{"id":29947,"date":"2023-06-02T16:57:00","date_gmt":"2023-06-02T16:57:00","guid":{"rendered":"https:\/\/www.dinsmore.com\/?post_type=publications&#038;p=29947"},"modified":"2025-11-24T20:19:38","modified_gmt":"2025-11-24T20:19:38","slug":"the-supreme-court-clarifies-the-meaning-of-knowingly-under-the-false-claims-act","status":"publish","type":"publications","link":"https:\/\/www.dinsmore.com\/publications\/the-supreme-court-clarifies-the-meaning-of-knowingly-under-the-false-claims-act\/","title":{"rendered":"The Supreme Court Clarifies the Meaning of \u201cKnowingly\u201d Under the False Claims Act"},"content":{"rendered":"\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/www.dinsmore.com\/wp-content\/uploads\/2023\/06\/FCA-Ruling-Header-1.jpg\" alt=\"\"\/><\/figure>\n\n\n\n<p>On June 1, 2023, the United States Supreme Court issued an important decision addressing the intent element of the False Claims Act (\u201cFCA\u201d) in <em>United States ex rel. Tracy Schutte v. SuperValu Inc.<\/em> and <em>United States ex rel. Thomas Proctor v. Safeway, Inc.<\/em> The FCA imposes liability on anyone who \u201cknowingly\u201d submits a false claim to the federal government and defines \u201cknowingly\u201d to include actual knowledge, deliberate ignorance, or recklessness.<a href=\"#_edn1\" id=\"_ednref1\">[i]<\/a> For companies that receive government funds, this case highlights the importance of contemporaneous documentation. Future FCA cases may turn on the existence of evidence regarding the company\u2019s subjective beliefs about the correct interpretation of the law.<\/p>\n\n\n\n<p>Several lower courts had adopted a defendant-friendly standard, holding that a defendant\u2019s subjective intent was irrelevant if its interpretation of an ambiguous law or regulation was objectively reasonable. Writing for a unanimous Court, Justice Clarence Thomas rejected this approach and emphasized that the FCA\u2019s text and common law roots required an evaluation of the defendant\u2019s knowledge and subjective beliefs at the time the defendant requested payment.<\/p>\n\n\n\n<p>Both cases involved a highly technical legal issue\u2014the meaning of the phrase \u201cusual and customary prices\u201d for prescription drugs. The defendants in both cases were large pharmacy chains that participated in a variety of federally-funded programs, including Medicare and Medicaid. Federal regulations required pharmacies to offer the government their \u201cusual and customary prices\u201d for drugs, but did not provide guidance about whether, and when, certain price discounts should factor into the calculation. The relators alleged the defendants concealed various systematic discounts and overcharged the government. The Seventh Circuit Court of Appeals, relying heavily on a prior Supreme Court decision interpreting a different statute,<a href=\"#_edn2\" id=\"_ednref2\">[ii]<\/a> ruled in the defendants\u2019 favor on the intent element because it found their views to be objectively reasonable and any subjective evidence of their actual beliefs to be irrelevant.<\/p>\n\n\n\n<p>The Supreme Court disagreed and held that, for the purposes of the FCA, \u201cknowingly\u201d refers to the defendant\u2019s subjective knowledge and beliefs at the time the defendant submits a claim for payment. Justice Thomas continued the Court\u2019s reliance on principles of common law fraud in FCA cases, noting that the FCA\u2019s definition of \u201cknowingly\u201d largely tracks the common law definition. Under the common law, fraud is found when there is a \u201cculpable state of mind\u201d and where a false statement is made \u201cwithout belief in its truth or recklessly, careless of whether it is true or false.\u201d<a href=\"#_edn3\" id=\"_ednref3\">[iii]<\/a> The Supreme Court explained that \u201cambiguity alone is not sufficient to preclude a finding of scienter\u201d and the focus must be \u201con what the defendant knew when presenting the claim.\u201d The Court noted evidence that a defendant disregarded clues that the government or the general industry held a different interpretation, or that a defendant took active steps to hide its practices from the government, could support a finding that the defendant acted \u201cknowingly.\u201d<\/p>\n\n\n\n<p>Companies should consider documenting the basis for their interpretation of potentially ambiguous regulations as well as communications with the government that are relevant to that interpretation.&nbsp; If you think this development may impact your organization, please contact Patrick Hagan, Jennifer Mitchell, Joe Wheeler, or another member of Dinsmore &amp; Shohl LLP\u2019s False Claims Act Team or Healthcare Practice Group.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><a href=\"#_ednref1\" id=\"_edn1\">[i]<\/a> 31 USC 3729(b)(1)(A).<\/p>\n\n\n\n<p><a href=\"#_ednref2\" id=\"_edn2\">[ii]<\/a> <em>Safeco Ins. Co. of America v. Burr<\/em>, 551 U.S. 47 (2007) (interpreting \u201cwillfully\u201d as used in the Fair Credit Reporting Act).<\/p>\n\n\n\n<p><a href=\"#_ednref3\" id=\"_edn3\">[iii]<\/a> Second Restatement of Torts, 526, Comment <em>e.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>On June 1, 2023, the United States Supreme Court issued an important decision addressing the intent element of the False Claims Act (\u201cFCA\u201d) in United States ex rel. Tracy Schutte v. SuperValu Inc. and United States ex rel. Thomas Proctor v. Safeway, Inc. The FCA imposes liability on anyone who \u201cknowingly\u201d submits a false claim\u2026<\/p>\n","protected":false},"author":8,"featured_media":0,"menu_order":0,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"tags":[],"publication-type":[12],"class_list":["post-29947","publications","type-publications","status-publish","format-standard","hentry","publication-type-legal-alerts"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.5 (Yoast SEO v26.9) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>The Supreme Court Clarifies the Meaning of \u201cKnowingly\u201d Under the False Claims Act - Dinsmore &amp; Shohl<\/title>\n<meta name=\"description\" content=\"The Supreme Court Clarifies the Meaning of \u201cKnowingly\u201d Under the False Claims Act Read insights and legal analysis from attorneys at Dinsmore &amp; Shohl LLP.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.dinsmore.com\/publications\/the-supreme-court-clarifies-the-meaning-of-knowingly-under-the-false-claims-act\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Supreme Court Clarifies the Meaning of \u201cKnowingly\u201d Under the False Claims Act\" \/>\n<meta property=\"og:description\" content=\"The Supreme Court Clarifies the Meaning of \u201cKnowingly\u201d Under the False Claims Act Read insights and legal analysis from attorneys at Dinsmore &amp; 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