David Chizewer Quoted in "SCOTUS Mulls Deceptive-Intent Standard in False Claims Act Suits"
David Chizewer, Chair of Goldberg Kohn's Litigation Group, is quoted in "SCOTUS Mulls Deceptive-Intent Standard in False Claims Act Suits," published April 20, 2023, in Westlaw Today, a Thomson Reuters publication.
The article reports on the U.S. Supreme Court hearings in a dispute over whether pharmacies accused of overcharging Medicare and Medicaid can avoid False Claims Act liability by arguing their conduct was supported by an "objectively reasonable" interpretation of the law. (United States et al. ex rel. Schutte et al. v. SuperValu Inc. et al., No. 21-1326; United States et al. ex rel. Proctor v. Safeway Inc., No. 22-111, oral argument held (U.S. Apr. 18, 2023)).
During the April 18 session, the high court considered what it means to submit a false claim "knowingly," or with scienter, under the FCA, 31 U.S.C.A. § 3729(b)(1)(A), in cases of legal falsity.
Three whistleblowers say two pharmacies overcharged the government by failing to account for customer discounts.
They are asking the high court to reverse two 7th U.S. Circuit Court of Appeals decisions that the pharmacies did not act with deceptive intent when they used an "objectively reasonable" interpretation of the regulatory term "usual and customary price" when seeking prescription drug reimbursement. Outside attorneys, who are not involved in the suits, say in the Westlaw Today article that the 7th Circuit decisions are "likely in peril."
Whistleblowers Tracy Schutte and Michael Yarberry petitioned the high court to hear a suit they filed against SuperValu Inc. The Supreme Court consolidated their case with one filed by Thomas Proctor against Safeway Inc.
During oral argument, some of the justices sought to clarify the petitioners' question of whether subjective knowledge is a factor in determining liability under the FCA.
"We're being asked whether the intent of someone to make a false statement is actionable even if later they come up with a different — an objectively reasonable argument, correct?" Associate Justice Sonia Sotomayor asked attorneys for the petitioners, who replied in the affirmative.
Counsel for the pharmacies said, "The right answer to this case is that our clients followed an undeniably objectively reasonable approach in what they did."
Associate Justice Ketanji Brown Jackson questioned his emphasis on "objectively reasonable."
"You say it doesn't matter, subjective intent to evaluate actual knowledge for the purpose of the FCA," she said.
Counsel for the pharmacies agreed.
Associate Justice Elena Kagan asked, "Don't you think it's a little odd to read a statute … like this to say that … subjectivity doesn't matter?"
Deputy Solicitor General Malcolm L. Stewart, arguing for the federal government as amicus curiae in support of the petitioners, said the pharmacies should have disclosed whether they considered their discounts when they calculated the "usual and customary" drug prices.
Goldberg Kohn's David Chizewer, who is not involved in the cases, pointed out that the discussion of "what should be expected from persons doing business with the government" was significant.
"At least one justice found it 'extreme' to hold a contractor to such a standard," Chizewer said. "Yet, that would seem to be the bare minimum of what we, as a society, should expect from each other."
