On June 1, 2023, the Supreme Court issued a decision in two consolidated cases, United States ex rel. Schutte v. SuperValu and United States ex rel. Proctor v. Safeway, holding that the False Claims Act’s scienter element “refers to [defendants’] knowledge and subjective beliefs—not to what an objectively reasonable person may have known or believed.” It may be prudent for companies that contract with the government (including federal contractors) to assess their interpretations of ambiguous regulations.
Background
The False Claims Act imposes civil liability on anyone who “knowingly” submits a “false” claim to the government. 31 U.S.C. § 3729(a). These cases are about the scienter element: specifically, the legal standard for determining whether a company “knowingly” made false claims.
The FCA allows private parties to bring qui tam lawsuits in the name of the United States. Petitioners brought such actions against two companies that operate retail drug pharmacies nationwide: SuperValu and Safeway. According to petitioners, those companies overcharged the government by submitting false claims for reimbursement from Medicaid and Medicare programs.
Medicare and Medicaid programs reimburse pharmacies for certain prescription drugs. Under the relevant regulations, the amount of reimbursement is based in part on the “usual and customary charges [for the drug] to the general public.” 42 C.F.R. § 447.512(b)(2) (2021). To receive a reimbursement, a pharmacy must submit a claim...
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