False Claims Act Knowledge Element after Schutte: What Is Lost, What Remains, What Companies Should Do Next to Minimize Exposure to Liability

Key Points

• Supreme Court eliminates FCA scienter defense based solely upon an objectively reasonable interpretation of ambiguous law when defendant has subjective knowledge that claim is false.
• Supreme Court ruled that the FCA’s scienter element applied to defendant’s subjective beliefs at the time defendant submitted claims.
• Other related FCA defenses should remain in effect, such that defendants have valid FCA defenses if there is objective ambiguity and there is a genuine subjective belief in the validity of the claim; if defendant has an honest opinion as to the accuracy of the claim; or acts with mere negligence or inadvertence.
• In light of the Court’s rejection of the reasonable interpretation of ambiguous law doctrine, companies can reduce potential exposure to liability by ensuring that they investigate employee complaints, develop processes to ensure that their practices conform to law, review relevant industry publications or billing practices to confirm entitlement, and making periodic inquiries of government officials when confronting ambiguous guidance because courts have found that those who engage in these practices do not act with substantial and unjustifiable risk that their claims are false in violation of the FCA.

Before the Supreme Court’s ruling in U.S. ex rel. Schutte v. SuperValu Inc.,¹ seven circuit courts of appeal had ruled that the defendant was innocent under the False Claims Act (FCA) if the defendant could show that objectively: (i) the governing statute, regulation or contract that was allegedly breached was ambiguous in relevant part; (ii) under a reasonable interpretation of the governing provision, the defendant’s representation could be accurate, not false; and (iii) there was no official governmental guidance to warn defendant away from that reasonable interpretation.² If defendant was able to satisfy these three elements, courts ruled that defendants’ subjective intent did not matter³ and it did not matter whether defendant held this interpretation before it submitted its claims or whether it developed this construction of law after claims were submitted.⁴ Further, because the test was objective, courts could determine the issue as a matter of law.⁵

In Schutte, the Supreme Court considered whether the reasonable interpretation of ambiguous law doctrine is solely an objective test or whether defendant’s subjective intent should be considered in determining whether defendant acted with scienter under the FCA. The Court ruled that the FCA’s scienter element applied to defendant’s subjective beliefs at the time defendant submitted claims.⁶

This article examines the Supreme Court’s ruling in Schutte; assesses what defenses are left for those confronting ambiguous law; and proposes steps companies can take to minimize exposure to liability in light of the Court’s ruling. As to defenses that remain, defendants, under existing case law, may still prevail if the law is ambiguous and defendants have a genuine belief that their practices conform with law or are able to show that, as most, their claims were based on an honest mistake or mere negligence, that is, acted without substantial and unjustifiable risk that their claims are false. As to steps to minimize risk of liability, companies should act to ensure that they investigate employee complaints, develop processes to ensure that their practices conform to law, review relevant industry publications or billing practices of others to confirm entitlement or make inquiries of the government because courts have found that those who engage in these practices do not act with substantial and unjustifiable risk that their claims are false.

The Court’s Ruling in Schutte

In Schutte, Justice Thomas, writing for the Court, observed that, at times, a law is “open to interpretation” but a person might correctly understand what the law means in context and may submit claims that are inaccurate anyway.⁷ The Court noted that in Schutte it had to consider whether, under these circumstances, the defendant may knowingly submit false claims under the FCA.⁸

In Schutte, under the governing law, pharmacies were required to bill Medicare and Medicaid for their “usual and customary” drug prices.⁹ The Court noted that, at the trial court level, relators contended that the pharmacies reported “usual and customary” prices that were higher than the discounted prices that were the pharmacies actual usual and customary prices.¹⁰ For example, relators presented evidence that Safeway charged just $10 for 94% of its cash sales for a 90-day supply of a cholesterol drug between 2008 and 2012.¹¹ Yet Safeway apparently reported prices as high as $108 as “usual and customary” during that time.¹² Similarly, the Court noted that relators presented evidence that at least for some drugs for some time periods SuperValu made more than 80% of its case sales for prices less than what it disclosed as its “usual and customary” price.¹³

Further, relators claimed that the pharmacies were informed that their lower, discounted prices were their “usual and customary” prices, believed that their discounted prices were “usual and customary” prices and tried to hide their discounted prices from regulators and contractors.¹⁴ According to relators, evidence of this included that both SuperValu and Safeway received a notice in 2006 from a pharmacy benefit manager stating that the phrase “usual and customary” refers to discounted prices.¹⁵ Further, relators contended that executives at both companies raised concerns about letting state agencies or pharmacy benefit managers learn about their discounted prices.¹⁶

At the trial court level, the district court ruled against SuperValu on the falsity element, concluding that SuperValu’s discounted prices were it “usual and customary” price and that, by not reporting them, SuperValu submitted false claims, but granted SuperValu summary judgment on the scienter element, ruling that SuperValu could not have acted “knowingly.”¹⁷ Soon after, it granted Safeway summary judgment on the same basis.¹⁸ The Seventh Circuit affirmed.¹⁹ It found that the pharmacies’ actions were consistent with an objectively reasonable interpretation of the phrase “usual and customary” because “the phrase could have been understood as referring to [the pharmacies’] retail prices, not their discounted prices.”²⁰ Thus, the court reasoned that it did not matter whether the pharmacies thought that their discounted prices were actually their “usual and customary” prices.²¹ But what mattered was that “someone else” may have reasonably thought that the retail prices were what counted.²²

In light of this factual and procedural background, the Court sought to resolve the following legal question:

