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

PRELIMINARY PRINT
Volume 598 U. S. Part 2
Pages 739–758
OFFICIAL REPORTS
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THE SUPREME COURT
June 1, 2023
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OCTOBER TERM, 2022 739
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 respond-
ents—SuperValu and Safeway—defrauded two federal benefts pro-
grams, Medicaid and Medicare. Both Medicaid and Medicare offer
prescription-drug coverage to their benefciaries, and both often cap any
reimbursement for drugs at the pharmacy's “usual and customary”
charge to the public. But, according to petitioners, SuperValu and
Safeway for years offered various pharmacy discount programs to their
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customers—yet reported their higher retail prices, rather than their
discounted prices. Petitioners also presented evidence that the compa-
nies believed their discounted prices were their usual and customary
prices and tried to prevent regulators and contractors from fnding out
about their discounted prices. In sum, petitioners claim that the evi-
dence 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 Dis-
trict Court ruled against SuperValu on the falsity element—fnding that
its discounted prices were its usual and customary prices and that, by
not reporting them, SuperValu submitted false claims. However, the
court granted SuperValu summary judgment based on the scienter ele-
ment, holding SuperValu could not have acted “knowingly.” In a sepa-
rate case, the court granted Safeway summary judgment on that same
basis. The Seventh Circuit affrmed 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
*Together with No. 22–111, United States et al. ex rel. Proctor v. Safe-
way, Inc., also on certiorari to the same court.
740 UNITED STATES ex rel. SCHUTTE v. SUPERVALU INC.
Syllabus
their actions were consistent with an objectively reasonable interpreta-
tion 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. 749–758.
(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 defnition of the term “know-
ingly” that largely tracks the traditional common-law scienter require-
ment for claims of fraud: Actual knowledge, deliberate ignorance, or
recklessness will suffce. 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 confrm the statements'
truth or falsity. And “[r]eckless disregard” captures defendants who
are conscious of a substantial and unjustifable risk that their claims are
false, but submit the claims anyway. These forms of scienter track the
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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. 749–752.
(b) Even though the phrase “usual and customary” may be ambiguous
on its face, such facial ambiguity alone is not suffcient to preclude a
fnding that respondents knew their claims were false. That is because
the Seventh Circuit did not hold that respondents made an honest mis-
take 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 fnds none to be persuasive.
First, the facial ambiguity of the phrase “usual and customary” does
not by itself preclude a fnding 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 defnitions 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
Cite as: 598 U. S. 739 (2023) 741
Syllabus
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 Electron-
ics, Inc., 579 U. S. 93, 106.
Finally, respondents contend their conduct is not actionable according
to the common law of fraud incorporated by the FCA because common-
law fraud does not encompass misrepresentations of law. Respondents
then posit that their alleged claims were false only because their claims'
falsity turned in part on the meaning of the phrase “usual and custom-
ary”—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, respondents 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 state-
ment that implied facts about their prices, essentially saying “this
is what our ``usual and customary' prices are.” Petitioners' cases thus
make out a valid fraud theory even under respondents' common-law
rule. Pp. 752–757.
No. 21–1326, 9 F. 4th 455; No. 22–111, 30 F. 4th 649, vacated and remanded.
Page
Thomas, J.,Proof
delivered the Pending Publication
opinion for a unanimous Court.
Tejinder Singh argued the cause for petitioners. With
him on the briefs were John Timothy Keller, Dale J.
Aschemann, Gary M. Grossenbacher, Glenn Grossenbacher,
Paul B. Martins, Julie Webster Popham, James A. Tate, and
Jason M. Idell.
Deputy Solicitor General Stewart argued the cause for the
United States urging reversal. With him on the brief were
Solicitor General Prelogar, Principal Deputy Assistant At-
torney General Boynton, Benjamin W. Snyder, Michael S.
Raab, and Charles W. Scarborough.
Carter G. Phillips argued the cause for respondents.
With him on the brief were Kwaku A. Akowuah, Joshua J.
Fougere, Jillian S. Stonecipher, Adam Kleven, Robert N.
