The Fourth Circuit, evenly divided while sitting en banc, recently unwound a panel decision finding that Safeco’s “reckless disregard” standard applies to the False Claims Act (“FCA”).
In January 2022, a panel of the Fourth Circuit held, joining every other circuit to have considered the issue, that when allegations of false claims are premised on violations of ambiguous laws or regulations, the defendant’s scienter is properly assessed using the standard for “reckless disregard” established by the Supreme Court in Safeco Insurance Company of America v. Burr, 551 U.S. 47 (2007). Under Safeco, courts ask whether a defendant’s interpretation of the ambiguous law or regulation at issue was objectively reasonable and whether authoritative guidance might have warned the defendant away from that interpretation. As discussed here, applying Safeco, the panel affirmed the district court’s dismissal of the case.
In May 2022, at the request of the relator and the urging of the Department of Justice and Taxpayers Against Fraud Education Fund, the Fourth Circuit granted rehearing en banc. The defendant drug manufacturer argued that the panel’s decision was correct because “when a defendant acts consistent with an objectively reasonable interpretation of an ambiguous legal obligation, and no authoritative guidance warns it away from that conduct, ‘it would defy history and current thinking to treat [that] defendant . . . as a knowing or reckless violator.’” DOJ filed an amicus brief in...
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