At this year's ACI False Claims Qui Tam Enforcement Conference's inaugural panel — Scienter After SuperValu — DOJ's Civil Fraud Deputy Chief was on the hot seat.
As our readers already know, in SuperValu, the Supreme Court shot down the defense bar's hopes of "objective reasonableness" as a scienter killer, and, in so doing, held the FCA's "knowledge" elements "focus primarily on what [defendants] thought and believed." U.S. ex rel. Schutte v. SuperValu Inc., 598 U.S. 739, 751 (2023). A plaintiff can prevail on its FCA claim by proving actual knowledge, deliberate ignorance, or recklessness, all of which turn on a defendant's subjective "awareness" of information that would render claims false. That much the Court made clear. What it left undecided was the validity of so-called "objective recklessness." After SuperValu, an objectively reasonable interpretation of an ambiguous statute or regulation cannot kill an FCA claim where there's contrary evidence of intent, but can a claim survive in the absence of any such evidence? Can the government or a relator proceed based only on "objective recklessness," that is, where a defendant "act[s] in the face of an unjustifiably high risk of illegality that was so obvious that it should have been known" even where it was not "actually conscious of that risk"? Id. at n.5. The Court declined to decide, leaving muddy waters in the decision's wake.
Without a clear answer, the government or a relator could attempt to bootstrap what essentially amounts to negligence into "objective recklessness" where, for example, a defendant "should have" known its interpretation was wrong or "should have" inquired with the relevant agency or "should have" done something else measured from hindsight after-the-fact. It's been a long time since law school (by this point longer for me than for many) but your author seems to recall 'shoulds' as the makings of a negligence claim, judging what the 'reasonable person' would have done. A far cry from fraud.
Yet, "should" came up so many times at the panel that your writer lost count, nearly as often as, "it depends." Can't a defendant's seeking legal advice defeat "recklessness"? It depends. How about asking the agency about its interpretation of a statute or regulation? It depends. When a compliance program catches a problem and corrects it, even imperfectly? It depends.
At the panel's close, your writer asked for DOJ's position on whether, without a shred of evidence of subjective intent, a defendant can be held liable for "objective recklessness." The answer? Two DOJ statements of interest filed post-SuperValu argue for an "objective" component to scienter. But, to put it plainly, will DOJ argue for a pure "objective recklessness" standard? Apparently, it depends....
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