on Jun 1, 2023 at 2:56 pm
In a unanimous opinion on Thursday, the Supreme Court rejected an attempt to shift the knowledge standard in False Claims Act cases that had the potential to gut the government’s primary anti-fraud statute. The justices avoided, for now, more nuanced questions that could ultimately affect the balance of power between the government and industry in FCA cases.
The Department of Justice has used the FCA to recover more than $70 billion since 1986, largely in cases related to health care and defense contracting. Under the FCA, a defendant is liable for submitting a false claim to the government for payment if it acted “knowingly,” which the statute defines as acting with actual knowledge, deliberate ignorance, or reckless disregard. At issue in two consolidated cases – United States ex rel. Schutte v. SuperValu Inc. and United States ex rel. Proctor v. Safeway – was whether and when a defendant’s subjective belief is relevant in determining knowledge if its conduct represented an objectively reasonable interpretation of the relevant issue. The U.S. Court of Appeals for the 7th Circuit had found it was never relevant. Vacating the 7th Circuit’s rulings, as was expected following oral argument in April, Justice Clarence Thomas explained for the unanimous court that “[w]hat matters for an FCA case is whether the defendant knew the claim was false. Thus, if [the defendants] correctly interpreted the relevant phrase and believed their claims were false,...
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