United States ex rel. Schutte v. Supervalu Inc. ( 2023 )

(Slip Opinion) OCTOBER TERM, 2022 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
UNITED STATES ET AL. EX REL. SCHUTTE ET AL. v.
SUPERVALU INC. ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE SEVENTH CIRCUIT
No. 21–1326. Argued April 18, 2023—Decided June 1, 2023*
In these cases, petitioners have sued retail pharmacies under the False
Claims Act (FCA), 31 U. S. C. §3729 et seq. The FCA permits private
parties to bring lawsuits in the name of the United States against
those who they believe have defrauded the Federal Government,
§3730(b), and imposes liability on anyone who “knowingly” submits a
“false” claim to the Government, §3729(a). Here, petitioners claim that
respondents—SuperValu and Safeway—defrauded two federal bene-
fits programs, Medicaid and Medicare. Both Medicaid and Medicare
offer prescription-drug coverage to their beneficiaries, and both often
cap any reimbursement for drugs at the pharmacy’s “usual and cus-
tomary” charge to the public. But, according to petitioners, SuperValu
and Safeway for years offered various pharmacy discount programs to
their customers—yet reported their higher retail prices, rather than
their discounted prices. Petitioners also presented evidence that the
companies believed their discounted prices were their usual and cus-
tomary prices and tried to prevent regulators and contractors from
finding out about their discounted prices. In sum, petitioners claim
that the evidence shows that respondents thought their claims were
inaccurate yet submitted them anyway.
Two essential elements of an FCA violation are (1) the falsity of the
claim and (2) the defendant’s knowledge of the claim’s falsity. The
District Court ruled against SuperValu on the falsity element—finding
that its discounted prices were its usual and customary prices and
——————
* Together with No. 22–111, United States et al. ex rel. Proctor v. Safe-
way, Inc., also on certiorari to the same court.
2 UNITED STATES EX REL. SCHUTTE v. SUPERVALU INC.
Syllabus
that, by not reporting them, SuperValu submitted false claims. How-
ever, 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 reason-
able 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 subjec-
tive 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 igno-
rance, or recklessness will suffice. See §3729(b)(1)(A). Each term fo-
cuses on what the defendant thought and believed: “Actual knowledge”
refers to what the defendant is aware of. “Deliberate ignorance” en-
compasses 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. Re-
statement (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 ambigu-
ous on its face, such facial ambiguity alone is not sufficient to preclude
a finding that respondents knew their claims were false. That is be-
cause the Seventh Circuit did not hold that respondents made an hon-
est mistake about that phrase; it held that, because other people might
make an honest mistake, defendants’ subjective beliefs became irrele-
vant 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
Cite as: 598 U. S. ____ (2023) 3
Syllabus
not by itself preclude a finding of scienter under the FCA. Even if the
phrase is ambiguous, respondents could have learned its correct mean-
ing. Indeed, petitioners argue that the companies received notice that
the phrase referred to their discounted prices, comprehended those no-
tices, and then tried to hide their discounted prices.
Second, the companies’ reliance on Safeco’s interpretation of the
common-law definitions of “knowing” and “reckless” is misplaced, be-
cause Safeco interpreted a different statute with a different mens rea
standard. 551 U. S., at 52. In any event, Safeco did not purport to set
forth the purely objective safe harbor that respondents invoke. “Noth-
ing in Safeco suggests that [one] should look to facts”—or, here, legal
interpretations—“that the defendant neither knew nor had reason to
know at the time he acted.” Halo Electronics, Inc. v. Pulse Electronics,
Inc., 579 U. S. 93, 106.
Finally, respondents contend their conduct is not actionable accord-
ing to the common law of fraud incorporated by the FCA because com-
mon law fraud does not encompass misrepresentations of law. Re-
spondents then posit that their alleged claims were false only because
their claims’ falsity turned in part on the meaning of the phrase “usual
and customary”—which, they argue, means that their claims would be
false only as misrepresentations of law. But that does not follow. Even
assuming that the FCA incorporates some version of this rule, re-
spondents did not make a pure misrepresentation of law; they did not
say, for example, “this is what ‛usual and customary’ means.’ ” Rather,
they made a statement that implied facts about their prices, essen-
tially saying “this is what our ‛usual and customary’ prices are.” Peti-
tioners’ case thus makes out a valid fraud theory even under respond-
ents’ common-law rule. Pp. 11–16.