Hochman, and Tacy F. Flint.*
*Briefs of amici curiae urging reversal were fled for the State of Con-
necticut et al. by William Tong, Attorney General of Connecticut, Joshua
Perry, Solicitor General, Michael K. Skold, Deputy Solicitor General,
Gregory K. O'Connell, Deputy Associate Attorney General, and Eric
742 UNITED STATES ex rel. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
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 Government.
31 U. S. C. § 3729(a). In some cases, that rule is straightfor-
ward: If a law authorized payment of $100 for “each” medical
P. Babbs and Karla A. Turekian, Assistant Attorneys General, by Mi-
chelle A. Henry, Acting Attorney General of Pennsylvania, and by the
Attorneys General for their respective jurisdictions as follows: Treg Tay-
lor of Alaska, Rob Bonta of California, Philip J. Weiser of Colorado, Kath-
leen Jennings of Delaware, Brian L. Schwalb of the District of Columbia,
Christopher M. Carr of Georgia, Anne E. Lopez of Hawaii, Kwame Raoul
of Illinois, Theodore E. Rokita of Indiana, Brenna Bird of Iowa, Kris Ko-
bach of Kansas, Aaron M. Frey of Maine, Anthony G. Brown of Maryland,
Andrea Joy Campbell of Massachusetts, Dana Nessel of Michigan, Keith
Ellison of Minnesota, Aaron D. Ford of Nevada, John M. Formella of
New Hampshire, Matthew J. Platkin of New Jersey, Raúl Torrez of New
Mexico, Letitia James of New York, Joshua H. Stein of North Carolina,
Drew Wrigley of North Dakota, Gentner F. Drummond of Oklahoma,
Ellen F. Rosenblum of Oregon, Peter F. Neronha of Rhode Island, Marty
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J. Jackley of South Dakota, Jonathan Skrmetti of Tennessee, Charity R.
Clark of Vermont, Robert W. Ferguson of Washington, and Joshua L. Kaul
of Wisconsin; for the National Whistleblower Center by Stephen M. Kohn,
Michael D. Kohn, and David K. Colapinto; for Taxpayers Against Fraud
Education Fund by Samuel J. Buffone, Jr.; and for Sen. Charles E. Grass-
ley by Eric R. Havian.
Briefs of amici curiae urging affrmance were fled for the Advanced
Medical Technology Association et al. by Douglas Hallward-Driemeier;
for the American Hospital Association et al. by Michael R. Dreeben, Jenya
Godina, and Anton Metlitsky; for the Chamber of Commerce of the
United States of America et al. by John P. Elwood, Craig D. Margolis,
Jayce Born, Andrew R. Varcoe, Erica Klenicki, Michael A. Tilghman II,
James C. Stansel, and Melissa B. Kimmel; for CTIA–The Wireless Associ-
ation et al. by Kyle D. Hawkins, William T. Thompson, and Drew F. Wald-
beser; for the National Association of Chain Drug Stores by Craig Y. Lee
and Daniel Stefany; for the National Defense Industrial Association et al.
by Beth S. Brinkmann, Matthew F. Dunn, Peter B. Hutt II, Krysten
Rosen Moller, and S. Conrad Scott; for the Professional Services Council
et al. by David W. Ogden, Ronald C. Machen, David M. Lehn, and Felicia
H. Ellsworth; for the Taxpayers' Federation of Illinois et al. by C. Eric
Fader, Karl A. Frieden, and Frederick Nicely; and for the Washington
Legal Foundation by John M. Masslon II and Cory L. Andrews.
Cite as: 598 U. S. 739 (2023) 743
Opinion of the Court
test, and a doctor knows that he did fve 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 understand whatever “customary”
meant in this context—and submit claims that were inaccu-
rate anyway.
