The False Claims Act ("FCA") imposes liability on any person or entity that "knowingly" presents a false or fraudulent claim for payment to the federal government, among other things. Last week, the Supreme Court agreed to hear an argument addressing a circuit split as to whether a defendant can knowingly violate the FCA if its conduct is “objectively reasonable” in light of prevailing law. The whistleblowers in these cases claim that subjective understanding should be considered when determining if a defendant knowingly engaged in the wrongdoing alleged.
Opponents of the "objectively reasonable" standard argue that implementing such a rule would allow companies to knowingly steal from the government and then create justifications for such actions after the fact in order to escape liability. On the other hand, proponents of this standard claim that complex and often unclear statutory and regulatory requirements should not form the basis for application of the FCA's severe penalties.
This case will be important to watch as the outcome, whether in favor of the "objectively reasonable" standard or not, will impact FCA litigation as well as potentially other litigation involving fraud standards going forward.