“If [pharmacies’] claims were false and they actually thought that their claims were false—because they believed that their reported prices were not actually their ‘usual and customary’ prices—then would they have ‘knowingly’ submitted a false claim within the FCA’s meaning? Or is the Seventh Circuit correct—that respondents could not have ‘knowingly’ submitted a false claim unless no hypothetical, reasonable person could have thought that their reported prices were their ‘usual and customary’ prices?²³”

In addressing this legal question, the Court concluded that based on “the FCA’s statutory text and its common-law roots, the answer to the question presented is straightforward: The FCA’s scienter element refers to respondents’ knowledge and subjective beliefs—not to what an objectively reasonable person may have known or believed.”²⁴ The Court further concluded that facial ambiguity alone is not sufficient to preclude a finding that the pharmacies knew their claims were false.²⁵

As to the FCA’s text, the Court noted that the FCA’s actual knowledge, reckless disregard and deliberate ignorance standards largely track the traditional common-law scienter requirements for claims of fraud.²⁶ The court noted that on their face and at common law, the FCA’s standards “focus primarily on what respondents thought and believed.”²⁷ For example, “the term ‘deliberate ignorance’ encompasses defendants who are aware of a substantial risk that their statements are false, but intentionally avoid taking steps to confirm the statement’s truth or falsity.”²⁸ And the term reckless disregard, “captures defendants who are conscious of a substantial and unjustifiable risk that their claims are false, but submit the claims anyway.”²⁹ Under these facts, the Court concluded that defendants could have acted with sufficient scienter to breach the FCA. The Court observed that what “typically matters at common law is whether the defendant made the false statement ‘without belief in its truth or recklessly, careless of whether it is true or false’.”³⁰ “If a defendant knows that he ‘lack[s an] honest belief’ in the statement’s truth, that is often enough to establish scienter for fraud.”³¹

The Court also concluded that “the text and the common law also point to what the defendant thought when submitting the false claim—not what the defendant may have thought after submitting it.”³² Thus, defendants cannot rely upon “post hoc interpretations that might have rendered their claims accurate.”³³ The focus instead is “on what the defendant knew when presenting the claim.”³⁴

What Defenses Were Lost and What Remains After Schutte

To navigate in the post-Schutte world and to reduce the likelihood of FCA liability, it is important to understand what FCA knowledge-based defenses remain, what knowledge-based defenses specifically were lost and what precedent remains indicating when a company is not acting with “substantial and unjustifiable risk” regarding the presentation of a false claim. Specifically, under the case law, defendants have valid FCA defenses if there is objective ambiguity and there is a genuine subjective belief in the validity of the claim; if defendant has an honest opinion as to the accuracy of the claim; or acts with mere negligence or inadvertence. But defendants risk running afoul of the FCA if they act with substantial unjustified risk as to the truth or falsity of the claim, which, under case law, some courts have found to exist when the defendant ignores bona fide employee concerns, fails to adopt internal controls to ensure accurate claims are submitted or receive claim denials or obtain other red flags without confirming entitlement.

• Objective Ambiguity Without Subjective Knowledge Likely Does Not Result in Reckless Disregard or Deliberate Ignorance

Schutte addressed the situation where notwithstanding statutory, regulatory or contractual ambiguity, defendant knew the correct interpretation of the governing provision and breached it. The Court expressly disclaimed addressing the situation where defendant did not have subjective knowledge regarding how some future court would interpret the law and objectively believed that its interpretation of law was correct.³⁵ But, historically, courts have ruled that where the underlying law is ambiguous and defendant had no reason to believe a future court would reach a different conclusion, there is no FCA scienter.³⁶

• Opinions Regarding Conclusions of Law or Factual Adherence to Legal Standards Do Not Result in FCA Scienter

Additionally, there is no FCA liability when defendant presents nothing more than an honestly held opinion. The FCA addresses the overarching issue of when can an opinion be knowingly false in two contexts.

First, several circuits have recognized that the FCA requires an objective falsehood, which is best understood and consistent with the common law, as providing that sincere statements of opinion cannot be false or fraudulent and that plaintiff must show more to establish FCA falsity.³⁷ This principle, significantly for the healthcare industry, applies when decisions involve considerations of clinical judgment.³⁸

Second, as Justice Thomas commented in SuperValu, “many courts appear to have stated—as a general rule—that misrepresentations of law are not actionable at common law.”³⁹ This is potentially a valuable defense in the healthcare world where frequently defendant is required to certify, either expressly or impliedly, to issues of law such that it complies with the Anti-Kickback statute or the Stark law. Under these circumstances, defendants can have a meritorious defense unless the defendant: (1) does not actually hold the opinion; (2) the opinion contains an embedded fact that is false; (3) knows facts that would preclude such an opinion; or (4) does not know facts that would justify the opinion.⁴⁰

• Honest Mistake, Inadvertence and Mere Negligence Do Not Result in FCA Liability

Given the FCA’s reckless disregard and deliberate ignorance standards, mere negligence, honest mistake and inadvertence do not result in FCA liability but instead plaintiff must demonstrate that defendant acted with a substantial and unjustifiable risk.⁴¹ Courts have found that defendants do not act with reckless disregard or deliberate ignorance—and hence with substantial unjustifiable risk—when they, among other things:

• Investigate employee concerns.
• Adopt compliance policies and procedures to identify false claims.
• Seek legal advice on the issue.
• Request guidance from the government (even if the government does not respond).
• Are aware that other similarly situated companies engage in the same practices.
• Are aware of industry publications that support the practice.⁴²