The cases before us today involve a legal standard similar
to that latter example: In certain circumstances, pharmacies
are required to bill Medicare and Medicaid for their “usual
and customary” drug prices. And, critically, these cases in-
volve defendants (respondents here) who may have correctly
understood the relevant standard and submitted inaccurate
claims anyway. The question presented is thus whether re-
spondents could have the scienter required by the FCA if
they correctly understood that standard and thought that
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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 Govern-
ment. § 3730(b). Petitioners here brought two such law-
suits against respondents, which are companies that operate
hundreds of retail drug pharmacies nationwide. In No. 21–
1326, respondents are a group of companies that we collec-
tively call SuperValu; in No. 22–111, respondent is Safeway,
Inc. According to petitioners, respondents overcharged
Medicare and Medicaid programs for years when seeking re-
744 UNITED STATES ex rel. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
imbursement for prescription drugs that the programs cov-
ered. In doing so, petitioners argue, respondents defrauded
the Government and violated the FCA.
A
The claims at issue here relate to two federal benefts 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
Medicare, which provides federally funded health insurance
coverage to individuals who are 65 or older or who are dis-
abled, 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 cer-
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tain drugs. See 42 CFR § 447.512(b)(2) (2021). Those regu-
lations 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 Outpatient 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 benefciaries. 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-
Cite as: 598 U. S. 739 (2023) 745
Opinion of the Court
cies (sometimes through middlemen called pharmacy beneft
managers). Many of the contracts at issue here limited any
reimbursement to the pharmacy's “usual and customary”
price.
The bottom line is that, when respondents submitted reim-
bursement claims to these entities, they often were required
to charge and disclose their “usual and customary” price for
that drug.1 But, according to petitioners, respondents re-
ported higher prices to these entities than the ones that they
usually and customarily charged to the public.
B
According to petitioners, in 2006, respondents' competitor,
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
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apply that price to future reflls of the drug for those custom-
ers. Meanwhile, Safeway also adopted a “membership” dis-
count program through which customers received discounted
generic drug prices (often $4 for a 30-day supply). To enroll
in that membership program, customers had to fll out a form
with only basic information; petitioners argue that Safeway
often already had this information on fle. SuperValu's pro-
grams continued until 2016; Safeway's continued until 2015.
Respondents' discount programs turned out to be popular.
Though the exact extent of that popularity is disputed, peti-
1
The FCA covers claims presented both to the Federal Government and
to a federal “contractor, grantee, or other recipient” when, as relevant
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.
746 UNITED STATES ex rel. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
tioners have presented evidence that the discounted prices
comprised a majority of sales for many drugs to customers
who paid in cash (and not through insurance) for at least
some years during the programs' operation. For example,
according to petitioners, a majority of SuperValu's 2012 cash
sales for 44 of its 50 top-selling prescription drugs were
made at those discounted prices. And, according to peti-
tioners, 88% of Safeway's 2014 cash sales for its top 20 ge-
neric 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 reimburse-
ment, 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
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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 presented evi-
dence that they claim supports that theory. For example,
both SuperValu and Safeway received a notice in 2006 from
a pharmacy beneft manager stating that the phrase “usual
and customary” refers to discounted prices; Safeway appar-
ently received the same message from state Medicaid agen-
cies. And executives at both companies raised concerns
Cite as: 598 U. S. 739 (2023) 747
Opinion of the Court
about letting state agencies or pharmacy beneft managers
fnd 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 (in-
ternal quotation marks omitted). An executive at Safeway
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 offcial policy 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.
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C Publication
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
SuperValu 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 submitted
claims that were false. But, the District Court then granted
summary judgment for SuperValu based on the scienter ele-
ment, holding SuperValu could not have acted “knowingly.”
Soon after, it granted Safeway summary judgment on the
same basis.
748 UNITED STATES ex rel. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
The Seventh Circuit affrmed. 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. Specifcally, the Seventh Circuit read Safeco to dic-
tate a two-step inquiry for ascertaining whether a defendant
acted recklessly or knowingly. At step one, the Seventh
Circuit took Safeco to ask whether a defendant's acts were
consistent with any objectively reasonable interpretation of
the relevant law that had not been ruled out by defnitive
legal authority or guidance. This step, the Seventh Circuit
held, applied regardless of whether the defendant actually
believed such an interpretation at the time of its claims.
