The Coalition for Government Procurement and the National Defense Industrial Association filed an amicus brief in the consolidated Supreme Court cases United States ex rel. Schutte v. SuperValu, Inc. and United States ex rel. Proctor v. Safeway, Inc. The brief urges the Court to hold, consistent with the decisions of multiple federal courts of appeals, that a defendant cannot be liable under the False Claims Act (“FCA”) for “knowingly” submitting a “false” claim if (1) it acted in accordance with an objectively reasonable reading of an ambiguous statute, regulation, or contract provision and (2) there was no authoritative guidance warning it away from that interpretation.  The Amici are represented by Covington & Burling LLP. 

In SuperValu and Safeway, the Court is asked to resolve questions over the role that subjective intent plays in evaluating whether a defendant satisfies the FCA’s “knowledge” requirement.  Petitioners argue that a contractor can be liable under the FCA for submitting a claim that is premised on an objectively reasonable interpretation of an ambiguous legal provision if the contractor recognized that the provision could be interpreted a different way.  However, as the amicus brief explains, such a claim cannot be false for alleged noncompliance with the ambiguous legal provision that has not otherwise been clarified by authoritative guidance.  Nor can such a contractor knowingly submit a false claim just because it was aware that the legal obligation may be interpreted differently.

The amicus brief explains why Petitioners’ lax scienter requirement would fail to give contractors fair notice.  An ambiguous legal requirement by definition fails to apprise regulated parties about what the law permits and prohibits.  It is a fundamental tenet of our legal system that defendants should not be punished for acting in accordance with what was at the time a reasonable interpretation of an ambiguous requirement, simply because a court subsequently adopts a different interpretation of that requirement.

The amicus brief also details the strain that a subjective scienter requirement places on government contractors, the defense industry, and national security.  As the brief explains, contractors grapple with an extraordinary number of complex and often intentionally ambiguous regulations, from Department of Defense (“DoD”) cybersecurity regulations that require contractors to provide “adequate security” yet do not provide any meaningful definition of the term, to the Federal Acquisition Regulation’s open-ended multi-factor definition of cost “reasonableness.”  These uncertainties force contractors to make difficult interpretive decisions when bidding for, performing, and billing under contracts that are often not subject to clear resolution.  

The brief argues that subjecting contractors who operate in such an uncertain legal landscape to treble damages and other essentially punitive remedies for acting in accordance with objectively reasonable legal interpretations is not only inconsistent with the FCA and the Court’s prior decision in Safeco Insurance Co. of America v. Burr, 551 U.S. 47 (2007), but also could threaten to chill contractors’ ability and willingness to support the government’s critical contracts and goals.  Facing the threat of incurring enormous liability for making reasonable choices in the face of unclear legal requirements, some companies (especially non-traditional offerors with limited contracting experience) could decline to bid on contracts, while others may choose to exit the government-contracting space.  Such diminished participation could thwart the efforts of the DoD and other agencies to increase their supplier base, impede their efforts to promote vigorous competition, and threaten their ability to address national-security needs, especially in a timely manner.  

Petitioners argue that their subjective test will not burden companies that do business with the government because those companies can always ask agencies to clarify the meaning of ambiguous laws, statutes, and regulations.  As the amicus brief further explains, however, Petitioner’s argument is impractical.  Agencies that have deliberately promulgated vague regulations are unlikely to offer further guidance about what those regulations mean.  Agency staff are often reluctant to advise contractors on how to navigate ambiguous legal requirements, and will often lack the resources to respond to requests about how to interpret countless uncertain or contradictory laws.  Even when agencies do respond to requests for clarification, those responses will often take months or years, making it impossible for contractors to obtain clarification before submitting claims.     

However it turns out, the Court’s decision in SuperValu and Safeway may prove to be a watershed decision, perhaps as important as the Court’s 2016 Escobar decision.  Argument is scheduled for April 18, 2023, with a decision expected by the end of the Court’s term.

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Photo of Peter B. Hutt II Peter B. Hutt II

Peter Hutt represents government contractors in a range of complex investigation, litigation, and compliance matters, including False Claims Act and fraud investigations and litigation, compliance with accounting, cost, and pricing requirements, and contract claims and disputes.

Peter has litigated more than 25 qui…

Peter Hutt represents government contractors in a range of complex investigation, litigation, and compliance matters, including False Claims Act and fraud investigations and litigation, compliance with accounting, cost, and pricing requirements, and contract claims and disputes.

Peter has litigated more than 25 qui tam matters brought under the False Claims Act, including matters alleging cost mischarging, CAS violations, quality assurance deficiencies, substandard products, defective pricing, Iraqi procurement fraud, health care fraud, and inadequate subcontractor oversight. He has testified before Congress concerning proposed amendments to the False Claims Act.

Peter has also conducted numerous internal investigations and frequently advises clients on whether to make disclosures of potential wrongdoing.

Peter also represents clients in a wide range of accounting, cost, and pricing matters, as well as other contract and grant matters. He is experienced in addressing issues concerning pensions and post-retirement benefits, contract formation, TINA and defective pricing, claims and terminations, contract financing, price reduction clauses, subcontracting and supply chain compliance, specialty metals compliance, and small business and DBE compliance. He has litigated significant cost, accounting, and contract breach matters in the Court of Federal Claims and the Armed Services Board of Contract Appeals.

Peter is recognized for his work both in government contracts and in False Claims Act disputes by Chambers USA, which notes that he is “whip-sharp, wicked smart and will advocate to the hilt for his clients.” Chambers also notes that “Peter brings a lot of thoughtfulness and creativity to cases. He is extremely clear in his communications and very responsive.”