Of course, when the opposite of each of these factors are present, some courts have ruled that defendants have acted with reckless disregard or deliberate ignorance. For example, some courts have ruled that a defendant acts with reckless disregard when employees raise compliance concerns that the company ignores;⁴³ when the company does not institute any internal controls or process to ensure that accurate claims are submitted;⁴⁴ and when the company receives denials on claims but nonetheless proceeds to submit claims without confirming entitlement.⁴⁵

Steps to Minimize Exposure to Liability

Prior to Schutte, all FCA defendants needed, according to seven circuits, was an objectively reasonable interpretation of ambiguous guidance and no authoritative guidance to warn defendant away from that interpretation. Further, even subjective knowledge was insufficient to create an FCA cause of action, so if a reasonable interpretation of ambiguous law existed, employee concerns could be essentially ignored.

As a result of Schutte, a simple objectively reasonable interpretation of law, by itself, is no longer sufficient to prevail in an FCA action. Instead, courts will take into account subjective considerations, such as what does the internal evidence reflect was the company’s belief regarding entitlement to governmental payment. In light of this, companies should now, to minimize exposure to liability, redouble their efforts to:

• Adopt compliance policies that ensure the accuracy of claims.
• Stay actively abreast of governmental rules and regulations regarding government payment and form a reasonable understanding of what those rules require.
• Communicate, when applicable, that understanding to the government whenever the issue arises (for example, in written correspondence with government representatives, routine audits, SEC filings or other public reports).
• Monitor official governmental pronouncements and court decisions to evaluate whether their interpretation continues to find support in the government’s pronouncements;
• Assess, to the extent possible, whether industry peers have adopted the same interpretation of the governing rules.
• Evaluate industry guidance to learn whether that supports the companies’ interpretation of law.
• Maintain centralized and retrievable records of the rules, regulations and governmental guidance; communications with the government; and the company’s deliberative process to interpret and apply those materials to the company’s operations and claims submissions.

The Path Forward to Achieve and Establish FCA-Compliance Post-Schutte

In one sense, it is important to underscore, as did Justice Thomas, that Schutte is limited to the precise instance where there is tangible evidence that defendant knew that its regulatory interpretation, notwithstanding ambiguity, was wrong and took efforts to conceal it.

The case does not reach those multiple instances in which, notwithstanding regulatory ambiguity, companies form a genuine belief that its claims are proper, form honest opinions regarding entitlement and undertake efforts to confirm entitlement to payment, such as investigating complaints, developing compliance policies, making inquiries of the government, reviewing peer conduct and industry guidance and performing legal research.

However, it is equally important to be cognizant regarding how Schutte did alter available FCA scienter defenses. Now companies need to be aware, and take proactive measures, to ensure, in light of ambiguous regulatory guidance, that they can document contemporaneously with the submission of claims why they believe that they are entitled to governmental payment.

Read past issues of The Salcido Report

• April 28, 2022 - Multiple Appellate Courts Now Rule that Government and Relator Cannot Take Advantage of Ambiguous Law to File False Claims Act Lawsuit to Obtain Treble Damages and Civil Penalties
  
  
• January 18, 2022 - OIG Joint Venture Advisory Opinion Does Not Consider Multiple Court Decisions That Undermine the Conclusions in Its Opinion
  
  
• November 24, 2020 - When Can Opinions be “False” and Result in False Claims Act Liability: Three Circuit Courts Provide Conflicting Guidance
  
  
• January 27, 2020 - False Claims Act – Year In Review: Five Decisions That Will Affect the Future of FCA Litigation
  
  
• October 10, 2019 - 11th Circuit’s Decision in AseraCare: Important in Determining When Clinical Judgment Regarding Medical Necessity Can Result in an Overpayment and How Evidence Regarding Corporate Knowledge Must be Tied to Claims to Establish False Claims Act Liability
  
  
• June 24, 2019 - Three Years After Escobar: Lessons Learned Regarding Plaintiffs’ Efforts To Neutralize Escobar and Opportunities This Practice Raises for Defendants
  
  
• February 12, 2018 - False Claims Act Circuit Splits—FCA Issues That May Soon Reach The Supreme Court Or Lead To Congressional Amendment
  
  
• October 9, 2017 - Under What Circumstances Can A Private Qui Tam Plaintiff Overrule Government Agency Experts’ Use Of Administrative Discretion To File False Claims Act Actions In The Post-Escobar FCA World?
  
  
• September 23, 2016 - Recent Significant Case Law Developments Regarding What Constitutes a Reckless Interpretation of a Law and When Retention of an Overpayment Violates the False Claims Act
  
  
• February 25, 2016 - What Must the Government Prove to Establish that a Defendant Recklessly Interpreted a Statute or Regulation in Violation of the False Claims Act?
  
  
• December 21, 2015 - Understanding When An Overpayment Can Result in False Claims Liability and Why Current Court Precedent and Regulatory Guidance Is Mistaken
  
  
• October 28, 2015 - Minimizing Exposure to Stark Law Liability in False Claims Act Cases by Isolating Those Who Determine Fair Market Value From Those Who Measure Contribution Margin or Other Similar Operational Data
  
  
• October 1, 2015 - When a Violation of a Rule or Regulation Becomes an FCA Violation: Understanding the Distinction Between Conditions of Payment and Conditions of Participation
  
  
• September 25, 2015 - False Claims Act Public Disclosure Alert

About the Author

Robert Salcido is a leading FCA practitioner.

