The Supreme Court recently heard oral argument in the appeal of two False Claims Act (FCA) cases from the Seventh Circuit that called into question the level of intent, or scienter, required to establish corporate liability under the FCA for "knowingly" overbilling the government for goods or services. The Court's eventual decision may have widespread implications in healthcare, government contracting, and other industries because it may impact how a company can defend against an FCA claim by arguing that its conduct was objectively reasonable, even if, subjectively, the company or its employees may have intended to violate the FCA or did not otherwise take adequate steps to ensure that their conduct was consistent with the statute.
Both cases, United States ex. rel. Schutte v. SuperValu, Inc., 9 F.4th 455 (7th Cir. 2021) ("SuperValu"), and United States ex. Rel. Proctor v. Safeway, Inc., 30 F.4th 649 (7th Cir. 2022) ("Safeway"), held that the Supreme Court's decision in Safeco Ins. Co. of America v. Burr, 551 U.S. 47 (2007), governs the interpretation of the FCA's scienter requirement. Specifically, citing Safeco, 551 U.S. at 70, the Seventh Circuit found in SuperValu that an FCA defendant does not act with reckless disregard as long as the defendant's interpretation of the relevant statute or regulation was objectively reasonable and no authoritative guidance warned the defendant away from that interpretation. SuperValu, 9 F.4th at 468. The appellate court found that...
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