Only if the defendant's acts were not consistent with any
objectively reasonable interpretation would the court pro-
ceed, at step two, to consider the defendant's actual subjec-
tive thoughts. Thus, under the Seventh Circuit's approach,
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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.” Spe-
cifcally, 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 under-
stood, 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
Cite as: 598 U. S. 739 (2023) 749
Opinion of the Court
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 mean-
ing? Or is the Seventh Circuit correct—that respondents
could not have “knowingly” submitted a false claim unless
no hypothetical, reasonable person could have thought 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 respond-
ents' 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 dis-
counted prices. Nor, for that matter, are we reviewing any
factual disputes about what respondents did or did not be-
lieve or do. These cases come to us from the grant of sum-
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mary 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 objectively
reasonable person may have known or believed. And, even
though the phrase “usual and customary” may be ambiguous
on its face, such facial ambiguity alone is not suffcient to
preclude a fnding 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 defnes the term
“knowingly” as encompassing three mental states: First,
750 UNITED STATES ex rel. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
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,”
§ 3729(b)(1)(A)(iii). In short, either actual knowledge, delib-
erate ignorance, or recklessness will suffce.3
That three-part test largely tracks the traditional
common-law scienter requirement for claims of fraud. See
Restatement (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, capturing
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the FCA's use of the term “deliberate ignorance,” that deci-
sion 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 unsur-
prising 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 frst 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
3
The FCA also specifes that the term “ ``knowingly' . . . require[s] no
proof of specifc intent to defraud.” § 3729(b)(1)(B).
Cite as: 598 U. S. 739 (2023) 751
Opinion of the Court
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
ibid. And here, the FCA's defnition of “knowingly” con-
frms 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); Es-
cobar, 579 U. S., at 191 (“A defendant can have ``actual knowl-
edge' that a condition is material without the Government
expressly calling it a condition of payment”); Black's Law
Dictionary 784 (5th ed. 1979) (“to understand,” or “the per-
ception 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
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that their statements are false, but intentionally avoid tak-
ing steps to confrm the statement's truth or falsity. See
Global-Tech Appliances, Inc. v. SEB S. A., 563 U. S. 754, 769
(2011); Black's Law Dictionary, at 672 (“[v]oluntary igno-
rance”); Derry, 14 App. Cas., at 376. And, third, the term
“reckless disregard” similarly captures defendants who are
conscious of a substantial and unjustifable 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 defnition of
“information” is broad, referring to all “knowledge obtained from investi-
gation, 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 unjustifably high risk of illegality that was so obvious
that it should have been known, even if the defendant was not actually
752 UNITED STATES ex rel. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
Again, that tracks traditional common-law fraud, which or-
dinarily “depends on a subjective test” and the defendant's
“culpable state of mind.” Id., § 10, Comment a. What typi-
cally 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.” Restatement (Sec-
ond) 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 modifes 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
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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 belief
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 diffculty here, however, is that the phrase “usual and
customary” is, on its face, less than perfectly clear. We as-
sume (as the District Court ruled in SuperValu's case) that
conscious of that risk. See Farmer, 511 U. S., at 836–837. We need not
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 satisfed by a defendant's subjective awareness of the
claim's falsity or an unjustifable risk of such falsity.
Cite as: 598 U. S. 739 (2023) 753
Opinion of the Court
respondents' “usual and customary” prices were their dis-
counted ones; if so, it might have been a forgivable mistake
if respondents had honestly read the phrase as referring to
retail prices, not discounted prices. But the Seventh Circuit
did not hold that respondents made an honest mistake; it held
that, because other people might make an honest mistake,
defendants' subjective beliefs became irrelevant to their sci-
enter. Respondents make three main arguments in support
of that rule. But none is persuasive.
1
Respondents frst 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.