Mr. Salcido has been lead counsel in several FCA actions in which he successfully defended clients in FCA actions that the government or relator filed at trial or summary judgment. Some of those cases include:

• Salcido was lead counsel for Golden Living in an FCA action where the federal government had sued Golden Living’s predecessor company, Beverly Enterprises, for $895 million, alleging that Beverly had engaged in an unlawful kickback scheme with McKesson Corp. in violation of the Anti-Kickback Act and the FCA. After 14 days of trial, the court ruled that Beverly and McKesson did not violate the FCA or the Anti-Kickback Act because their business negotiations were fair, reasonable and conducted in good faith. See United States of America ex rel. Jamison v. McKesson Corp., 900 F. Supp. 2d 683 (N.D. Miss. 2012).
• Salcido was lead counsel for Aegis Therapies and a Golden Living skilled nursing facility where the federal government had alleged that defendants provided medically unnecessary rehabilitation therapy. The district court granted defendants’ summary judgment motion, ruling that the government had used the wrong standard to assess whether the services were medically necessary and failed to prove that defendants’ certification regarding medical necessity was objectively false. See United States ex rel. Lawson v. Aegis Therapies, Inc., 2014 U.S. Dist. LEXIS 45221 (S.D. Ga. Mar. 31, 2015).
• Salcido was lead counsel for a defendant physician and multispecialty group practice that the government accused of FCA violations. The district court dismissed all the government’s claims on summary judgment. Ultimately, because the United States’ action lacked “substantial justification,” the U.S. was ordered to pay defendants more than $500,000 in legal fees. In making the ruling, the court ruled that Medicare fraud law is an area of expertise and ruled that it was undisputed that Mr. Salcido possessed such expertise. See United States v. Prabhu, 442 F. Supp. 2d 1008 (D. Nev. 2006).
• Salcido was lead counsel for Golden Living in an action where the relator and the government sued multiple defendants alleging that they violated the FCA because they knowingly created and operated a supply company in violation of Medicare Supplier Standards. The district court granted defendants’ FCA summary judgment motion regarding the Supplier Standards allegations, finding that the government’s prior administrative proceedings demonstrated that the defendant supply company was entitled to payment. See United States ex rel. Jamison v. McKesson Corp., 784 F. Supp. 2d 664 (N.D. Miss. 2011).

Mr. Salcido has authored a number of books and chapters in leading publications (including the American Health Lawyers Association, BNA Books and Bloomberg BNA) regarding the application of the FCA, including:

• False Claims Act & the Health Care Industry: Counseling & Litigation (4th ed. American Health Law Ass’n 2022).
• “The False Claims Act in Health Care Prosecutions: Application of the Substantive, Qui Tam and Voluntary Disclosure Provisions” in Health Care Fraud and Abuse: Practical Perspectives, Ch. 3 (3d ed. BNA Books 2013) (with annual supplements).
• “False Claims Act: Health Care Applications and Defenses” in Bloomberg BNA Health Law and Bus. Series No. 2650 (2012).

Because of his work successfully defending a number of FCA lawsuits, Mr. Salcido has been recognized in:

• Selected for inclusion in The Best Lawyers in America 2021.
• Recognized by BTI Consulting Group as 2020 Client Service All-Star which is based on in-depth interviews with general counsel and recognizes lawyers who have been identified as “delivering the absolute best levels of client service.”
• Recognized by The National Law Journal in its 2019 inaugural list of Health Care Law Trailblazers regarding those who have made an impact through new strategies or innovative court cases for several notable FCA wins.
• Recognized by The National Law Journal in its 2018 Winning Litigators chosen for their “great results for clients in high stakes matters” for obtaining a successful trial verdict in an FCA lawsuit.
• Chambers USA: America’s Leading Lawyers for Business (2006-2022). In the 2011-2022 editions of Chambers USA, Robert is listed under Healthcare: Regulatory & Litigation, Leading Individuals (Nationwide) (Band 1) and as Healthcare Leading Individuals (District of Columbia) (Band 1).
• Recognized by The National Law Journal in its 2014 Litigation Trailblazers & Pioneers as one of 50 “people who have made a difference in the fight for Justice” for his outstanding work in defending FCA lawsuits.
• Law360, which selected Robert as one of the four Health Care MVPs for 2012 based upon a successful trial verdict obtained in defense of a national skilled nursing facility chain in a $895 million FCA lawsuit the government filed.
• Recognized by Washington, D.C., Super Lawyers in the health care practice area (2008-2011; 2013-2020).

Robert also won awards for his governmental service, including:

• 1993 Department of Health and Human Services Office of Inspector General (OIG) Integrity Award (highest award OIG bestows to individuals outside of the OIG).
• 1992 United States Department of Justice Special Achievement Award (for Sustained Superior Performance of Duty).
• 1991 United States Department of Justice Special Achievement Award (for Sustained Superior Performance of Duty).

Before entering private practice, Mr. Salcido served as trial counsel for the U.S. Department of Justice Civil Fraud Section, which has nationwide jurisdiction over the FCA, where he led several successful prosecutions of the FCA on the U.S.’ behalf.