No. 21–1326, 9 F. 4th 455; No. 22–111, 30 F. 4th 649, vacated and re-
manded.
THOMAS, J., delivered the opinion for a unanimous Court.
Cite as: 598 U. S. ____ (2023) 1
Opinion of the Court
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SUPREME COURT OF THE UNITED STATES
_________________
Nos. 21–1326 and 22–111
_________________
UNITED STATES, ET AL., EX REL. TRACY SCHUTTE,
ET AL., PETITIONERS
21–1326 v.
SUPERVALU INC., ET AL.
UNITED STATES, ET AL., EX REL. THOMAS PROCTOR,
PETITIONER
22–111 v.
SAFEWAY, INC.
ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE SEVENTH CIRCUIT
[June 1, 2023]
JUSTICE THOMAS delivered the opinion of the Court.
The False Claims Act (FCA) imposes liability on anyone
who “knowingly” submits a “false” claim to the Govern-
ment. 31 U. S. C. §3729(a). In some cases, that rule is
straightforward: If a law authorized payment of $100 for
“each” medical test, and a doctor knows that he did five
tests but submits a claim for ten, then he has knowingly
submitted a false claim. But sometimes the rule is less
clear. If a law authorized payment for only “customary”
medical tests, some doctors might be confused when it came
time for billing. And, while some doctors might honestly
mistake what that term means, others might correctly un-
derstand whatever “customary” meant in this context—and
submit claims that were inaccurate anyway.
2 UNITED STATES EX REL. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
The cases before us today involve a legal standard similar
to that latter example: In certain circumstances, pharma-
cies are required to bill Medicare and Medicaid for their
“usual and customary” drug prices. And, critically, these
cases involve defendants (respondents here) who may have
correctly understood the relevant standard and submitted
inaccurate claims anyway. The question presented is thus
whether respondents could have the scienter required by
the FCA if they correctly understood that standard and
thought that their claims were inaccurate.
We hold that the answer is yes: What matters for an FCA
case is whether the defendant knew the claim was false.
Thus, if respondents correctly interpreted the relevant
phrase and believed their claims were false, then they could
have known their claims were false.
I
The FCA permits private parties to bring lawsuits in the
name of the United States—called qui tam lawsuits—
against those who they believe have defrauded the Federal
Government. §3730(b). Petitioners here brought two such
lawsuits against respondents, which are companies that op-
erate hundreds of retail drug pharmacies nationwide. In
No. 21–1326, respondents are a group of companies that we
collectively call SuperValu; in No. 22–111, respondent is
Safeway, Inc. According to petitioners, respondents over-
charged Medicare and Medicaid programs for years when
seeking reimbursement for prescription drugs that the pro-
grams covered. In doing so, petitioners argue, respondents
defrauded the Government and violated the FCA.
A
The claims at issue here relate to two federal benefits pro-
grams: Medicaid, which establishes a cooperative federal-
state program that provides medical assistance to certain
low-income individuals, see 42 U. S. C. §1396 et seq., and
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Opinion of the Court
Medicare, which provides federally funded health insur-
ance coverage to individuals who are 65 or older or who are
disabled, see 42 U. S. C. §1395 et seq.
As relevant here, States’ Medicaid plans may offer outpa-
tient prescription-drug coverage to qualifying individuals.
§1396d(a)(12). However, the Federal Centers for Medicare
and Medicaid Services (CMS) has promulgated regulations
that limit the amount these programs may reimburse for
certain drugs. See 42 CFR §447.512(b)(2) (2021). Those
regulations limit any reimbursement to the lower of two
amounts, one of which is the healthcare provider’s “usual
and customary charges [for the drug] to the general public.”
Ibid. State Medicaid agencies likewise typically reimburse
pharmacies for the lowest of different amounts, one of
which is often the pharmacy’s “usual and customary
charge” to the public. See CMS, Medicaid Covered Outpa-
tient Prescription Drug Reimbursement Information by
State, Quarter Ending September 2022 (Nov. 16, 2022),
https://www.medicaid.gov/medicaid/prescription-drugs/
state-prescription-drug-resources/medicaid-covered-
outpatient-prescription-drug-reimbursement-information-
state/index.html.
