Amidst the many headline-making decisions issued by the U.S. Supreme Court this summer, there lies one opinion that should not be overlooked by False Claims Act (FCA) practitioners. The Supreme Court recently held that when determining culpability in an FCA case, liability turns on a defendant's own subjective belief and not just what an "objectively reasonable" person knew or believed. The court's June 1 decision in Schutte v. SuperValu, No. 21-1326, will greatly impact how future FCA cases are litigated.
The FCA (31 U.S.C. Section 3729) is a federal statute originally enacted in 1863 to curb defense contractor fraud during the American Civil War. It imposes liability on any person or company that knowingly submits a false claim to the government. The FCA provides that knowledge can be shown through: actual knowledge of the information; acting in deliberate ignorance of the truth or falsity of the information; or acting in reckless disregard of the truth or falsity of the information. The FCA requires no proof of specific intent to defraud.
The Department of Justice utilizes the FCA quite prolifically (either directly or via qui tam relators) to recover billions of dollars in cases primarily related to health care and defense contracting. Notably, the U.S. District Court for the Eastern District of Pennsylvania sees one of the highest rates of FCA activity in the country.
Schutte v. SuperValu, which the Supreme Court consolidated with Proctor v. Safeway, originated in the...
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