Supreme Court Appears Poised to Reverse SuperValu and Safeway Decisions
The Supreme Court heard argument today in a pair of cases where the Seventh Circuit Court of Appeals had held that, for purposes of determining whether a defendant acted “knowingly” under the False Claims Act, the defendant’s contemporaneous subjective intent is irrelevant if an “objectively reasonable” justification for the defendant’s conduct can be posited later.[1]
The False Claims Act imposes liability on anyone who acts “knowingly” in connection with, among other things, the submission of a false claim or the use of a false record or statement material to a false or fraudulent claim to the government. The Act further provides that “knowingly” can be shown in three different ways: “actual knowledge,” “deliberate ignorance,” or “reckless disregard.”[2]
During the argument today, a majority of the Court appeared inclined to reverse the Seventh Circuit decisions and to hold instead that courts and juries may consider evidence of a defendant’s contemporaneous subjective intent when assessing whether a defendant acted “knowingly” under the False Claims Act.
At times during the argument, the justices considered the more complex question of whether a defendant should be liable under the False Claims Act if it believed that it was taking an aggressive position that a court more likely than not would find to be wrong. In that circumstance, the justices and counsel for the parties seemed to disagree about what, if any, duty the defendant would have to disclose its uncertainty to the government or to seek further guidance from the government.
But it appeared that a majority of the justices did not see the need to resolve that question now, and that the Court’s decision likely will focus on the narrow question of the admissibility of evidence of what a defendant believed at the time of the submission of claims to the government. On that question, a majority of the justices appeared to agree that, under the plain language of the False Claims Act’s definition of “knowingly,” evidence of contemporaneous subjective intent is relevant and must be considered.
A decision so holding would resolve considerable uncertainty that has arisen in the two years since the Seventh Circuit issued the SuperValu decision. The opinion of the Court is expected sometime before the end of the term in June. A transcript of the argument is available here.
Gregg Shapiro of Gregg Shapiro Law
[1] See United States ex rel. Schutte v. SuperValu Inc., 9 F.4th 455 (7th Cir. 2021), and United States ex rel. Proctor v. Safeway, Inc., 70 F.4th 649 (7th Cir. 2022).
[2] 31 U.S.C. § 3729(b)(1)(A).