Through Medicare Part D, the Government also offers
prescription-drug coverage to beneficiaries. See 42 U. S. C.
§1395w–101 et seq.; 42 CFR pt. 423. To administer that
coverage, CMS awards contracts to private plan sponsors.
See 42 U. S. C. §1395w–115; 42 CFR §§423.315, 423.329.
Those plan sponsors, in turn, enter contracts with pharma-
cies (sometimes through middlemen called pharmacy bene-
fit managers). Many of the contracts at issue here limited
any reimbursement to the pharmacy’s “usual and custom-
ary” price.
The bottom line is that, when respondents submitted re-
imbursement claims to these entities, they often were re-
quired to charge and disclose their “usual and customary”
4 UNITED STATES EX REL. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
price for that drug.1 But, according to petitioners, respond-
ents reported higher prices to these entities than the ones
that they usually and customarily charged to the public.
B
According to petitioners, in 2006, respondents’ competi-
tor, Walmart, began offering 30-day supplies of many drugs
for $4.2 To compete with Walmart, SuperValu and Safeway
adopted price-match programs in which their pharmacies
would match a competitor’s lower price at a customer’s re-
quest. SuperValu’s pharmacies would then automatically
apply that price to future refills of the drug for those cus-
tomers. Meanwhile, Safeway also adopted a “membership”
discount program through which customers received dis-
counted generic drug prices (often $4 for a 30-day supply).
To enroll in that membership program, customers had to
fill out a form with only basic information; petitioners argue
that Safeway often already had this information on file. Su-
perValu’s programs continued until 2016; Safeway’s contin-
ued until 2015.
Respondents’ discount programs turned out to be popu-
lar. Though the exact extent of that popularity is disputed,
petitioners have presented evidence that the discounted
prices comprised a majority of sales for many drugs to cus-
tomers who paid in cash (and not through insurance) for at
least some years during the programs’ operation. For ex-
ample, according to petitioners, a majority of SuperValu’s
2012 cash sales for 44 of its 50 top-selling prescription
——————
1 The FCA covers claims presented both to the Federal Government
and to a federal “contractor, grantee, or other recipient” when, as rele-
vant here, the money is “to be spent or used . . . to advance a Government
program.” 31 U. S. C. §3729(b)(2)(A).
2 Respondents, of course, demur and portray themselves in a far more
sympathetic light. We do not resolve any of those factual disputes today,
as we resolve only a legal question arising from the grant of summary
judgment to respondents. In this posture, we must take the evidence in
petitioners’ favor.
Cite as: 598 U. S. ____ (2023) 5
Opinion of the Court
drugs were made at those discounted prices. And, accord-
ing to petitioners, 88% of Safeway’s 2014 cash sales for its
top 20 generic drugs were at discounted rates.
Petitioners contend that those discounted prices were ac-
tually respondents’ “usual and customary” prices—and
that, rather than submitting those lower prices for reim-
bursement, respondents instead reported their higher, non-
discounted prices. For example, petitioners have presented
evidence that Safeway charged just $10 for 94% of its cash
sales for a 90-day supply of a cholesterol drug between 2008
and 2012. Yet Safeway apparently reported prices as high
as $108 as “usual and customary” during that time. And
petitioners presented evidence that, at least at some times
and for some drugs, SuperValu made more than 80% of its
cash sales for prices less than what it disclosed as its “usual
and customary” price.
To be sure, the phrase “usual and customary” on its face
appears somewhat open to interpretation. But petitioners
contend that respondents were informed that their lower,
discounted prices were their “usual and customary” prices,
believed their discounted prices were their “usual and cus-
tomary” prices, and tried to hide their discounted prices
from regulators and contractors. Petitioners have pre-
sented evidence that they claim supports that theory. For
example, both SuperValu and Safeway received a notice in
2006 from a pharmacy benefit manager stating that the
phrase “usual and customary” refers to discounted prices;
Safeway apparently received the same message from state
Medicaid agencies. And executives at both companies
raised concerns about letting state agencies or pharmacy
benefit managers find out about their discounted prices.
