In the wake of the SCOTUS decision on knowledge in Schutte/Proctor last month, parties and courts are already beginning to grapple with its implications. In one declined FCA case pending in the Western District of Virginia, DOJ recently filed a statement of interest in which it rejected Defendants' argument that Schutte established a new "reckless disregard" standard that "captures defendants who are [1] conscious of a [2] substantial and [3] unjustifiable risk that their claims are false, but submit them anyway." To the contrary, DOJ interprets SCOTUS as "not limit[ing] the type of evidence that the government or relators could use to prove that Defendants acted with reckless disregard or impose a heightened standard for evaluating such evidence."
DOJ posited that Schutte's holding is "straightforward" — that the FCA's "scienter element refers to respondents' knowledge and subjective beliefs, not to what an objectively reasonable person may have known or believed" — and that the Supreme Court's summary of the three FCA scienter elements (actual knowledge, deliberate ignorance, and reckless disregard) did not reflect its intention to place new limitations on any of them. DOJ goes on to argue that the fact that, in footnote 5 of the Schutte decision, SCOTUS noted that there could be an "objective form of 'recklessness'" indicates that it did not intend to disturb prior precedent from lower courts endorsing such a test. Defendants in a response brief stated that notwithstanding DOJ's statement of interest, they stand by their interpretation of Schutte, but that the court need not resolve what the reckless disregard standard is because there are other bases for the court to dismiss the complaint.
Whether or not the court weighs in or sidesteps the issue here, we at Qui Notes will be watching (and blogging about) this issue.
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