For background on this case, please refer to Part I. For updates from the Supreme Court oral arguments on April 18, please refer to Part II.
On Thursday, June 1, the Supreme Court issued its opinion in United States et al. ex rel. Schutte et al. v. SuperValu Inc., et al., No. 21-1326, 598 U.S. __ (2023) together with United States et al. ex rel. Proctor v. Safeway, Inc., No. 22-111. Justice Thomas wrote the unanimous opinion, which eviscerates the ability to get a False Claims Act (FCA) case dismissed at any stage pre-trial for failure to plead or prove scienter. But obtaining a dismissal or judgment pre-trial on this basis had always been a very long shot.
Recently, however, a few circuits around the country – e.g., the Seventh Circuit in Supervalu – had begun to conclude that you cannot knowingly make a false statement when you adopt an objectively reasonable interpretation of an ambiguous regulatory scheme. The Supreme Court nipped that argument in the bud, holding “knowingly” still means what it says – that it matters what your subjective belief was at the time you made the statement – a rather unremarkable outcome.
At minimum, if you are “conscious of a substantial and unjustifiable risk” that the claim you submit is false, but submit it anyway, you possess the requisite level of knowledge to be held liable for submitting a false claim. This eliminates post-hoc rationalizations about what an objective, reasonable person – in a vacuum – may know or believe as a defense to scienter.
Though that defense rarely, if ever worked, and certainly not as a stand-alone. The harder question is whether a statement can be false when the regulatory scheme is ambiguous? And what kind of warning constitutes sufficient knowledge of a substantial risk that your interpretation is incorrect? Does it have to come from a regulator? Or simply industry interpretation? The Court didn’t answer these questions.
And now the case goes back to the district court, to determine what “usual and customary” charges means – something the regulator should have done in the first place.
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