For example, some emails between SuperValu executives
described their discount program as a “stealthy approach”
and noted concern for the “integrity” of their “U&C price”
claims. App. to Pet. for Cert. in No. 21–1326, p. 67a (inter-
nal quotation marks omitted). An executive at Safeway
6 UNITED STATES EX REL. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
similarly stated that “[w]e may have some issues with
U&C” and that “if you [match a] price offer, that becomes
your usual and customary [price] for that day.” 30 F. 4th
649, 667 (CA7 2022) (internal quotation marks omitted).
Other documents directed Safeway’s employees to match
Walmart prices, but cautioned that employees should not
“put any of this in writing to stores because our official pol-
icy is we do not match.” Id., at 666. Petitioners argue that
this and other evidence show that respondents thought that
their claims were inaccurate yet submitted them anyway.
C
Before proceeding, some context about how these cases
reached us is useful to understand the question presented.
The FCA (as relevant here) imposes liability on those who
“knowingly presen[t] . . . a false or fraudulent claim for pay-
ment or approval.” §3729(a)(1)(A). Thus, two essential el-
ements of an FCA violation are (1) the falsity of the claim
and (2) the defendant’s knowledge of the claim’s falsity.
In SuperValu’s case, the District Court ruled against Su-
perValu on the falsity element—it determined that Super-
Valu’s discounted prices were its “usual and customary”
prices and that, by not reporting them, SuperValu submit-
ted claims that were false. But, the District Court then
granted summary judgment for SuperValu based on the sci-
enter element, holding SuperValu could not have acted
“knowingly.” Soon after, it granted Safeway summary judg-
ment on the same basis.
The Seventh Circuit affirmed. 9 F. 4th 455 (2021). In
doing so, it relied heavily on Safeco Ins. Co. of America v.
Burr, 551 U. S. 47 (2007)—a case that interpreted the term
“ ‘willfully’ ” in the Fair Credit Reporting Act (FCRA), id., at
52. Specifically, the Seventh Circuit read Safeco to dictate
a two-step inquiry for ascertaining whether a defendant
acted recklessly or knowingly. At step one, the Seventh Cir-
Cite as: 598 U. S. ____ (2023) 7
Opinion of the Court
cuit took Safeco to ask whether a defendant’s acts were con-
sistent with any objectively reasonable interpretation of the
relevant law that had not been ruled out by definitive legal
authority or guidance. This step, the Seventh Circuit held,
applied regardless of whether the defendant actually be-
lieved such an interpretation at the time of its claims. Only
if the defendant’s acts were not consistent with any objec-
tively reasonable interpretation would the court proceed, at
step two, to consider the defendant’s actual subjective
thoughts. Thus, under the Seventh Circuit’s approach, a
claim would have to be objectively unreasonable, as a legal
matter, before a defendant could be held liable for “know-
ingly” submitting a false claim, no matter what the defend-
ant thought.
Turning to the facts here, the Seventh Circuit held that
respondents were entitled to summary judgment because
their actions were consistent with an objectively reasonable
interpretation of the phrase “usual and customary.” Specif-
ically, the court reasoned that the phrase could have been
understood as referring to respondents’ retail prices, not
their discounted prices—even if the phrase, correctly un-
derstood, referred to their discounted prices. It thus did not
matter whether respondents thought that their discounted
prices were actually their “usual and customary” prices.
What mattered, instead, was that someone else, standing
in respondents’ shoes, may have reasonably thought that
the retail prices were what counted.
We granted certiorari, see 598 U. S. ___ (2023), to resolve
that legal question: If respondents’ claims were false and
they actually thought that their claims were false—because
they believed that their reported prices were not actually
their “usual and customary” prices—then would they have
“knowingly” submitted a false claim within the FCA’s
meaning? Or is the Seventh Circuit correct—that respond-
ents could not have “knowingly” submitted a false claim un-
less no hypothetical, reasonable person could have thought
8 UNITED STATES EX REL. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
that their reported prices were their “usual and customary”
prices?
