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The Supreme Court Clarifies the Meaning of “Knowingly” Under the False Claims Act

On June 1, 2023, the United States Supreme Court issued an important decision addressing the intent element of the False Claims Act (“FCA”) 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 “knowingly” submits a false claim to the federal government and defines “knowingly” to include actual knowledge, deliberate ignorance, or recklessness.[i] 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’s subjective beliefs about the correct interpretation of the law.

Several lower courts had adopted a defendant-friendly standard, holding that a defendant’s 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’s text and common law roots required an evaluation of the defendant’s knowledge and subjective beliefs at the time the defendant requested payment.

Both cases involved a highly technical legal issue—the meaning of the phrase “usual and customary prices” 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 “usual and customary prices” 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,[ii] ruled in the defendants’ 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.

The Supreme Court disagreed and held that, for the purposes of the FCA, “knowingly” refers to the defendant’s subjective knowledge and beliefs at the time the defendant submits a claim for payment. Justice Thomas continued the Court’s reliance on principles of common law fraud in FCA cases, noting that the FCA’s definition of “knowingly” largely tracks the common law definition. Under the common law, fraud is found when there is a “culpable state of mind” and where a false statement is made “without belief in its truth or recklessly, careless of whether it is true or false.”[iii] The Supreme Court explained that “ambiguity alone is not sufficient to preclude a finding of scienter” and the focus must be “on what the defendant knew when presenting the claim.” 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 “knowingly.”

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.  


[i] 31 USC 3729(b)(1)(A).

[ii] Safeco Ins. Co. of America v. Burr, 551 U.S. 47 (2007) (interpreting “willfully” as used in the Fair Credit Reporting Act).

[iii] Second Restatement of Torts, 526, Comment e.

© 2023 Dinsmore & Shohl LLP. All rights reserved.National Law Review, Volume XIII, Number 155

About this Author

Patrick Hagan, Dinsmore Law Firm, Civil Litigation and Environmental Attorney

Pat is a litigator who focuses his practice on complex civil litigation, including False Claims Act and environmental litigation. In addition, he has led internal investigations for major government contractors and has coordinated legal and public relations responses on behalf of clients when their reputations are at stake.

In particular, Pat has extensive experience representing government contractors and health care providers accused of fraud in all phases of cases under the False Claims Act, including cases involving contracts with the...

Jennifer Mitchell, health care practice group partner, Dinsmore Shohl, law firm,

Jennifer is a Partner in the Health Care Practice Group and leads the firm’s HIPAA Privacy and Security practice and initiatives. In her HIPAA practice, she works with clients to minimize the risk of privacy and data security issues, assisting with all aspects of HIPAA privacy and security compliance, governance, audits/investigations, breach analyses, training and strategic planning. She has a thorough understanding of federal and state privacy and confidentiality laws and has served as a health care privacy expert witness. 

Within the...

Joseph D. Wheeler Health Care & Corporate Attorney Dinsmore & Shohl Columbus, OH

Joe is a health care and corporate attorney. He regularly advises health care clients, including physician groups, ambulatory surgery centers, and hospitals on a range of complex transactional, operational, and regulatory issues. He frequently counsels clients on compliance and operational issues related to HIPAA, the Anti-Kickback Statute, physician self-referral laws (Stark), the False Claims Act, and internal investigations.

As former in-house counsel to a regional health system, Joe understands the unique nature of health care industry transactions, the myriad regulatory issues...

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