Read More

_{1 143 S. Ct. 1391 (2023).}

_{2 See, e.g., U.S. ex rel. Olhausen v. Arriva Med., LLC, No. 21-10366, 2022 WL 1203023, at *2 (11th Cir. Apr. 22, 2022); U.S. ex rel. Proctor v. Safeway, Inc., 30 F. 4th 649 (7th Cir. 2022), vacated 143 S. Ct. 1391 (2023); U.S. ex rel. Schutte v. SuperValu Inc., 9 F.4th 455, 472 (7th Cir. 2021), vacated 143 S. Ct. 1391 (2023); United States v. Allergan, Inc., 746 F. App’x 101, 109-10 (3d Cir. 2018); U.S. ex rel. McGrath v. Microsemi Corp., 690 F. App’x 551, 552 (9th Cir. 2017); U.S. ex rel. Donegan v. Anesthesia Assocs. of Kansas City, PC, 833 F.3d 874, 880 (8th Cir. 2016); U.S. ex rel. Purcell v. MWI Corp., 807 F.3d 281, 289 (D.C. Cir. 2015); see also U.S. ex rel. Sheldon v. Allergan Sales, LLC, 24 F.4th 340, 343-44 (4th Cir. 2022), vacated and judgment aff’d by equally divided court, 2022 U.S. App. LEXIS 26729 (4th Cir. Sept. 23, 2022).}

_{3 See, e.g., Proctor, 30 F.4th at 658 (holding that “a defendant’s subjective intent is irrelevant for purposes” of analysis); Schutte, 9 F.4th at 470 (quoting Supreme Court in Safeco that “defendant’s subjective intent does not matter for [the court’s] scienter analysis—the inquiry is an objective one”); Purcell, 807 F.3d at 284 (ruling that defendants did not violate the FCA because they “could reasonably have concluded” that their conduct complied with the law, even though they believed—and testified that they “knew”—it did not).}

_{4 Schutte, 9 F.4th at 470 (rejecting contention that for an erroneous interpretation to be objectively reasonable, defendant must have held it at the time that it submitted its false claim because even “if the Relators can raise an issue of fact on this point, it is irrelevant. The FCA establishes liability only for knowingly false claims—it is not enough that a defendant suspect or believe that its claim was false”) (emphasis supplied).}

_{5 Because the objective reasonable inquiry hinges on the text of applicable law that the defendant allegedly violated, it is a question of law. See Olhausen, 2022 U.S. App. LEXIS 10989, at *4 (“the analysis of whether an interpretation of ambiguous law is reasonable is an objective one”); Schutte, 9 F.4th at 468; Donegan, 833 F.3d at 879 (determination of objective reasonableness “is an issue of law”); Purcell, 807 F.3d at 288.}

_{6 143 S. Ct. at 1401.}

_{7 Id. at 1398.}

_{8 Id. at 1396.}

_{9 Id. As the Court explained, States’ Medicaid plans may offer outpatient prescription-drug coverage to qualifying individuals. Id. If they do so, the Centers for Medicare & Medicaid Services (CMS) has promulgated regulations that limit the amount these programs may reimburse for certain drugs. Id. These regulations limit any reimbursement to the lower of two amounts, one of which is the healthcare provider’s “usual and customary charges [for the drug] to the general public.” Id. State Medicaid agencies likewise typically reimburse pharmacies for the lowest of different amounts, one of which is often the pharmacy’s “usual and customary charge” to the public. Id. The Court noted that through Medicare Part D, where the government also offers prescription-drug coverage to beneficiaries, private plan sponsors who administer coverage, contracts with pharmacies (sometimes through middlemen called pharmacy benefit managers) and many of the contracts at issue here limited any reimbursement to the pharmacy’s “usual and customary” price. Id. at 1397. Courts had previously ruled that the governing law regarding usual and customary charge is ambiguous because it could refer to the prices that are charged most frequently for a drug or it could mean the retail rather than the discount price. See Schutte, 9 F.4th at 469. Further, it could mean that discount prices only apply if applied to all consumers, or discounts could only apply if they constitute the price most frequent charged to consumers, or it could apply to all discount programs offered to the public. Id.}

_{10 143 S. Ct. at 1396.}

_11 Id.

_12 Id.

_{13 Id. at 1398.}

_14 Id.

_15 Id.

_16 Id.

_17 Id.

_18 Id.

_19 Id.

_{20 Id. at 1399 (emphasis in original).}

_21 Id.

_22 Id.

_23 Id.

_24 Id.

_25 Id.

_{26 Id. at 1400.}

_27 Id.

_{28 Id. (citations omitted).}

_{29 Id. at 1401 (citations omitted).}

_{30 Id. (quoting RESTATEMENT (SECOND) OF TORTS § 526, Comment e).}

_31 Id.

_{32 Id. (emphasis in original).}

_33 Id.

_{34 Id. (citations omitted).}

_{35 Specifically, the Court noted that it ruled that it is sufficient for FCA liability “if respondents believed that their claims were not accurate” and that it “need not address any of the other factual or legal disputes involved in these cases, including whether petitioners have made a showing sufficient under the correct legal standard to preclude summary judgment.” Id. at 1404.}

