Presented by Hodgson Russ, the Whistleblower Blog is written by a team of lawyers experienced in successfully guiding both whistleblowers and companies accused by whistleblowers of wrongdoing through the False Claims Act process.

Can an “Objectively Reasonable” Interpretation of the Law—Even if You Don’t Believe it—Protect Against False Claims Act Liability?

The whistleblowers contend that the companies offered prescription drugs at discounted prices to customers paying out of pocket, while charging higher rates to the government. Under Medicare and Medicaid programs, pharmacies are required to charge the same price to the government as the general public.

The case centers on whether companies can avoid liability for fraud by showing that an “objectively reasonable” reading of the law supported their conduct, even if the company believed that its conduct was unlawful. Lawyers for the whistleblowers argued such a reading would permit “some of the worst offenders to escape liability.” And Joe Biden’s administration supported the whistleblowers, arguing that companies should “not say things they do not believe to be true.” Attorneys for the companies countered that the Medicare and Medicaid billing requirements are unclear and provide no guidance. The Seventh Circuit ruled in favor of the companies, finding their interpretation of the law was “objectively reasonable,” even if they did not actually believe the interpretation and intended to deceive the government.

At oral argument, some justices expressed concern that ruling in favor of the whistleblowers could require judges to determine whether a company believes its legal advice is true or false. But a ruling in favor of the companies could undermine one of the government’s most powerful tools for fighting fraud in government contracts and programs. It would require the government to affirmatively show that the defendant’s interpretation of law had already been foreclosed by authoritative guidance and that defendants could not have reasonably believed that their interpretation was correct. Notably, a ruling in favor of the companies could lead to attempts in Congress to amend the FCA. A bipartisan group of senators has already attempted to do so, although unsuccessfully, in the wake of the court’s landmark 2016 decision in Universal Health Services. v. United States ex rel. Escobar.

A ruling is due by the end of June.

If you have questions about the False Claims Act or how you can defend against such claims, please contact Alexandria Rowen or any of the attorneys in our False Claims Act Practice Group.


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