Valid False Claims Act Defenses Still in Play After SCOTUS Decision, Lawyer Says
Defendants in False Claims Act cases still have a valid defense in light of the U.S. Supreme Court's recent ruling in U.S. ex rel. Schutte v. SuperValu "if there is objective ambiguity" in the law and there exists a "genuine subjective belief in the validity of the claim," Akin Gump lawyer Robert Salcido said in a blog post. FCA defendants also have a valid defense if they "acted with mere negligence or inadvertence," Salcido added, explaining the plaintiff must show that the defendant acted with a "substantial and unjustifiable risk."
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Salcido sought to sort out which FCA defenses were still available following the recent SCOTUS decision, which said defendants may no longer claim they did not "knowingly" make false statements based on an "objectively reasonable interpretation" of an ambiguous law when the defendant has subjective knowledge the claim is false. The court said the FCA's scienter element, which says a person must have "knowingly" made false statements, specifically refers to a defendant's knowledge and subjective beliefs.
The Akin Gump partner said that where defendants can get in trouble under Schutte is if they "act with substantial unjustified risk as to the truth or falsity of the claim," which some courts have said exists when the defendant disregards legitimate employee concerns, fails to implement internal controls to "ensure accurate claims are submitted" or receives "claim denials without confirming entitlement."
To preclude making any of these defenses, Salcido advised companies to adopt compliance policies to ensure the accuracy of claims; to keep up to date with government rules and regulations, communicating this understanding to the government when applicable; to monitor government announcements and court decisions; to assess industry peers' interpretations of new rules; to evaluate industry guidance; and to 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."