTX Report, https://scotxreport.com/cases/25-0127. AI-generated summary of the Court's opinion, orders and the parties' briefs, with pin cites to the page of each document; verify against the Court's own documents at search.txcourts.gov.