Tag: Scienter Standard

Supreme Court Provides Clarification on Scienter Standard for FCA and FCRA Claims June 16, 2023 The Supreme Court has announced its decision in the consolidated cases involving the United States and two grocery store chains. In their decision, the Supreme Court unanimously held that the False Claims Act's (FCA) scienter element refers to a defendant's knowledge and subjective beliefs. This decision ruled out "what an objectively reasonable person would believe" as a potential reference for the FCA's scienter element. The Court's decision comes after the Seventh Circuit heard two consolidated cases. These cases concerned submissions from two supermarket chains requesting reimbursement from Medicaid and Medicare. The Centers for Medicare and Medicaid Services (CMS) have regulations that limit pharmacy reimbursement for certain drugs to the "usual and customary" price charged to the general public. According to the case, the supermarkets had price-matching programs between 2006 and 2016. These programs offered discounted prices on several prescription medications to match their competitors' prices. However, they failed to submit these discounted prices to the CMS when requesting reimbursement. During this time, some executives and other individuals at the two companies voiced concerns about what "usually and customarily" meant when supermarkets offered discounted prices. When hearing the cases, the Seventh Circuit's Court of Appeals affirmed the lower Court's summary judgment, favoring the defendants. The Seventh Circuit determined that the defendant only needed an objectively reasonable interpretation of the law, even if they did not believe it. As a result, the Seventh Circuit did not consider the actual beliefs of the supermarket chains concerning the regulation. In an opinion for the Supreme Court, Justice Thomas addressed what scienter in FCA cases meant. When considering the text of the FCA, the Court referenced three "types" of possible knowledge. These references include: Actual Knowledge: This includes whether the individual knows about the information in consideration. Deliberate Ignorance: This refers to when defendants know the falsehoods of their statements and choose not to confirm the validity of their claims. Reckless Disregard: This occurs when the defendants know about a "substantial and unjustifiable risk that their claims are false" yet still choose to submit them. The Court resolved that even one of these types of knowledge would sufficiently satisfy the scienter element in the FCA. In addition, it also determined that Safeco did not apply based on two grounds: It interpreted the Fair Credit Reporting Act (FCRA), not the FCA. The FCRA and the FCA have different mens rea standards. The FCRA uses willful, whereas the FCA uses "knowingly or recklessly." Thus, the Supreme Court vacated the judgments of the lower courts and remanded the cases for additional proceedings. It also considered the clarified standard, which could affect many other FCA cases in the future. Stay updated on all the new rules of compliance with Pre-employ’s free news resources on FCRA, EEOC, and more. Contact a Sales Rep today for more information. Source

Tag: Scienter Standard

Supreme Court Provides Clarification on Scienter Standard for FCA and FCRA Claims

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