Photo of Krysten Rosen Moller Krysten Rosen Moller

Krysten Rosen Moller focuses her practice on representing clients in internal investigations, government investigations, and follow-on civil litigation, with an emphasis on serving clients in the life sciences and healthcare industries.

Krysten assists companies with complex internal and government investigations covering a broad…

Krysten Rosen Moller focuses her practice on representing clients in internal investigations, government investigations, and follow-on civil litigation, with an emphasis on serving clients in the life sciences and healthcare industries.

Krysten assists companies with complex internal and government investigations covering a broad range of issues, including fraud and abuse, advertising and promotion, and bribery and corruption. Krysten has particular experience conducting targeted and efficient internal investigations and representing pharmaceutical and medical device companies against investigations from the Department of Justice or other government regulators. Krysten’s complementary litigation practice focuses on defending life sciences and healthcare companies in related litigation, including cases arising under the False Claims Act and other follow-on litigation arising from government investigations.

Krysten also counsels clients on compliance matters. She regularly represents companies negotiating HHS OIG Corporate Integrity Agreements (CIAs) and advises companies on implementing and operating under CIAs. She has also conducted False Claims Act risk assessments and advised on other fraud and abuse issues.

Photo of Robert Huffman Robert Huffman

Bob Huffman represents defense, health care, and other companies in contract matters and in disputes with the federal government and other contractors. He focuses his practice on False Claims Act qui tam investigations and litigation, cybersecurity and supply chain security counseling and compliance…

Bob Huffman represents defense, health care, and other companies in contract matters and in disputes with the federal government and other contractors. He focuses his practice on False Claims Act qui tam investigations and litigation, cybersecurity and supply chain security counseling and compliance, contract claims and disputes, and intellectual property (IP) matters related to U.S. government contracts.

Bob has leading expertise advising companies that are defending against investigations, prosecutions, and civil suits alleging procurement fraud and false claims. He has represented clients in more than a dozen False Claims Act qui tam suits. He also represents clients in connection with parallel criminal proceedings and suspension and debarment.

Bob also regularly counsels clients on government contracting supply chain compliance issues, including cybersecurity, the Buy American Act/Trade Agreements Act (BAA/TAA), and counterfeit parts requirements. He also has extensive experience litigating contract and related issues before the Court of Federal Claims, the Armed Services Board of Contract Appeals, federal district courts, the Federal Circuit, and other federal appellate courts.

In addition, Bob advises government contractors on rules relating to IP, including government patent rights, technical data rights, rights in computer software, and the rules applicable to IP in the acquisition of commercial items and services. He handles IP matters involving government contracts, grants, Cooperative Research and Development Agreements (CRADAs), and Other Transaction Agreements (OTAs).

Photo of Conrad Scott Conrad Scott

Conrad Scott is a litigator in the firm’s New York office and a member of the firm’s Appellate and Supreme Court Practice Group. He focuses on representing financial institutions, life-sciences firms, and technology companies in appeals, complex commercial disputes, and litigation under the…

Conrad Scott is a litigator in the firm’s New York office and a member of the firm’s Appellate and Supreme Court Practice Group. He focuses on representing financial institutions, life-sciences firms, and technology companies in appeals, complex commercial disputes, and litigation under the Administrative Procedure Act.

Conrad rejoined the firm after serving as a law clerk for Associate Justices Ruth Bader Ginsburg and Anthony M. Kennedy of the U.S. Supreme Court.

Photo of Alexander Hastings Alexander Hastings

Alex Hastings advises clients across a broad range of government contracting issues, including advising clients in transactional matters involving government contractors and assisting defense contractors and pharmaceutical companies in securing and performing government contracts.

Mr. Hastings also advises clients concerning best practices in…

Alex Hastings advises clients across a broad range of government contracting issues, including advising clients in transactional matters involving government contractors and assisting defense contractors and pharmaceutical companies in securing and performing government contracts.

Mr. Hastings also advises clients concerning best practices in e-discovery. He assists in investigations and litigations that involve complex e-discovery issues and has represented clients in matters involving the U.S. Department of Justice, Securities and Exchange Commission and the United States International Trade Commission.

Mr. Hastings’ government contracts experience includes advising clients regarding new developments in regulatory requirements, including the Federal Acquisition Regulation’s (FAR) anti-human trafficking requirements and the FAR and Bayh-Dole Act’s intellectual property provisions. Mr. Hastings also provides due diligence regulatory advice to clients contemplating the acquisition of government contracting entities or assets.

Mr. Hastings’ e-discovery experience includes advising a wide-array of clients on best practices in information governance and document collection and assisting clients develop effective mobile device and document management policies.

Mr. Hastings also maintains an active pro bono practice and routinely writes on issues related to government contracts and e-discovery.

 

Photo of Laura Wilk Laura Wilk

Laura Wilk is a litigator in the firm’s Washington, DC office. Her practice focuses on defending clients in litigation arising under the False Claims Act. Before joining the firm, Laura clerked for Judge Leslie H. Southwick of the U.S. Court of Appeals for…

Laura Wilk is a litigator in the firm’s Washington, DC office. Her practice focuses on defending clients in litigation arising under the False Claims Act. Before joining the firm, Laura clerked for Judge Leslie H. Southwick of the U.S. Court of Appeals for the Fifth Circuit and Chief Judge Daniel P. Jordan III of the U.S. District Court for the Southern District of Mississippi. In law school, Laura interned in the civil division of the United States Attorney’s Office for the Southern District of Texas.

Laura maintains an active pro bono practice.