In its recent decision in United States ex. rel. Schutte v. SuperValu Inc., the Seventh Circuit joined four other circuits in holding that the Supreme Court’s objective scienter standard articulated in the Fair Credit Reporting Act (FCRA) case Safeco Insurance Company of America v. Burr applies to the False Claims Act (FCA). Under the objective scienter standard, a defendant who acts under an incorrect interpretation of a statute does not do so with reckless disregard—and therefore scienter, a required element of a FCA violation—if (i) the interpretation was objectively reasonable, and (ii) no authoritative guidance cautioned the defendant against it.
Notably for companies that contract with the federal government, this decision narrows the scope of their liability under the FCA. It also highlights the importance of such companies identifying and acting in accordance with authoritative guidance—a term of art whose precise contours remain undefined.
Continue Reading Seventh Circuit Holds Objective Scienter Standard Applies to FCA