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Supreme Court Unanimously Rejects After the Fact Excuses

Posted  June 2, 2023

In a major victory for honest citizens, on June 1, 2023, the Supreme Court unanimously reversed the Seventh Circuit’s decision in United States ex rel. Schutte v. SuperValu Inc. Constantine Cannon whistleblower attorneys Eric HavianMichael RonickherAri Yampolsky, and Noah Brecker-Redd had filed an amicus brief on behalf of Senator Charles Grassley, the champion of the FCA, urging the Court to reverse this frankly ridiculous reading of the statute.

The Seventh Circuit opinion had gutted the False Claims Act (FCA) by creating a so-called “objective reasonableness” defense that appeared nowhere in the statute. The Seventh Circuit bowdlerized the detailed statutory language defining when fraud is committed “knowingly,” and replaced it with the possibility of an excuse after the fact. As the Supreme Court put it, defendants would not have to show they made an honest mistake; it would be enough to say that “because other people might make an honest mistake, defendants’ subjective beliefs became irrelevant.”

The Court’s 9-0 opinion made short work of the defendants’ argument:

Based on the FCA’s statutory text and its common-law roots, the answer to the question presented is straightfor­ward: The FCA’s scienter element refers to respondents’ knowledge and subjective beliefs—not to what an objec­tively reasonable person may have known or believed.

In other words, “What matters for an FCA case is whether the defendant knew the claim was false.”

Those who watched the Supreme Court arguments were expecting the reversal. Indeed, when defense counsel argued for their interpretation, Justice Sotomayor referenced Constantine Cannon’s brief for Sen. Grassley, noting dryly that the “person most knowledgeable about that, what Congress intended, is probably Senator Grassley . . . and he disagrees with you.”

While the ultimate result was expected, the clarity and unanimity of the opinion are welcome signs that defendants who want to escape liability for knowingly committing fraud have a rightly tough road ahead. Sen. Grassley expressed gratitude that “every single Supreme Court justice saw reason and chose to uphold the integrity of the law.” As partner Eric Havian said, “It’s an absolute home run for whistleblowers.”

Constantine Cannon whistleblower attorneys celebrate this return to the core principles of the FCA: if you know, or should know, that you are committing fraud, you will be liable.

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