It is equally important to recognize what we did not grant
certiorari to review: We are not reviewing the meaning of
the phrase “usual and customary” or whether any of re-
spondents’ claims were, in fact, inaccurate or otherwise
false. Nor are we reviewing whether respondents actually
thought that the phrase “usual and customary” referred to
their discounted prices. Nor, for that matter, are we re-
viewing any factual disputes about what respondents did or
did not believe or do. These cases come to us from the grant
of summary judgment to respondents on one discrete legal
issue, and we granted certiorari to resolve only that issue.
II
Based on the FCA’s statutory text and its common-law
roots, the answer to the question presented is straightfor-
ward: The FCA’s scienter element refers to respondents’
knowledge and subjective beliefs—not to what an objec-
tively reasonable person may have known or believed. And,
even though the phrase “usual and customary” may be am-
biguous on its face, such facial ambiguity alone is not suffi-
cient to preclude a finding that respondents knew their
claims were false.
A
We start, as always, with the text of the FCA. See Uni-
versal Health Services, Inc. v. United States ex rel. Escobar,
579 U. S. 176, 187 (2016). Here, the FCA defines the term
“knowingly” as encompassing three mental states: First,
that the person “has actual knowledge of the information,”
§3729(b)(1)(A)(i). Second, that the person “acts in deliber-
ate ignorance of the truth or falsity of the information,”
§3729(b)(1)(A)(ii). And, third, that the person “acts in reck-
less disregard of the truth or falsity of the information,”
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Opinion of the Court
§3729(b)(1)(A)(iii). In short, either actual knowledge, delib-
erate ignorance, or recklessness will suffice.3
That three-part test largely tracks the traditional com-
mon-law scienter requirement for claims of fraud. See Re-
statement (Second) of Torts §526 (1976); Restatement
(Third) of Torts: Liability for Economic Harm §10 (2018).
For example, one widely cited English decision, Derry v.
Peek, [1889] 14 App. Cas., articulated the rule as follows:
“[F]raud is proved when it is shewn that a false representa-
tion has been made (1) knowingly, or (2) without belief in
its truth, or (3) recklessly, careless whether it be true or
false.” Id., at 374 (judgment of Lord Herschell). And, cap-
turing the FCA’s use of the term “deliberate ignorance,”
that decision noted that an action for fraud would lie if “a
person making a false statement had shut his eyes to the
facts, or purposely abstained from inquiring into them.”
Id., at 376. Those standards have been cited and widely
adopted by American courts in the century since. See 3 D.
Dobbs, P. Hayden, & E. Bublick, Law of Torts §665, p. 645
(2d ed. 2011) (Dobbs); Restatement (Second) of Torts, App.
§526, Reporter’s Note.
That the text of the FCA tracks the common law is un-
surprising because, as we have recognized, the FCA is
largely a fraud statute. See Escobar, 579 U. S., at 187–188,
and n. 2. Indeed, the FCA was first enacted in 1863 to
“ ‘sto[p] the massive frauds perpetrated by large contractors
during the Civil War.’ ” Id., at 181. To this day, the FCA
refers to “ ‘false or fraudulent’ ” claims, pointing directly to
“the common-law meaning of fraud.” Id., at 187 (emphasis
added). In the absence of statutory text to the contrary, we
would assume that “ ‘Congress intends to incorporate the
well-settled meaning’ ” of such a common-law term. See
——————
3 The FCA also specifies that the term “ ‘knowingly’ . . . require[s] no
proof of specific intent to defraud.” §3729(b)(1)(B).
10 UNITED STATES EX REL. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
ibid. And here, the FCA’s definition of “knowingly” con-
firms that assumption by largely tracking the common-law
scienter standards for fraud.
On their face and at common law, the FCA’s standards
focus primarily on what respondents thought and believed.
First, the term “actual knowledge” refers to whether a per-
son is “aware of ” information.4 See Intel Corp. Investment
Policy Comm. v. Sulyma, 589 U. S. ___, ___–___ (2020) (slip
op., at 6–7); Escobar, 579 U. S., at 191 (“A defendant can
have ‛actual knowledge’ that a condition is material without
the Government expressly calling it a condition of pay-
ment”); Black’s Law Dictionary 784 (5th ed. 1979) (“to un-
derstand,” or “the perception of the truth”); Restatement
(Second) of Torts §526, and Comment c. Second, the term
“deliberate ignorance” encompasses defendants who are
aware of a substantial risk that their statements are false,
but intentionally avoid taking steps to confirm the state-
ment’s truth or falsity. See Global-Tech Appliances, Inc. v.
