When I first read the recent U.S. Supreme Court decision in U.S. ex rel. Schutte v. Supervalu I found the decision both troubling and very difficult to understand. Upon some additional reflection, however, I think that the decision has the potential to be a good thing for all parties involved in False Claims Act (FCA) litigation.
The decision was focused on whether the government needed to demonstrate that a party’s intent was objectively incorrect to prevail in a False Claims Act case, or whether their subjective intent was controlled. This can be a bit hard to understand, at least for me, but the question was “if the defendants thought that what they were doing is wrong, did they have improper intent even if they can show that there were ways to interpret the law that would have permitted their conduct? The court ruled that even if there were interpretations that would justify the behavior, the defendant had improper intent unless they were relying on those interpretations.
The distinction between subjective and objective intent can seem a bit overwhelming. But the more I think about the case, the more I think it is a poor use of brain power to focus too much on that difference.
In fact, one of my takeaways from the case is that in general, “intent” will often be a less important element in FCA cases. But this change offers a significant benefit.
Let me explain.
In a FCA case, there are two broad questions. First, were the claims, or statements made to justify those claims, false or inaccurate? Second, did the party submitting the claims have an improper intent? To prevail, the government, or the relator standing in the government’s shoes, must prove both that the claims were false and that the person submitting the claims had an improper intent. The new Supreme Court case looks only at one of these two questions, intent. The Supreme Court concluded that if the organization said, “what we’re doing is wrong,” unless there is something like an opinion from legal counsel explaining the conduct was permissible, they had improper intent. But the government will still need to show that the claims are false.
Here is why I think this can be helpful.
The most expensive part of most FCA cases is document production. The government asks for and reviews mountains of emails as it attempts to discern intent. The bad news is that the Supreme Court decision makes it much more likely that government will be able to prevail on the question of intent. But the good news is that it may be cost-effective and tactically wise to simply skip that expensive document review. Instead, the analysis can focus on the real important question: are the claims false?
After all, if someone thinks that they are breaking the law, but they really aren’t, their intent is completely irrelevant. And if someone is in fact breaking the law, it is going to be the very rare situation that they were able to successfully argue ignorance of the law was actually an excuse.
So I think the Supreme Court case creates an opportunity to focus legal efforts on analyzing the truth or falsity of the claims. That analysis is intellectually interesting and can be done much more cost-effectively than a document review. It also puts a premium on having creative counsel.
The bottom line is that while many observers are viewing the case as a win for the government, I think it might actually be a win for efficiency.
I have always been fond of the song, The Living Years by Mike + The Mechanics, and while the song is most definitely not about this or any other Supreme Court decision, some of its lyrics fit. Don’t yield to the fortunes, you sometimes see as fate, it may have a new perspective, on a different day, and if you don’t give up, and don’t give in, you may just be okay.
And that is how I am feeling about this decision. I have a new perspective, and we’re gonna be ok.
