It's Objectively Reasonable That The False Claims Act Requires An Objective Scienter Standard, Says Seventh Circuit

On August 12, 2021, the Seventh Circuit joined a growing chorus of circuits to cabin expansive False Claims Act liability by holding that the Act requires an objective scienter standard. Under this standard, a defendant who acted under an incorrect interpretation of the relevant statute or regulation did not act with the requisite knowledge under the FCA if (1) the interpretation was objectively reasonable and (2) no authoritative guidance warned the defendant away from that interpretation.

In United States ex rel. Schutte v. SuperValu, Inc., No. 20-2241 (7th Cir. Aug. 12, 2021), the relators alleged that, from 2006 to 2016, SuperValu knowingly submitted to Medicare and Medicaid false reports of its pharmacies' "usual and customary" drug prices. On these reports, SuperValu listed its retail cash prices as its usual and customary price, rather than lower amounts that it charged qualifying customers under a price-matching discount program. The district court concluded