SEB S. A., 563 U. S. 754, 769 (2011); Black’s Law Diction-
ary, at 672 (“[v]oluntary ignorance”); Derry, 14 App. Cas.,
at 376. And, third, the term “reckless disregard” similarly
captures defendants who are conscious of a substantial and
unjustifiable risk that their claims are false, but submit the
claims anyway. See Black’s Law Dictionary, at 1142;
Farmer v. Brennan, 511 U. S. 825, 836 (1994); Restatement
(Third) of Torts §10, Comment c.5
——————
4 Respondents contend that “information” can refer only to purely fac-
tual information, like the number of drugs sold. But the definition of
“information” is broad, referring to all “knowledge obtained from inves-
tigation, study, or instruction.” See Webster’s New Collegiate Dictionary
592 (1975); see also American Heritage Dictionary 674–675 (1981). And,
in this context, the scienter requirement of the FCA is plainly directed to
the falsity of the claims submitted. §3729(a)(1)(A).
5 In some civil contexts, a defendant may be called “reckless” for acting
in the face of an unjustifiably high risk of illegality that was so obvious
that it should have been known, even if the defendant was not actually
conscious of that risk. See Farmer, 511 U. S., at 836–837. We need not
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Opinion of the Court
Again, that tracks traditional common-law fraud, which
ordinarily “depends on a subjective test” and the defend-
ant’s “culpable state of mind.” Id., §10, Comment a. What
typically matters at common law is whether the defendant
made the false statement “without belief in its truth or
recklessly, careless of whether it is true or false.” Restate-
ment (Second) of Torts §526, Comment e. If a defendant
knows that he “lack[s an] honest belief ” in the statement’s
truth, that is often enough to establish scienter for fraud.
Id., Comment d.; Dobbs §665, at 647.
Both the text and the common law also point to what the
defendant thought when submitting the false claim—not
what the defendant may have thought after submitting it.
As noted above, the text encompasses those who “knowingly
presen[t] . . . a false or fraudulent claim”; the term “know-
ingly” thus modifies present-tense verbs like “presents.”
§3729(a)(1)(A). As such, the focus is not, as respondents
would have it, on post hoc interpretations that might have
rendered their claims accurate. It is instead on what the
defendant knew when presenting the claim. See also Re-
statement (Second) of Torts §526, Comment e (“It is enough
that being conscious that he has neither knowledge nor be-
lief in the existence of the matter he chooses to assert it as
a fact”); accord, Halo Electronics, Inc. v. Pulse Electronics,
Inc., 579 U. S. 93, 105 (2016) (“[C]ulpability is generally
measured against the knowledge of the actor at the time of
the challenged conduct”).
B
The difficulty here, however, is that the phrase “usual
and customary” is, on its face, less than perfectly clear. We
assume (as the District Court ruled in SuperValu’s case)
——————
consider how (or whether) that objective form of “recklessness” relates to
the FCA today because, as noted above, it is enough to say that the FCA’s
standards can be satisfied by a defendant’s subjective awareness of the
claim’s falsity or an unjustifiable risk of such falsity.
12 UNITED STATES EX REL. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
that respondents’ “usual and customary” prices were their
discounted ones; if so, it might have been a forgivable mis-
take if respondents had honestly read the phrase as refer-
ring to retail prices, not discounted prices. But the Seventh
Circuit did not hold that respondents made an honest mis-
take; it held that, because other people might make an hon-
est mistake, defendants’ subjective beliefs became irrele-
vant to their scienter. Respondents make three main
arguments in support of that rule. But none is persuasive.
1
Respondents first focus on the inherent ambiguity of the
phrase at issue here, asserting that they could not have
“known” that their claims were inaccurate because they
could not have “known” what the phrase “usual and custom-
ary” actually meant. The most that is possible, respondents
posit, is that they took a (correct) guess.
