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Volume XIII, Number 32

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Supreme Court Justices Agree to Hear Second FCA Issue This Term

As many of our readers are likely aware, last week the Supreme Court agreed to hear a second False Claims Act (FCA) issue this term. Having previously accepted and heard argument on a case concerning the government’s authority to dismiss an FCA whistleblower case after declining to intervene, the Court has now granted certiorari to hear two cases addressing what constitutes a “knowing” violation of the FCA. Hanging in the balance is the fate of two lower court decisions that endorsed a powerful defense to FCA liability.

The specific issue that the Justices have now agreed to hear is whether a defendant’s “objectively reasonable” interpretation of ambiguous statutory language presents a cognizable defense to the “knowledge” element for liability under the FCA. The Supreme Court actually received petitions for writs in certiorari in four cases raising this same question, but as of last Friday, the high court has only agreed to hear two of these cases:  U.S. ex rel. Tracy Schutte v. SuperValu, Inc. and U.S. ex rel. Thomas Proctor v. Safeway, Inc. (The other two cases in which the petitions for writs of certiorari are still pending are Troy Olhausen v. Arriva Medical, LLC et al. and U.S. ex rel. Deborah Sheldon v. Allergan Sales, LLC.)

The Supreme Court’s decision to take up the SuperValu and Safeway cases is big news to stakeholders across the FCA bar, because they recognize a potential “ambiguity” defense to FCA liability. Specifically, the Seventh Circuit held in SuperValu and Safeway that a defendant can avoid FCA liability based on failure to comply with a federal program requirement so long as the defendant can demonstrate an “objectively reasonable” interpretation of the requirement it is accused of violating – even if that interpretation was not held at the time of the conduct.  In the view of the Department of Justice (DOJ), a Supreme Court decision affirming SuperValu and Safeway would potentially permit defendants to escape liability for conduct they in fact know to violate the FCA.  Perhaps not surprisingly, the FCA defense bar views these cases as recognizing a legitimate and important defense for defendants facing potentially massive FCA exposure in cases where they are accused of violating murky regulatory requirements for which there is no agency guidance. We will cover these cases in more detail in a future publication.

The decision to grant certiorari in SuperValu and Safeway follows on the heels of the argument in U.S. ex rel. Jesse Polansky v. Executive Health Resources, the case in which the Court is addressing the review standard applicable to the government’s authority to dismiss FCA qui tam cases after declining to intervene.  The Justices heard oral argument in Polansky in December and are likely to rule within the next few months. We will also cover this case in more detail in a future publication.

Stay tuned for further updates on and discussion of both of the FCA questions currently before the Court.

©1994-2023 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.National Law Review, Volume XIII, Number 19
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About this Author

Samantha P. Kingsbury Associate Health Care Compliance, Fraud & Abuse, and Regulatory Counseling
Associate

Samantha’s practice focuses on health care enforcement defense matters. These matters often involve criminal and administrative actions brought against health care providers and companies by state and federal governmental and regulatory agencies. She also has experience in assisting clients with internal investigations of potential violations of the federal anti-kickback statute, the Stark law, and the False Claims Act, among other statutes and regulations. Samantha also has experience preparing self-disclosures and other reports relating to such enforcement matters, as well as developing...

617-348-1829
Kevin McGinty Healthcare & Class Action Attorney Mintz Law Firm
Member

Kevin is an accomplished class action litigator with deep experience defending clients facing all types of class claims. He ably represents clients in consumer, contract, antitrust, unfair trade practice, tort, and employment class actions. Companies in diverse industries — including financial services, manufacturing, insurance, and retail — seek his assistance on complex litigation. A particular focus of his practice is representing healthcare-related companies in connection with False Claims Act cases, commercial disputes, privacy claims, and class actions.

Kevin concentrates in...

617-348-1688
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