Sunday Read: Supervalu and the FCA

The False Claims Act (FCA) is America’s first and most successful whistleblower law. Originally signed into law by President Abraham Lincoln, the FCA targets fraud against the government and in government contracting. Since it was amended in 1986, whistleblowers under the FCA have helped the government recover $46.5 billion from wrongdoers, and been awarded more than $7.8 billion for their assistance.??

The FCA has faced several key setbacks recently, and will soon be put to the test again in April, when the Supreme Court of the United States (SCOTUS) hears consolidated cases regarding pharmacies overbilling Medicare and Medicaid, which are government programs. These cases explore whether or not an entity or individual “knowingly” submitted false claims if it acted based upon a reasonable, though incorrect, interpretation of the law.??

With the sole purpose of the FCA under review, attorneys from the National Whistleblower Center filed an amicus curiae brief with SCOTUS in an effort to preserve the intent of the law.??

In this Sunday Read, the National Whistleblower Center (NWC) highlights the importance of these cases, why their outcome will have a huge influence on Medicaid and other government programs, and how they could impact the concept of accountability.???

Case Basics and Background Info?

The SCOTUS case at the core of the FCA debate is U.S. ex rel. Schutte v. SuperValu Inc., combines the Supervalu case with U.S. ex rel. Proctor v. Safeway. As reported by Whistleblower Network News, both cases stem from qui tam whistleblower suits alleging pharmacy operators of defrauding Medicare and Medicaid by billing for prescription drugs based upon artificially high prices, while they charged customers much lower prices.??

The U.S. Court of Appeals for the Seventh Circuit ruled that SuperValu and Safeway did not violate the FCA – despite overbilling the government for prescription drugs – because they operated under an “objectively reasonable” interpretation of the law. These decisions are currently questioned by the whistleblower plaintiffs and whistleblower advocates alike.??

National Whistleblower Center supports the whistleblower and the U.S. Department of Justice (DOJ) who have pushed back against this interpretation of the FCA and called upon SCOTUS to reverse the ruling. Appeals to SCOTUS were consequently filed and oral arguments for the case are scheduled for April 18, 2023. Further, NWC filed an amicus brief in February supporting a reversal of the Seventh Circuit decision.??

Understanding Amicus Curiae, Briefly??

Amicus curiae translates from Latin to “friend of the court.” It is an individual or organization who is not a party to a legal case, but is permitted to assist by offering information, expertise, or insight that has a bearing on the issues. The decision of whether to consider an amicus brief lies within the discretion of the court, which, in this case, is the highest court in the land.??

NWC has a long legacy of submitting amicus briefs when whistleblower issues are a factor in Supreme Court cases. Since its founding in 1988, NWC has filed amicus briefs in more than a dozen whistleblower cases at both the state and federal levels. This advocacy is critical to stopping disastrous decisions. NWC, Whistleblower Advocacy Group, The Anti-Fraud Coalition and the DOJ, as well as Senator Charles Grassley (R-IA) have filed amicus curiae briefs in the Supervalu case.??

The input of these “friends of the court” provide a wealth of knowledge for the SCOTUS justices and contextualize many key details to demonstrate where the Seventh Circuit set a dangerous precedent. Through amicus briefs, organizations and individuals who will be impacted by the outcome of important cases are able to participate in the deliberation and advocate for their desired outcome.??

NWC’s Amicus Brief?

NWC’s amicus brief was submitted on Feb. 23, 2023 and is publicly available. NWC’s Founder & Chairman of the Board Stephen M. Kohn noted in the brief that “a review of the contracts and vouchers paid by the U.S. Congress when drafting the False Claims Act demonstrates, incontrovertibly, that liability for defrauding the government was meant to be based on subjective bad faith regardless of any ambiguities that existed in a statute, regulation, contract, or agreement.”?

“The U.S. Court of Appeals for the Seventh Circuit incorrectly interpreted the False Claims Act’s scienter requirement,” the brief continues. “If the Seventh Circuit majority’s interpretation of the role of subjective intent in demonstrating that a contractor acted ‘knowingly’ is affirmed, the plain meaning and original intent of the False Claims Act will be completely undermined and whistleblowers, who have driven the success of the False Claims Act, will be discouraged from taking the great risks they face when reporting fraud.”?

Senator Grassley’s Brief?

Sen. Grassley’s concerns are particularly weighty, as he is widely credited for the 1986 amendments modernizing the FCA. His opinions on whistleblower protections have been made known for decades and more recently during the Federal Bar Association’s 2023 Qui Tam Conference, when Sen. Grassley told the audience in February:???

“As we all know, the key to the success of the False Claims Act is that it allows whistleblowers to stand in the shoes of the federal government, and then sue fraudsters.”?

The Senator’s sentiments reflected that of the NWC and were similarly at the heart of his amicus brief.??

“The Seventh Circuit’s radical departure from the statute continues a lamentable tradition of some courts interpreting the FCA in an unduly restrictive fashion, which Congress and this Court repeatedly have stepped in to correct,” Sen. Grassley wrote. “The Court should repair this tear in the FCA. If it is not set right, it will not be long before the centerpiece of the government’s anti-fraud arsenal becomes unusable.”?

The Bigger Picture: Protecting Against Fraud?

Since 1986, qui tam suits have allowed the government to recover more than $70 billion from fraudsters. The decision of the Court in Supervalu will determine whether?whistleblowers continue to come forward and whether strong whistleblower protections will remain. ?

If fraud is tolerated and accountability is not enforced by the Supreme Court, it may shatter the validity and foundations of FCA claims. This could also discourage whistleblowers and lead to disaster.?

There are no Supreme Court justices with a background in whistleblower protection–that is where NWC steps in. Please consider donating today, because your support is essential to NWC’s continued fight for whistleblowers and the integrity of the False Claims Act.?

Support NWC?

NWC fights to bolster whistleblower programs and inform the public about its laws. As a 501(c)(3) non-profit our awareness building work is made possible with the support of our generous donors. Please consider donating $50 today to help us continue to educate about critical laws like the FCA and how it can impact everyone’s lives. ?

This story was written by Justin Smulison , a professional writer, podcaster and event host based in New York.?