High Court False Claims Ruling Underscores Communication Is Key

Federal contractors should avoid taking unjustifiable risks when interpreting regulations—and then submitting bills to the US government— if they want to stay out of False Claims Act trouble.

That’s one of the takeaways from Justice Clarence Thomas’ June 1 opinion in United States ex rel. Schutte v. SuperValu Inc., which reinstated FCA suits alleging the SuperValu and Safeway Inc. grocery chains overcharged Medicare and Medicaid for prescription drugs.

The unanimous opinion had law firms that represent FCA defendants sending out client alerts, saying to prepare for less success in motions to dismiss. But the opinion doesn’t appear to be a pro-plaintiff game-changer beyond being a reprieve from what would have been a devastating defeat for those that try to uncover fraud, attorneys told Bloomberg Law.

This is “going to generally be a fact question that isn’t susceptible to a resolution on a motion to dismiss,” said Reuben A. Guttman of Guttman, Buschner & Brooks PLLC, a firm that represents whistleblowers.

But “I don’t think the opinion changed the rules of the game” for litigating FCA cases. “The opinion is true to the statute and consistent with the common law of fraud,” he said.

The dual cases arrived from the US Court of Appeals for the Seventh Circuit, which had rejected the two suits for lack of scienter because SuperValu Inc. and Safeway had offered a reasonable regulatory interpretation. And the companies had unsuccessfully urged the Supreme Court to find that intent must be lacking if their interpretation of an ambiguous rule was objectively reasonable.

Writing for a unanimous court, Thomas said the Seventh Circuit improperly failed to consider evidence of subjective intent—that the companies believed they were wrongly seeking payments from the government.

Read the entire article here: https://news.bloombergtax.com/financial-accounting/high-court-false-claims-ruling-underscores-communication-is-key