Key Points

• Supreme Court eliminates FCA scienter defense based solely upon an objectively reasonable interpretation of ambiguous law when defendant has subjective knowledge that claim is false.
• Supreme Court ruled that the FCA’s scienter element applied to defendant’s subjective beliefs at the time defendant submitted claims.
• Other related FCA defenses should remain in effect, such that defendants have valid FCA defenses if there is objective ambiguity and there is a genuine subjective belief in the validity of the claim; if defendant has an honest opinion as to the accuracy of the claim; or acts with mere negligence or inadvertence.
• In light of the Court’s rejection of the reasonable interpretation of ambiguous law doctrine, companies can reduce potential exposure to liability by ensuring that they investigate employee complaints, develop processes to ensure that their practices conform to law, review relevant industry publications or billing practices to confirm entitlement, and making periodic inquiries of government officials when confronting ambiguous guidance because courts have found that those who engage in these practices do not act with substantial and unjustifiable risk that their claims are false in violation of the FCA.

Before the Supreme Court’s ruling in U.S. ex rel. Schutte v. SuperValu Inc.,¹ seven circuit courts of appeal had ruled that the defendant was innocent under the False Claims Act (FCA) if the defendant could show that objectively: (i) the...

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