_{36 U.S. ex rel. Davis v. District of Columbia, 793 F.3d 120, 125, 127 (D.C. Cir. 2015) (where the defendant “reasonably understood” that its contractual arrangement complied with its legal obligation to maintain records capable of being audited, the relator cannot demonstrate that the defendant “knowingly” breached its legal obligation under the FCA); U.S. ex rel. Ketroser v. Mayo Found., 729 F.3d 825, 831–32 (8th Cir. 2013) (rejecting relators’ contention that surgical pathology reports must be written where no express rule existed requiring a written report because “all Relators have plausibly alleged is their desire that the Medicare regulation and CPT Codebook be interpreted to require a separate written report for each permanent slide that is billed as a separate surgical pathology service. This fails to state an FCA claim of knowing fraud … . The absence of a clear requirement that a written report must underlie or support each claim for surgical pathology services means that Relators pleaded a claim of regulatory noncompliance, not a plausible claim that [the defendant] submitted false or fraudulent claims for Medicare payment. Moreover, [the defendant’s] reasonable interpretation of any ambiguity inherent in the regulations belies the scienter necessary to establish a claim of fraud under the FCA”) (citations omitted; emphasis in original); Farmer v. City of Houston, 523 F.3d 333, 342 (5th Cir. 2008) (“the jury would necessarily assess how obvious it should have been to defendants that they were violating the regulations: the more obvious the violation, the more rational the inference that defendants were acting knowingly. Here, however, the violation is not obvious at all … . The presence of this ambiguity makes it less likely that the jury would conclude that a violation—if, indeed, there was one—of the provision means that defendants acted with reckless disregard for the truth, especially given the limited case law interpreting the provision”) (footnote omitted); U.S. ex rel. Hochman v. Nackman, 145 F.3d 1069, 1074 (9th Cir. 1998) (where the VA guidance was conflicting regarding the circumstances under which physicians would be entitled to scare specialty pay, “[a]bsent evidence that the defendants knew that the [Veterans Health] Guidelines on which they relied did not apply, or that the defendants were deliberately indifferent to or recklessly disregardful of the alleged inapplicability of those provisions, no False Claims Act liability can be found”).}

_{37 U.S. ex rel. Thomas v. Siemens AG, 593 F. App’x 139, 143 (3d Cir. 2014) (holding that a “statement is ‘false’ when it is objectively untrue” and finding that relator did not demonstrate an objectively untrue statement when the relator contended that the defendant had failed to disclose accurately on a form the discounts it provides to other customers because the government forms were ambiguous and the government itself accepted different interpretations of how those forms should be completed, including what kinds of discounts needed to be disclosed); U.S. ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 377-78 (4th Cir. 2008) (to prove falsity, plaintiffs must show that the “statement or conduct alleged . . . represent[s] an objective falsehood”; finding plaintiffs could not satisfy this standard when defendant allegedly breached general maintenance standards in contract, “such as keeping vehicles in ‘safe operating condition and good appearance,’” and did not specify a specific maintenance program or require specific acts of maintenance; and holding that an “FCA relator cannot base a fraud claim on nothing more than his own interpretation of an imprecise contractual provision” but instead must show an expression of fact “which (1) admit[s] of being adjudged true or false in a way that (2) admit[s] of empirical verification”) (citations and internal quotations omitted); see also U.S. ex rel. Jamison v. McKesson Corp., 784 F. Supp. 2d 664, 676-77 (N.D. Miss. 2011) (rejecting government’s FCA action because it “rests not on an objective falsehood, as required by the FCA, but rather on its subjective interpretation of Defendants’ regulatory duties”); United States v. Prabhu, 442 F. Supp. 2d 1008, 1032-33 (D. Nev. 2006) (“To establish falsity under the FCA, it is not sufficient to demonstrate that the person’s practices could have or should have been better. Instead, plaintiff must demonstrate that an objective gap exists between what the Defendant represented and what the Defendant would have stated had the Defendant told the truth. Accordingly, because, at a minimum, reasonable minds may differ regarding whether the documentation underlying [defendant’s] claims satisfied some undefined standard, the Government has not establish[ed] falsity as a matter of law.”) (citations and footnote omitted); U.S. ex rel. Burlbaw v. Orenduff, 400 F. Supp. 2d 1276, 1288 (D.N.M. 2005) (“Where disputed legal issues arise from vague provisions or regulations, a contractor’s decision to take advantage of a position can not result in his filing a knowingly false claim.”) (citations and internal quotation marks omitted), aff’d, 548 F.3d 931 (10th Cir. 2008). See generally, R. Salcido, When Can Opinions be “False” and Result in False Claims Act Liability: Three Circuit Courts Provide Conflicting Guidance (Nov. 24, 2020).}

