On January 25, in United States ex rel. Sheldon v. Allergan, No. 20-2330 (4th Cir., Jan. 25, 2022), the United States Court of Appeals for the Fourth Circuit upheld a lower-court dismissal of a False Claims Act (FCA) case brought against drug manufacturer Forest Laboratories, LLC and held that the test for scienter in issues involving a legal falsity is objective and is not met where the defendant applies an objectively reasonable interpretation to complicated or ambiguous laws or regulations without clear administrative or legal guidance. Significantly, the Fourth Circuit refused to consider evidence of subjective bad faith and held "this objective standard precludes inquiry into a defendant's subjective intent."

With this decision, the Fourth Circuit joined its sister Circuit Courts of Appeal in extending the Supreme Court's holding in Safeco Insurance Co. of America v. Burr, 551 U.S. 47 (2007), "interpreting the Fair Credit Reporting Act's analogous scienter provision" to the FCA.¹ The Fourth Circuit held that "[u]nder the FCA, a defendant cannot act 'knowingly' if it based its actions on an objectively reasonable interpretation of the relevant statute when it has not been warned away from that interpretation by authoritative guidance." (Sheldon at *12). The court emphasized that "the Supreme Court has instructed that this 'rigorous' [scienter] requirement ought to find 'strict enforcement' in the courts." Id. (citing United States ex rel. Escobar, 136 S. Ct. 1989,...

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