(Reuters) - A U.S. appeals court on Friday deadlocked on whether a party can be held liable for defrauding the government if it can point to an "objectively reasonable" interpretation of the law to support its conduct, leaving in place a lower court order dismissing a $680 million whistleblower lawsuit against a company that is now part of AbbVie Inc.
The en banc 4th U.S. Circuit Court of Appeals is the latest appeals court to consider the "objectively reasonable" standard, which critics, including the U.S. Justice Department, have said allows knowing fraud to go unpunished.
But unlike the 3rd, 7th, 8th, 9th and D.C. Circuits, which have adopted the standard, the evenly split 4th Circuit's ruling leaves the issue unresolved. It affirmed, by default, U.S. District Judge Ellen Hollander's 2020 dismissal of the case against Forest Laboratories, but vacated a 2-1 panel ruling in January that had upheld her reasoning.
Lawyers for Deborah Sheldon, the widow of former Forest sales manager Troy Sheldon pursuing the whistleblower case on his behalf, and for AbbVie did not immediately respond to requests for comment.
Hollander dismissed Sheldon's 2014 lawsuit after concluding that it did not matter whether Forest actually intended to defraud Medicaid by reporting inaccurate drug price data, as Sheldon claimed, because the company's conduct was legal under an "objectively reasonable" interpretation of the law at the time.
She cited the U.S. Supreme Court's 2007 ruling in Safeco v....
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