We disagree. Although the terms, in isolation, may have
been somewhat ambiguous, that ambiguity does not pre-
clude respondents from having learned their correct mean-
ing—or, at least, becoming aware of a substantial likelihood
of the terms’ correct meaning. To illustrate why, consider
a hypothetical driver who sees a road sign that says “Drive
Only Reasonable Speeds.” That driver, without any more
information, might have no way of knowing what speeds
are reasonable and what speeds are too fast. But then as-
sume that the same driver was informed earlier in the day
by a police officer that speeds over 50 mph are unreasonable
and then noticed that all the other cars around him are go-
ing only 48 mph. In that case, the driver might know that
“Reasonable Speeds” are anything under 50 mph; or, at the
least, he might be aware of an unjustifiably high risk that
anything over 50 mph is unreasonable. Indeed, if the same
police officer later pulled the driver over, we imagine that
he would be hard pressed to argue that some other person
might have understood the sign to allow driving at 80 mph.
Cite as: 598 U. S. ____ (2023) 13
Opinion of the Court
The same analysis applies here. According to petitioners,
respondents received notice that the phrase “usual and cus-
tomary” referred to their discounted prices (in some cases,
it seems, from the same entities to which they reported
their prices). And, according to petitioners, respondents
comprehended those notices and then tried to hide their dis-
counted prices. If that is true, then perhaps respondents
actually knew what the phrase meant; or perhaps respond-
ents were aware of an unjustifiably high risk that the
phrase referred to their discounted prices. And, if that is
true, then respondents may have known that their claims
were false. The facial ambiguity of the phrase thus does not
by itself preclude a finding of scienter under the FCA.
2
Second, like the Seventh Circuit, respondents rely on
Safeco. They contend that Safeco already interpreted the
common-law definitions of “knowing” and “reckless” and
that it did so by looking first at whether the defendant’s
“reading of the statute” was “objectively unreasonable.”
551 U. S., at 69. Accordingly, respondents conclude that,
because the FCA has the same common-law terms, it should
be read with the same, objective common-law focus.
This argument fails twice over. First, Safeco interpreted
a different statute, the FCRA, which had a different mens
rea standard, “ ‘willfully.’ ” Id., at 52 (quoting 15 U. S. C.
§1681n(a)). While Safeco did reference the common law’s
standards for “knowing” and “reckless” conduct, see 551
U. S., at 59–60, 68–69, its interpretation was ultimately
tied to the FCRA’s particular text. To take Safeco as estab-
lishing categorical rules for those terms would accordingly
“abandon the care we have traditionally taken to construe
such words in their particular statutory context.” Jerman
v. Carlisle, McNellie, Rini, Kramer & Ulrich, L. P. A., 559
U. S. 573, 585 (2010). And, as explained above, the FCA’s
scienter standards are plainly satisfied by a defendant’s
14 UNITED STATES EX REL. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
conscious belief that his claims are false.
Second, Safeco did not purport to set forth the purely ob-
jective safe harbor that respondents invoke. To the con-
trary, Safeco stated that a person is reckless if he acts
“knowing or having reason to know of facts which would
lead a reasonable man to realize” that his actions were sub-
stantially risky. 551 U. S., at 69 (emphasis added; internal
quotation marks omitted). Or, as Safeco alternatively put
it, the common law of recklessness contained an objective
standard because it encompassed actions involving “an un-
justifiably high risk of harm that is either known or so ob-
vious that it should be known.” Id., at 68 (emphasis added;
internal quotation marks omitted); see also Restatement
(Second) of Torts §500, Comment a (1964) (“Recklessness
may consist of either of two different types of conduct. In
one the actor knows . . . of facts which create a high degree
of risk”). Thus, as we have stated previously, “[n]othing in
Safeco suggests that we should look to facts that the defend-
ant neither knew nor had reason to know at the time he
acted.” Halo Electronics, 579 U. S., at 106.6 By a similar
token here, we do not look to legal interpretations that re-
spondents did not believe or have reason to believe at the
time they submitted their claims.
3
Respondents make one more argument, approaching the
issue from a somewhat different angle. They contend that,
at common law, their claims would not be actionable as
fraudulent even if their reported prices were not accurate
under the correct meaning of “usual and customary.” Their
——————
6 Respondents read a footnote in Safeco to establish the sort of purely
objective safe harbor for which they argue. See Safeco, 551 U. S., at 70,
n. 20. But that footnote—even if it does deem subjective intent to be ir-
relevant in the FCRA context—certainly was not meant to establish the
general rule for the terms “knowing” or “reckless” in all contexts. Cf.