_{38 When all that exists, at most, is genuine differing opinions regarding clinical judgment, there is no objective falsity and no FCA violation. See generally U.S. ex rel. Bell v. Cross, No. 21-11064, 2021 U.S. App. LEXIS 35079, at *7-8 (11th Cir. Nov. 26, 2021) (affirming district court dismissal at summary judgment, finding that relator did not set forth specific facts raising a genuine issue that defendant furnished medically unnecessary services because “for a clinical judgment to be ‘false’ in the context of the FCA, it must be objectively false, meaning that it contains a flaw that can be demonstrated through verifiable facts” and relator’s own testimony that treatments were “unnecessary,” which differed from that of the professionals who authorized the therapy, did no more than establish a difference of opinion and “such a difference of opinion falls short of establishing objective falsity”) (internal quotations and citations omitted); United States v. AseraCare, Inc., 938 F.3d 1278, 1297 (11th Cir. 2019) (“[A] reasonable difference of opinion among physicians reviewing medical documentation ex post is not sufficient on its own to suggest that those judgments—or any claims based on them—are false under the FCA.”); United States v. DaVita, No. 8:18-cv-01250, 2020 U.S. Dist. LEXIS 102981, at *21 (C.D. Cal. Apr. 10, 2020) (finding relator could not establish FCA falsity when relator’s complaint “details only Relator’s subjective difference of opinion with other physicians as to the medical necessity of certain treatments, which is not sufficient on its own to suggest that those judgments—or any claims based on them—are false under the FCA”) (internal quotation and citations omitted); U.S. ex rel. Dooley v. Metic Transplantation Lab, Inc., Case No. CV 13-07039, 2017 U.S. Dist. LEXIS 99506, at *72–74 (C.D. Cal. June 27, 2017) (noting that “Mikes, Vista Hospice Care, and other cases together stand for the proposition that medical providers such as Defendants can only be deemed to have submitted claims to Medicare seeking reimbursement for laboratory tests performed that are ‘knowingly . . . false’ by proving the providers, in their medical opinion, knew (or acted in deliberate ignorance or reckless disregard of the truth) that their selection of such tests was not ‘medically necessary’” and noting that the court found “the reasoning underlying these cases to be persuasive” and declined “Relators’ request to march Defendants before a jury for, at most, failing to take timely notice of advances in histocompatibility testing technology and methods”); U.S. ex rel. Lawson v. Aegis Therapies, Inc., No. 210-072, 2015 U.S. Dist. LEXIS 45221, at *32–34 (S.D. Ga., Mar. 31, 2015) (“The FCA requires proof of an objective falsehood to show falsity” and finding that the government’s “[v]ague allegations of debatably improper therapy provided to unidentified patients do not create a material issue of fact for an FCA action” and thus granting defendants’ summary judgment motion) (citations and internal quotations omitted); U.S. ex rel. Wall v. Vista Hospice Care, Inc., No. 3:07-cv-604, 2016 U.S. Dist. LEXIS 80160, at *55–56 (N.D. Tex. June 20, 2016) (finding in medical necessity case that because “a physician must use his or her clinical judgment to determine hospice eligibility, an FCA claim about the exercise of that judgment must be predicated on the presence of an objectively verifiable fact at odds with the exercise of that judgment, not a matter of questioning subjective clinical analysis” and noting that such objectively verifiable facts at odds with clinical judgment could include that “the physician never reviewed the patient’s medical condition nor saw the patient, or that the physician did not actually believe that if the patient’s disease ran its normal course, the patient had a prognosis of six months or less” but a “testifying physician’s disagreement with a certifying physician’s prediction of life expectancy is not enough to show falsity”) (footnote omitted); Prabhu, 442 F. Supp. 2d at 1032–33 (defendant’s “claims are not false . . . because his documentation practices would fall within the range of reasonable medical and scientific judgment regarding how to document the medical necessity of pulmonary rehabilitation services”).}

_{39 143 S. Ct. at 1403 (citations omitted).}

_{40 See, e.g., Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund., 575 U.S. 175, 186, 188-90 (2015).}

_{41 See, e.g., U.S. ex rel. Urquilla-Diaz v. Kaplan Univ., 780 F.3d 1039, 1058 (11th Cir. 2015) (“Congress did not intend to turn the False Claims Act, a law designed to punish and deter fraud … into a vehicle either punish[ing] honest mistakes or incorrect claims submitted through mere negligence or imposing a burdensome obligation on government contractors rather than a limited duty to inquire”) (internal quotations and citations omitted); U.S. ex rel. Owens v. First Kuwaiti, 612 F.3d 724, 726–28 (4th Cir. 2010) (“Congress … made plain its intention that the act not punish honest mistakes or incorrect claims submitted through mere negligence” and noting that “Congress crafted the FCA to deal with fraud, not ordinary contractual disputes. The FCA plays an important role in safeguarding the integrity of federal contracting, administering strong medicine in situations where strong remedies are needed. Allowing it to be used in run-of-the-mill contract disagreements and employee grievances would burden, not help, the contracting process, thereby driving up costs for the government and, by extension, the American public”); see also U.S. ex rel. Jacobs v. Walgreen Co., No. 21-20463, 2022 U.S. App. LEXIS 5502, at *2 (5th Cir. Mar. 2, 2022) (affirming dismissal at pleading stage because relator’s amended complaint “provided ten ‘examples’ of [defendant’s] allegedly fraudulent billing practices, none of which pleaded facts supporting an inference that the allegedly fraudulent conduct amounted to anything more than innocent mistake or negligence. Our precedent is clear: th[e] mens rea requirement [of an FCA claim] is not met by mere negligence or even gross negligence”) (internal quotations and citations omitted).}

