U.S. ex rel. Schutte v. SuperValu Inc.
The Facts
SuperValu and Safeway pharmacies operated price-matching programs that offered customers reduced drug prices, but continued to bill Medicare and Medicaid at higher standard shelf prices. Whistleblowers filed False Claims Act suits alleging the pharmacies knowingly submitted false claims. The companies argued that even if their billing was wrong, their interpretation of the term 'usual and customary price' in the Medicare regulations was objectively reasonable, which some circuits had held precluded FCA liability.
The Application
The companies' defense rested on the objective reasonableness of their interpretation of "usual and customary price," but the Supreme Court held this argument irrelevant to the FCA's scienter requirement. Under the rule applied here, SuperValu and Safeway could not escape liability by showing their pricing theory was plausibly defensible; instead, the court must examine whether they actually knew or believed their practice of billing shelf prices while offering lower prices through price-matching was false, or whether they recklessly disregarded a substantial risk of falsity. The decision shifted the focus from the objective defensibility of their regulatory interpretation to whether the companies were aware of the discrepancy between their stated and actual pricing practices. On remand, the factfinder would assess what the companies actually knew about their own billing conduct and whether that knowledge or conscious indifference satisfied the FCA's scienter standard.
The Conclusion
**The Supreme Court held 9-0 that FCA scienter is determined by the defendant's subjective knowledge and beliefs, not by whether an objectively reasonable interpretation existed.** The case was remanded for the lower court to assess what SuperValu and Safeway actually knew or believed about their billing practices.
No circuit court data for this case.
Case Analysis
Overview
SuperValu and Safeway were accused of knowingly overcharging Medicare and Medicaid by billing the government at higher shelf prices while offering lower prices to customers through price-matching programs; the companies argued their interpretation of 'usual and customary' price was objectively reasonable. The Supreme Court held 9-0 that the False Claims Act's scienter requirement is based on the defendant's actual knowledge and subjective beliefs, not on whether the defendant's interpretation was objectively reasonable.
Facts
SuperValu and Safeway pharmacies operated price-matching programs that offered customers reduced drug prices, but continued to bill Medicare and Medicaid at higher standard shelf prices. Whistleblowers filed False Claims Act suits alleging the pharmacies knowingly submitted false claims. The companies argued that even if their billing was wrong, their interpretation of the term 'usual and customary price' in the Medicare regulations was objectively reasonable, which some circuits had held precluded FCA liability.
Issue
Whether the False Claims Act's scienter requirement is satisfied when a defendant's interpretation of the relevant law was objectively reasonable at the time of submission, or whether the FCA looks to what the defendant actually knew or believed when submitting claims to the government.
Rule
The FCA imposes liability for knowingly submitting false claims. 'Knowingly' means actual knowledge, deliberate ignorance, or reckless disregard for the truth. The subjective scienter inquiry focuses on what the defendant knew, believed, or suspected at the time of submission. An objectively reasonable interpretation of the law does not immunize a defendant who actually knew their claims were false or who was aware of a substantial and unjustifiable risk that they were submitting false claims.
Analysis
The companies' defense rested on the objective reasonableness of their interpretation of "usual and customary price," but the Supreme Court held this argument irrelevant to the FCA's scienter requirement. Under the rule applied here, SuperValu and Safeway could not escape liability by showing their pricing theory was plausibly defensible; instead, the court must examine whether they actually knew or believed their practice of billing shelf prices while offering lower prices through price-matching was false, or whether they recklessly disregarded a substantial risk of falsity. The decision shifted the focus from the objective defensibility of their regulatory interpretation to whether the companies were aware of the discrepancy between their stated and actual pricing practices. On remand, the factfinder would assess what the companies actually knew about their own billing conduct and whether that knowledge or conscious indifference satisfied the FCA's scienter standard.
Conclusion
**The Supreme Court held 9-0 that FCA scienter is determined by the defendant's subjective knowledge and beliefs, not by whether an objectively reasonable interpretation existed.** The case was remanded for the lower court to assess what SuperValu and Safeway actually knew or believed about their billing practices.
Notes
OT2022. Added via SCOTUS bulk import 2026-05-14
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