The Year Ahead: 2023 Cases to Watch

In the year ahead, courts will continue to play a critical role in outlining the contours of successful False Claims Act (FCA) actions. In this post, we will highlight a few cases and trends to be on the lookout for.

The Supreme Court’s docket includes an opportunity to consider and clarify the FCA’s knowledge requirement, and its forthcoming opinion will address the government’s dismissal authority under the FCA. Where the Supreme Court has yet to opine, circuit courts continue to diverge in hotly contested circuit splits, especially regarding the Anti-Kickback Statute (AKS), rendering the AKS a key focus area alongside Medicare Advantage and cybersecurity fraud priorities. Financial fraud whistleblower programs will also continue to grow in prominence over the next year, after the Anti-Money Laundering Act and SEC whistleblower programs were strengthened in the final months and days of 2022.

Supreme Court False Claims Act Cases to Watch

Scienter. On January 13, 2023, the Supreme Court granted certiorari in two now-consolidated appeals seeking to clarify the FCA’s knowledge (scienter) standard.[1] In U.S. ex rel. Schutte v. SuperValu and U.S. ex rel. Proctor v. Safeway, relators alleged the retail pharmacy conglomerates submitted false or fraudulent claims under the Medicare and Medicaid programs. At issue is whether the defendants’ subjective belief that their conduct was unlawful is relevant to establishing a “knowing” violation if there also exists an incorrect but objectively reasonable contrary interpretation of legal requirements. Relying on the Supreme Court’s analysis of the Fair Credit Reporting Act (FCRA)’s scienter requirement, the Seventh Circuit said no: a defendant lacks sufficient knowledge to be liable under the FCA if a statute or regulation is ambiguous and “(a) it has an objectively reasonable reading of the statute or regulation and (b) there was no authoritative guidance [circuit court precedent or guidance from the relevant agency] warning against its erroneous view.”[2]  The Supreme Court stands ready to provide clarity on the scienter requirement and already sought the views of the United States when deciding to grant certiorari.

In its amicus brief, the US solicitor general argued the Seventh Circuit got it wrong by imposing Fair Credit Reporting Act’s scienter requirement in the FCA context—rather, the FCA’s text, history, and common-law antecedents indicate subjective bad faith can be sufficient to establish scienter under the FCA.

Taxpayers Against Fraud filed an amicus brief in support of the relator’s petition for writ of certiorari and amicus briefs in the circuit courts. TAF will continue to monitor and advocate for the correct interpretation of the FCA’s scienter requirement as this case progresses.

Government Dismissal Authority. This year, the Supreme Court will decide the scope of the government’s authority to dismiss non-intervened qui tam actions under 31 U.S.C. § 3730(c) and what standard applies to such dismissal authority. In U.S. ex rel. Polansky v. Executive Health Resources, the relator alleged the defendant caused hospitals to falsely bill Medicare for outpatient services at a higher inpatient rate. Two years later, the government declined to intervene. After five years of the relator’s independent litigation, the government moved to dismiss the action, citing burden to the government and doubts about the relator’s ability to succeed. The Third Circuit affirmed the district court’s dismissal of the action,[3] and the Supreme Court granted the relator’s petition for writ of certiorari. Taxpayers Against Fraud filed an amicus brief in support of the petitioner and reversal, and the Supreme Court heard oral arguments on December 6, 2022.

By Jaclyn Tayabji of Tycko & Zavareei LLP

[1] The FCA defines “knowing” and “knowingly” as a person who, with respect to information, “(i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the information.” 31 USC 3729(b)(1)(A). No specific intent to defraud is required. Id.

[2] United States ex rel. Schutte v. Supervalu Inc., 9 F.4th 455, 468, 471 (7th Cir. 2021), cert. granted, No. 21-1326, 2023 WL 178398 (U.S. Jan. 13, 2023).

[3] Polansky v. Exec. Health Res. Inc, 17 F.4th 376, 380 (3d Cir. 2021), cert. granted sub nom. United States ex rel. Polansky v. Exec. Health Res., Inc., 213 L. Ed. 2d 1063, 142 S. Ct. 2834 (2022).