Key Takeaways:

• On June 1, 2023, in United States ex rel. Schutte v. SuperValu Inc., the U.S. Supreme Court unanimously held that defendants cannot avoid liability under the False Claims Act (FCA) by demonstrating that their conduct was consistent with an "objectively reasonable" interpretation of an ambiguous legal requirement.
• The Court's decision clarifies that FCA liability turns on the subjective standard of whether a defendant, at the time it submitted a claim, knew or had reason to know that the claim was false.

The SuperValu case arose from separate lawsuits against two companies that operate retail drug pharmacies across the country: SuperValu Inc. and Safeway, Inc. In each case, a whistleblower – on behalf of the federal government – brought FCA claims against the company for allegedly overcharging Medicare and Medicaid in seeking reimbursement for prescription drugs. The companies were obligated, through Medicare contracts or Medicaid regulations, to disclose their "usual and customary" prices for drugs.

Each company offered a discount program through which customers could purchase drugs at reduced prices. These programs generated a substantial amount of revenue for the companies. But according to the whistleblowers, the companies did not report those discounted prices as their "usual and customary" prices; instead, they reported – and charged the government – significantly higher, non-discounted prices. The whistleblowers presented evidence that the companies...

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