_{42 See, e.g., Skibo v. Greer Labs., Inc., 841 F. App’x 527, 534 (4th Cir. 2021) (evidence of common understanding in industry regarding governing regulation sufficient to show that defendant did not act with FCA scienter at summary judgment when relators did not produce more than a “scintilla of evidence” in support of their understanding of the regulation); U.S. ex rel. Gonzalez v. Planned Parenthood of L.A., 759 F.3d 1112, 1115–16 (9th Cir. 2014) (finding that where the defendant had exchanged letters with state officials describing its billing process that it was billing at usual and customary rates and not at acquisition cost and state officials did not object and when state later acknowledged that regarding the definition of “at cost” the state had provided “conflicting, unclear, or ambiguous misrepresentations … to providers,” the relator could not set forth a plausible FCA cause of action that the defendant knowingly presented false claims); U.S. ex rel. Williams v. Renal Care Grp., Inc., 696 F.3d 518, 529–31 (6th Cir. 2012) (rejecting the government’s contention that where dialysis facility created a wholly-owned subsidiary and it was unclear whether Medicare regulations would permit a wholly owned subsidiary to receive enhanced reimbursement (known as Method II reimbursement) that the facility “knowingly” submitted “false” claims given that (1) the defendants sought legal counsel on this issue; (2) defendants’ legal counsel sought clarification on the rules from CMS officials; (3) defense counsel wrote a contemporaneous letter to the government where counsel references a positive conversation with the government employee regarding the issue, and counsel’s notes and billing records reflect as much (even though the government did not respond to defense counsel’s request that the government confirm that the arrangement was permissible and defense counsel, in the communication to the government, did not identify the companies requesting the information); (4) the defendants were aware of large dialysis providers that had wholly-owned subsidiaries filing for Method II reimbursements; (5) industry publications openly encouraged the use of Method II reimbursements to increase profit; (6) the wholly owned subsidiary dialysis supplier was a separately incorporated entity with its own Medicare supplier number; and (7) the supply company had informed CMS and OIG about its ownership structure during site visits or in other communications, and concluding that “the defendants were not in reckless disregard of the truth or falsity of their claims. Rather, they consistently sought clarification on the issue, followed industry practice in trying to sort through ambiguous regulations, and were forthright with government officials over [the company’s] structure”); U.S. ex rel. Hefner v. Hackensack Univ. Med. Ctr., 495 F.3d 103, 107–110 (3d Cir. 2007) (medical center did not act with reckless disregard when it had compliance procedures to submit accurate claims, had an existing compliance department, and hired a consulting firm to improve its compliance with billing and documentation practices and even though erroneous claims were submitted to the government the “mere failure of a system to catch an error does not establish recklessness”); Burlbaw, 400 F. Supp. 2d at 1286 (where defendants had received governmental assurances, defendants’ “failure to research the statutes and investigate the facts themselves constituted only negligent behavior, rather than reckless or deliberate action”) (citations omitted), aff’d, 548 F.3d 931 (10th Cir. 2008); U.S. ex rel. Perales v. St. Margaret’s Hosp., 243 F. Supp. 2d 843, 866 (C.D. Ill. 2003) (defendant hospital did not bury “its head in the sand and willfully ignore[ ] the law” when “there is evidence that [it] received and considered relevant publications in this area of the law, established a corporate compliance committee, and routinely consulted counsel in drafting the contracts and agreements, which is suggestive of an intent to abide by the law”); cf. Urquilla-Diaz, 780 F.3d at 1061–62 (holding that the defendant school did not act with reckless disregard when individual testified that when he signed certification of compliance with the Rehabilitation Act, even though he had not personally ensured that the company’s nondiscrimination policies and grievance procedures complied with the Rehabilitation Act because he “relied on the opinions of his subordinates, including those charged with compliance, and had no reason to believe that [the defendant’s] policies violated the Rehabilitation Act or its implementing regulations” and “while he did not independently review the agreement or specifically review [the defendant’s] policies for compliance with the Rehabilitation Act, [the defendant] had hired ‘the kind of people that had integrity, that had experience, [and] that had knowledge’; the company also used a system where there were ‘experts who ran the departments,’ and they were responsible for ensuring [the defendant’s] compliance” and the relator “adduced no evidence—either in the district court or on appeal—suggesting (much less showing) that [the individual’s] reliance on his subordinates was unreasonable under the circumstances”).}

_{43 See, e.g., U.S. ex rel. Polukoff v. St. Mark’s Hosp., 895 F.3d 730, 744 (10th Cir. 2018) (finding that plaintiff stated a cause of action that hospitals knowingly presented false claims when relator alleged that at one hospital the relator personally informed the CEO that a physician allegedly performing unnecessary surgeries had been suspended for participating in this practice at another hospital, but continued to recruit the physician, and a second defendant hospital allegedly knew of the false claims because it “‘ignored the loud objections from its own medical staff and leadership, including the Director of the Catheterization Laboratory … and the Medical Director for Cardiovascular Services … as well as written warnings and complaints from [a professor] at the University of Utah’”); U.S. ex rel. Prather v. Brookdale Senior Living Cmtys., Inc., 892 F.3d 822, 838 (6th Cir. 2018) (finding that relator could plausibly plead FCA scienter when defendants allegedly had been informed by the employees explicitly hired to review claims that there may be compliance issues, and consequently had an obligation to inquire into whether they were actually in compliance with all appropriate regulations, but allegedly did not conduct such an inquiry and instead repeatedly pushed their employees to ignore the problems).}

_{44 See, e.g., U.S. ex rel. IBEW Local Union No. 98 v. Farfield Co., 5 F.4th 315, 348–49 (3d Cir. 2021) (defendant recklessly disregardful when it delegated to unknowledgeable individuals the responsibility of complying with law); U.S. ex rel. Kirk v. Schindler Elevator Corp., 601 F.3d 94, 116 (2d Cir. 2010) (rejecting defendant’s Rule 12(b)(6) motion because if the relator is correct that the law required defendant to identify the number of veterans it employs to obtain government contracts and the defendant “had no mechanism in place to identify covered veterans” the FCA elements would be satisfied because defendant would necessarily know that its reports regarding its number of employed veterans were wrong), rev’d other grounds, 131 S. Ct. 1885 (U.S. 2011).}

_{45 U.S. ex rel. Yates v. Pinellas Hematology & Oncology, P.A., 21 F.4th 1288, 1303 (11th Cir. 2021) (finding that jury possessed sufficient evidence to find that defendant acted with reckless disregard when testimony indicated that clinical laboratory owner informed buyer that it would need a Clinical Laboratory Improvement Amendments (CLIA) certificate after sale, new owner did not obtain a CLIA certificate, and once Medicare began denying claims sent from laboratory, the new owner changed address on claims to indicate that claims were filed from a CLIA-certified laboratory).}