On March 28, 2023, the NAM filed an amicus brief asking the U.S. Supreme Court to affirm that to prove liability under the False Claims Act where ambiguous laws are at issue, a plaintiff must establish that the defendant’s interpretation of the requirements for submitting a claim to the government was not objectively reasonable. A person is subject to liability under the FCA if the person “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval. In this case, the 7th Circuit held that when allegations of false claims are premised on violations of ambiguous laws or regulations, a defendant’s subjective awareness of the laws or regulations are irrelevant to establishing that a defendant acted "knowingly." Rather, the 7th Circuit concluded that a plaintiff must establish that a defendant’s interpretation of the requirements for submitting a claim was not objectively reasonable. In other words, a defendant cannot be held liable if it can show that "(a) it has an objectively reasonable reading of the statute or regulation and (b) there was no authoritative guidance warning against its erroneous view." Although the 8th and D.C. Circuits have also applied the objective standard, the 6th, 9th, 10th, and 11th Circuits look to whether a defendant "actually knew or should have known that its conduct violated a regulation in light of any ambiguity at the time of the alleged violation." Here, the petitioners (FCA relators) urge the Court to hold that a violation of the FCA can rest on a defendant’s subjective understanding of ambiguous laws or regulations.
We argue in our brief that the objectively reasonable standard is important to cabining expansive FCA liability, which can often include crippling treble damages and statutory penalties after lengthy and costly litigation. Manufacturers routinely face complex contractual and regulatory schemes that contain ambiguous or unsettled provisions when they are serving as government contractors or otherwise implementing government programs.
Unfortunately, on June 1, 2023, the reversed the 7th Circuit's decision.