In a move that may substantially increase healthtech companies’ exposure to monetary damages, the U.S. Supreme Court agreed to weigh in on the key standard for fraud lawsuits under the False Claims Act (“FCA”). On January 13, 2023, the Supreme Court granted petitions for writs of certiorari in two now-combined 7th Circuit Court whistleblower fraud lawsuits that address the fraud standard– Schutte v. Supervalu Inc. and Proctor v. Safeway.
The FCA imposes monetary damages on persons and companies that defraud the government by “knowingly” submitting to the government false claims for payment, or “knowingly” making false statements in support of such claims. Lawsuits under the FCA may be filed by the government or by a private party, such as a whistleblower.
In the underlying cases, the 7th Circuit held that a company can shield itself from fraud lawsuits if the company’s lawyers can show that the company’s conduct was consistent with an erroneous but “objectively reasonable” interpretation of the law, regardless of the company’s subjective beliefs. However, some judges and commentators have opined that “subjective bad faith” can establish the necessary intent.
The Supreme Court will now hopefully resolve this issue of whether and when a defendant’s contemporaneous subjective understanding or beliefs about the lawfulness of its conduct are relevant to whether it “knowingly” violated the FCA.
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