Page:U.S. ex rel. Schutte v. SuperValu.pdf/2

Syllabus

that, by not reporting them, SuperValu submitted false claims. However, the court granted SuperValu summary judgment based on the scienter element, holding SuperValu could not have acted “knowingly.” In a separate case, the court granted Safeway summary judgment on that same basis. The Seventh Circuit affirmed in both cases, relying heavily on Safeco Ins. Co. of America v. Burr, 551 U. S. 47—a case that interpreted the term “willfully” in the Fair Credit Reporting Act. As the Seventh Circuit read Safeco, the companies could not have acted “knowingly” if their actions were consistent with an objectively reasonable interpretation of the phrase “usual and customary.” Thus, the Seventh Circuit concluded, the companies were entitled to summary judgment even if they actually thought that their discounted prices were their “usual and customary” prices (and thus thought their claims were false).

Held: The FCA’s scienter element refers to a defendant’s knowledge and subjective beliefs—not to what an objectively reasonable person may have known or believed. Pp. 8–17.

(a) The FCA’s text and common-law roots demonstrate that the FCA’s scienter element refers to a defendant’s knowledge and subjective beliefs. The FCA sets out a three-part definition of the term “knowingly” that largely tracks the traditional common-law scienter requirement for claims of fraud: Actual knowledge, deliberate ignorance, or recklessness will suffice. See §3729(b)(1)(A). Each term focuses on what the defendant thought and believed: “Actual knowledge” refers to what the defendant is aware of. “Deliberate ignorance” encompasses defendants who are aware of a substantial risk that their statements are false, but intentionally avoid taking steps to confirm the statements’ truth or falsity. And “[r]eckless disregard” captures defendants who are conscious of a substantial and unjustifiable risk that their claims are false, but submit the claims anyway. These forms of scienter track the common law of fraud, which generally focuses on the defendant’s lack of an honest belief in the statement’s truth. Restatement (Second) of Torts §526, Comment e. The focus is on what a defendant thought when submitting a claim—not what a defendant may have thought after submitting it. Pp. 8–11.

(b) Even though the phrase “usual and customary” may be ambiguous on its face, such facial ambiguity alone is not sufficient to preclude a finding that respondents knew their claims were false. That is because the Seventh Circuit did not hold that respondents made an honest mistake about that phrase; it held that, because other people might make an honest mistake, defendants’ subjective beliefs became irrelevant to their scienter. Respondents make three main arguments to support that theory, but the Court finds none to be persuasive.

First, the facial ambiguity of the phrase “usual and customary” does