Halo Electronics, 579 U. S., at 106, n. (distinguishing the footnote in the
patent-infringement context).
Cite as: 598 U. S. ____ (2023) 15
Opinion of the Court
argument is as follows: At common law, misrepresentations
of law are not actionable; only misrepresentations of fact
are. Because the FCA incorporates the common law of
fraud, it embodies that same limitation. And the claims
here would have been knowingly false only because re-
spondents correctly understood what “usual and custom-
ary” meant. Therefore, respondents conclude, their reports
were not false because of any misrepresentation of fact; to
the contrary, their claims would have been false only be-
cause of their view of the law.
But those premises do not support that conclusion. To be
sure, many courts appear to have stated—as a general
rule—that misrepresentations of law are not actionable at
common law. See Restatement (Second) of Torts §545; W.
Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and
Keeton on Law of Torts §109, pp. 758–759 (5th ed. 1984)
(Prosser & Keeton). So, for example, if a defendant had told
the plaintiff, “your claim will be dismissed because federal
courts lack jurisdiction over claims like that,” that repre-
sentation might not be actionable as a fraud. See ibid.;
Utah Power & Light Co. v. Federal Ins. Co., 983 F. 2d 1549,
1556 (CA10 1993). Varying rationales appear to have been
given for this rule, including that such statements are of
mere opinion and that no one could justifiably rely on them.
See Dobbs §677, at 688.
For purposes of these cases, we assume without deciding
that the FCA incorporates some version of this rule; even
then, the rule has significant limits on its own terms. As
relevant here, statements involving some legal analysis re-
main actionable if they “carry with [them] by implication”
an assertion about “facts that justify” the speaker’s state-
ment. Restatement (Second) of Torts §545, Comment c; see
also Prosser & Keeton §109, at 759. So, as a contrasting
example, a person might be liable for falsely stating that
“the plumbing work that I did on your house complied with
state law.” See Sorenson v. Gardner, 215 Ore. 255, 261, 334
16 UNITED STATES EX REL. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
P. 2d 471, 474 (1959). That is because such a statement
says something about both the correct meaning of building
codes and the facts about the home’s construction. Ibid.;
see also Hoyt Properties, Inc. v. Production Resource Group,
L. L. C., 736 N. W. 2d 313, 319 (Minn. 2007). And home-
owners might justifiably rely on that latter representation
about the facts, which thus could be actionable as fraud.
Respondents’ disclosures here sound more like our hypo-
thetical plumber, not our hypothetical legal advisor. Ra-
ther than saying, “this is what ‛usual and customary’
means,” respondents essentially said, “this is what our
‛usual and customary’ prices are.” In doing so, they plainly
implied facts about their prices that were not known to the
plan sponsors, pharmacy benefit managers, and state Med-
icaid agencies that received their claims. Petitioners’ cases
thus make out a valid fraud theory even under respondents’
common-law rule.
* * *
Under the FCA, petitioners may establish scienter by
showing that respondents (1) actually knew that their re-
ported prices were not their “usual and customary” prices
when they reported those prices, (2) were aware of a sub-
stantial risk that their higher, retail prices were not their
“usual and customary” prices and intentionally avoided
learning whether their reports were accurate, or (3) were
aware of such a substantial and unjustifiable risk but sub-
mitted the claims anyway. §3729(b)(1)(A). If petitioners
can make that showing, then it does not matter whether
some other, objectively reasonable interpretation of “usual
and customary” would point to respondents’ higher prices.
For scienter, it is enough if respondents believed that their
claims were not accurate.
We need not address any of the other factual or legal dis-
putes involved in these cases, including whether petitioners
have made a showing sufficient under the correct legal
Cite as: 598 U. S. ____ (2023) 17
Opinion of the Court
standard to preclude summary judgment. Nor do we need
to address any of the parties’ policy arguments, which “can-
not supersede the clear statutory text.” Escobar, 579 U. S.,
at 192. We accordingly vacate the judgments below and re-
mand these cases to the Seventh Circuit for further pro-
ceedings consistent with this opinion.
It is so ordered.