On January 13, 2023, the Supreme Court of the United States granted a writ of certiorari in two cases, United States ex rel. Schutte v. SuperValu Inc., 9 F.4th 455 (7th Cir. 2021) and United States ex rel. Proctor v. Safeway, Inc., 70 F.4th 649 (7th Cir. 2022), weighing the issue of whether a defendant acts “knowingly” in violation of the False Claims Act (“FCA”) if he relied on an objectively reasonable interpretation of an ambiguous law. This issue goes to the heart of FCA liability in cases involving “legal falsity.”
These cases will also call into question whether a defendant’s subjective intent matters when evaluating FCA liability. To be liable under the FCA, a defendant must act “knowingly,” which means the defendant “(i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the information.” 31 U.S.C. § 3729(b). Proof of specific intent to defraud is not required under the FCA. However, because FCA liability is frequently based upon an alleged violation of complex laws and convoluted regulations, defendants often argue that they did not act “knowingly” as their subjective interpretation of the requirements was reasonable.
Currently, a circuit split has developed on the issue of “objective reasonableness,” and whether an objectively reasonable interpretation of a regulation, even if incorrect, can shield a defendant from FCA liability. In...
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