The U.S. Supreme Court recently announced its ruling in United States Ex Rel Schutte v. SuperValu Inc., a case that will impact how corporations will defend themselves in False Claims Act (“FCA”) litigation. In a win for the government, the Court held that the knowledge element of the FCA concerns what a defendant knew at the time it submitted a claim, not what someone could have objectively known after-the-fact.
The FCA permits private parties to bring lawsuits in the name of the United States against those who they believe have defrauded the federal government. It imposes liability on anyone who “knowingly” submits a “false” claim to the government. For businesses facing draconian FCA liability, it is common to challenge that “knowledge” element of an FCA claim. Specifically, defendants often argue that—due to the sheer complexity of federal statutes and regulations—their interpretation of the law that is being advanced in litigation is objectively reasonable and, thus, their actions do not meet the knowledge requirement in the statute. Defendants have argued that their “objectively reasonable” conduct defeats the knowledge requirement, regardless of their subjective intent. The government, for its part, has long contended that a defendant’s subjective knowledge should be controlling.
Before the Supreme Court’s latest decision, the circuits were split on how to interpret the knowledge requirement. In SuperValu, the Seventh Circuit had held that subjective intent was...
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