On June 1, 2023, the U.S. Supreme Court ruled in the consolidated False Claims Act ("FCA") cases, U.S. ex rel. Schutte v. SuperValu Inc. and U.S. ex rel. Proctor v. Safeway, Inc., that “[w]hat matters for an FCA case is whether the defendant knew the claim was false.” Justice Clarence Thomas wrote the unanimous decision.
The FCA imposes liability for civil penalties, treble damages, and litigation costs for “knowingly” submitting a false claim to the U.S. government. Knowingly means actual knowledge, deliberate ignorance, or reckless disregard.
The relators in SuperValu and Safeway alleged that defendants knowingly defrauded the U.S. government by overcharging Medicare and Medicaid for drug reimbursements. Specifically, they alleged that defendants submitted false claims by not passing through all discounts in their “usual and customary” drug pricing. The relators pointed to company emails and internal documents reflecting concerns over discounted prices and “U&C” price claims.
The district courts granted summary judgment for defendants because defendants could not have “knowingly” submitted false claims. The U.S. Court of Appeals for the Seventh Circuit affirmed. Relying on Safeco Ins. Co. of America v. Burr, 551 U.S. 47 (2007), a Fair Credit Reporting Act ("FCRA") case interpreting the term “willfully,” the Seventh Circuit held that defendants’ reporting of higher prices was “consistent with an objectively reasonable interpretation of the phrase ‘usual and customary....
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