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We disagree. Although the terms, in isolation, may have
been somewhat ambiguous, that ambiguity does not preclude
respondents from having learned their correct meaning—or,
at least, becoming aware of a substantial likelihood of the
terms' correct meaning. To illustrate why, consider a hypo-
thetical driver who sees a road sign that says “Drive Only
Reasonable Speeds.” That driver, without any more infor-
mation, might have no way of knowing what speeds are rea-
sonable and what speeds are too fast. But then assume that
the same driver was informed earlier in the day by a police
offcer that speeds over 50 mph are unreasonable and then
noticed that all the other cars around him are going 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 unjustifably high risk that anything over 50
mph is unreasonable. Indeed, if the same police offcer later
pulled the driver over, we imagine that he would be hard
pressed to argue that some other person might have under-
stood the sign to allow driving at 80 mph. The same analy-
754 UNITED STATES ex rel. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
sis applies here. According to petitioners, respondents re-
ceived notice that the phrase “usual and customary” referred
to their discounted prices (in some cases, it seems, from the
same entities to which they reported their prices). And, ac-
cording to petitioners, respondents comprehended those no-
tices and then tried to hide their discounted prices. If that
is true, then perhaps respondents actually knew what the
phrase meant; or perhaps respondents were aware of an un-
justifably high risk that the phrase referred to their dis-
counted prices. And, if that is true, then respondents may
have known that their claims were false. The facial ambigu-
ity of the phrase thus does not by itself preclude a fnding of
scienter under the FCA.
2
Second, like the Seventh Circuit, respondents rely on
Safeco. They contend that Safeco already interpreted the
common-law defnitions of “knowing” and “reckless” and that
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it did so by looking frst 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 establish-
ing 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 satisfed by a defendant's con-
scious belief that his claims are false.
Cite as: 598 U. S. 739 (2023) 755
Opinion of the Court
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 substan-
tially risky. 551 U. S., at 69 (emphasis added; internal quo-
tation marks omitted). Or, as Safeco alternatively put it,
the common law of recklessness contained an objective
standard because it encompassed actions involving “an un-
justifably high risk of harm that is either known or so obvi-
ous 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
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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 fraud-
ulent even if their reported prices were not accurate under
the correct meaning of “usual and customary.” Their argu-
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
irrelevant 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).
756 UNITED STATES ex rel. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
ment is as follows: At common law, misrepresentations of law
are not actionable; only misrepresentations of fact are. Be-
cause the FCA incorporates the common law of fraud, it em-
bodies that same limitation. And the claims here would
have been knowingly false only because respondents cor-
rectly understood what “usual and customary” 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 because 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 plain-
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tiff, “your claim will be dismissed because federal courts lack
jurisdiction over claims like that,” that representation 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 justifably 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 signifcant 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 statement.
Restatement (Second) of Torts § 545, Comment c; see also
Prosser & Keeton § 109, at 759. So, as a contrasting exam-
ple, 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 P. 2d
Cite as: 598 U. S. 739 (2023) 757
Opinion of the Court
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 homeown-
ers might justifably 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. Rather
than saying, “this is what ``usual and customary' means,” re-
spondents essentially said, “this is what our ``usual and cus-
tomary' prices are.” In doing so, they plainly implied facts
about their prices that were not known to the plan sponsors,
pharmacy beneft managers, and state Medicaid agencies
that received their claims. Petitioners' cases thus make out
a valid fraud theory even under respondents' common-law
rule.
* * *
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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 unjustifable risk but submit-
ted 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 suffcient under the correct legal stand-
ard to preclude summary judgment. Nor do we need to ad-
758 UNITED STATES ex rel. SCHUTTE v. SUPERVALU INC.
Opinion of the Court
dress any of the parties' policy arguments, which “cannot
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 proceed-
ings consistent with this opinion.
It is so ordered.
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Reporter’s Note
The attached opinion has been revised to refect the usual publication
and citation style of the United States Reports. The revised pagination
makes available the offcial United States Reports citation in advance of
publication. The syllabus has been prepared by the Reporter of Decisions
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for the convenience of the reader and constitutes no part of the opinion of
the Court. A list of counsel who argued or fled briefs in this case, and
who were members of the bar of this Court at the time this case was
argued, has been inserted following the syllabus. Other revisions may
include adjustments to formatting, captions, citation form, and any errant
punctuation. The following additional edits were made:
None