As noted in a previous Clark Hill legal alert, the Supreme Court granted certiorari and will hear (in April) oral argument in two important cases (now consolidated) involving interpretation of a critical element of the False Claims Act (FCA). Those cases are U.S. ex rel. Proctor v. Safeway, Inc. and U.S. ex rel. Schutte v. SuperValu, Inc. Both involve the central issue of the FCA’s knowledge requirement. At issue is whether a defendant’s belief in the lawfulness of its conduct is legally relevant to whether it “knowingly” violated the False Claims Act. (The technical legal term for the knowledge requirement sometimes used in the cases is “scienter.”)
The Safeco Standard
The question now before the Court is framed as whether the “objective knowledge standard” articulated by the Court in Safeco Insurance Co. v. Burr regarding violations of the FCRA properly applies to the FCA’s explicit knowledge requirement in circumstances where the purported falsity of a claim turns on an ambiguous legal obligation. The Courts of Appeal disagree on this point.
Differing Statutory Language
In Safeco, the court used long-standing common law principles to determine whether the Fair Credit Reporting Act (FCRA) had been violated. In doing so, the court equated “reckless disregard” with “willfulness.” At the same time, it significantly noted that whether a violation exists at all is a contextually driven matter.
The Safeco case obviously involved a different statute (not the False Claims Act)...
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