On June 1, 2023, the Supreme Court decided a pair of closely watched False Claims Act (FCA) cases, U.S. ex rel. Schutte v. SuperValu Inc., No. 21-1326, and U.S. ex rel. Proctor v. Safeway, Inc., No. 22-111. The decision resolves a narrow but important question: Is subjective intent relevant to FCA claims involving so-called “legal falsity” in which the defendant is alleged to have knowingly misrepresented its compliance with a legal requirement in connection with a claim for payment from the government? The Court answered yes, holding that in such cases FCA liability turns on what the defendant actually believed about the truth or falsity of its representations, not on what an objectively reasonable person may have believed.
The plaintiffs here sued two retail pharmacies, SuperValu and Safeway, alleging that they misreported their “usual and customary” price in submitting claims for reimbursement from Medicare and Medicaid. In the decisions below, split panels of the Seventh Circuit affirmed summary judgment for each defendant based on the ambiguity of the phrase “usual and customary” and the objective reasonableness of the defendant’s interpretation during the litigation, rejecting the need for a separate inquiry into the defendant’s beliefs at the time the claims were submitted.
In reaching the opposite conclusion—that a defendant’s contemporaneous belief is what matters under the FCA—the Supreme Court framed its decision narrowly, addressing only that “one discrete...
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