In the 

United States Court of Appeals

For the Seventh Circuit ____________________ 

No. 20-2241 

UNITED STATES OF AMERICA ex rel. TRACY SCHUTTE, et al., 

Relators-Appellants, 

v.

SUPERVALU INC., et al., 

Defendants-Appellees. 

____________________ 

Appeal from the United States District Court for the

Central District of Illinois.

No. 11-cv-3290 — Richard Mills, Judge. 

____________________ 

ARGUED JANUARY 19, 2021 — DECIDED AUGUST 12, 2021 

____________________ 

Before ROVNER, HAMILTON, and ST. EVE, Circuit Judges. 

ST. EVE, Circuit Judge. This Court is no stranger to False 

Claims Act qui tam actions. The present appeal, however, contains a novel question for this Circuit: does the Supreme 

Court’s interpretation of the Fair Credit Reporting Act’s scienter provision in Safeco Insurance Company of America v. Burr, 

551 U.S. 47 (2007), apply with equal force to the False Claims 

Act’s scienter provision? We join the four circuits that have 
2 No. 20-2241

answered that question in the affirmative and hold that it 

does.

This issue comes to us in a lawsuit against Defendants

(collectively, “SuperValu”), which claims that SuperValu

knowingly filed false reports of its pharmacies’ “usual and 

customary” (“U&C”) drug prices when it sought reimbursements under Medicare and Medicaid. SuperValu listed its retail cash prices as its U&C drug prices rather than the lower, 

price-matched amounts that it charged qualifying customers 

under its discount program. Medicaid regulations define 

“usual and customary price” as the price charged to the general public. Based on our decision in U.S. ex rel. Garbe v. Kmart 

Corporation, 824 F.3d 632 (7th Cir. 2016), the district court held 

that SuperValu’s discounted prices fell within the definition 

of U&C price and that SuperValu should have reported them. 

Relators Tracy Schutte and Michael Yarberry (the “Relators”) 

thus established falsity, the first prong of their False Claims 

Act (“FCA” or “the Act”) claims. On the scienter prong, however, the court applied the Safeco standard to the FCA and 

held that SuperValu did not meet it.

We agree that the scienter standard articulated in Safeco 

applies to the FCA. Here, as with the Fair Credit Reporting 

Act (“FCRA”), there is no statutory indication that Congress 

meant its usage of “knowingly,” or the scienter definitions it 

encompasses, to bear a different meaning than its common 

law definition. We further hold that while the FCA’s scienter 

provision is defined via three distinct definitions, a failure to 

establish the Safeco standard as a threshold matter precludes 

liability under any of these definitions. Applying this standard to the case at hand, SuperValu did not act with the 
No. 20-2241 3 

requisite knowledge under the FCA. The judgment of the district court is affirmed.

I. Background

Underlying this case is a complex regulatory scheme, the 

details of which inform whether SuperValu has run afoul of 

the FCA’s prohibition on submitting false claims to the government. Before canvassing the case facts, it is necessary to 

provide a brief overview of both the regulatory schemes under Medicare Part D and Medicaid and our FCA precedent 

involving those statutes. 

A. Medicare Part D and Medicaid 

Medicare and Medicaid are government healthcare programs administered by the Department of Health and Human 

Services through the Centers for Medicare and Medicaid Services (“CMS”). Medicare Part D is a prescription drug benefit

providing insurance coverage to beneficiaries. The government employs a multi-tier system to provide Medicare prescription subsidies. At the outset, CMS awards contracts to 

private plan sponsors to facilitate the benefits program and 

pays them directly, based in part on the number of enrolled 

beneficiaries. 42 U.S.C. § 1395w-115; 42 C.F.R. §§ 423.265, 

423.315, 423.329(a), (c). Plan sponsors, in turn, enter agreements with pharmacies or with middlemen, known as Pharmacy Benefit Managers (“PBMs”), which deal directly with 

the pharmacies. The PBMs’ contractual agreements with 

pharmacies specify the methods of calculating prescription 

drug rates for reimbursement claims, and the PBMs process 

claims and oversee reimbursements. See 42 U.S.C. § 1395w111(i). 
4 No. 20-2241

Medicare Part D limits prescription drug reimbursement 

rates to the lower of either the “actual charge” or “106 percent 

of the average sales price,” subject to specific limitations. 42 

C.F.R. § 414.904(a). While federal regulations do not define 

“actual charge,” they do define “actual cost.” 42 C.F.R. § 

423.100. The actual cost for a prescription from a “network 

pharmacy” means the “negotiated price” set by the PBM contract with that pharmacy. Id. If an out-of-network pharmacy 

prescribed the drug, the actual cost is the U&C price. Id. Medicare regulations define U&C price as the price charged to “a 

customer who does not have any form of prescription drug 

coverage.” Id. PBM contracts must comply with the Medicare 

Part D statute and regulations.

Medicaid operates in similar fashion but leverages the cooperative efforts of the states. 42 U.S.C. § 1396 et seq. The federal government and participating states jointly finance Medicaid, and the states implement the program through “state 

plans.” To be eligible for federal funding, a state’s plan must 

comply with the Medicaid statute and federal regulations and 

obtain approval from CMS. 42 U.S.C. §§ 1396-1, 1396a, 1396b. 

A state’s plan must describe the state agency’s “payment 

methodology for prescription drugs,” and the drug reimbursement methodology must comport with federal requirements for Medicaid expenditures. 42 C.F.R. § 447.518(a)–(b). 

Relevant here, federal regulations limit the pharmacy reimbursement for certain prescription drugs to the lower of either 

“[Actual acquisition cost] plus a professional dispensing fee” 

or providers’ “usual and customary charges to the general 

public.”1 42 C.F.R. § 447.512(b). Because both Medicare and 

1 While the state plans for the four states implicated in this appeal 

contain definitions of U&C price that have slight variances from the 
No. 20-2241 5 

Medicaid programs involve third-party submission of claims 

to the government, these reimbursement processes give rise 

to FCA litigation.

B. United States ex rel. Garbe v. Kmart Corporation

We confronted one such FCA qui tam suit in United States

ex rel. Garbe v. Kmart Corporation. In Garbe, we elaborated on 

the falsity prong of FCA claims in the context of U&C prices 

reported by pharmacies. The Garbe relator alleged that Kmart 

submitted false claims for prescription reimbursements under 

Medicare and Medicaid by failing to report its discountprogram prices as its U&C prices. Garbe, 824 F.3d at 636. 

Instead, Kmart had reported the higher prices it charged to 

third-party insurers and non-program cash customers. Id. The 

district court disposed of the relator’s FCA claim on a motion 

for partial summary judgment. On interlocutory appeal, we 

added the question whether the district court correctly held 

that Kmart’s discount-program prices were U&C prices—the 

prices “charged to the general public.” Id. at 637. We affirmed 

that determination. 

Our decision referenced a variety of sources—dictionary 

definitions, regulatory definitions, Medicare policy, caselaw, 

and a CMS manual—to determine the boundaries of “usual 

and customary price charged to the general public.” We noted 

that unless state regulations provided a different meaning, 

the U&C price “is defined as the ‘cash price offered to the general public.’” Id. at 643. Upon consideration of these sources 

and the case facts, we determined that Kmart’s program fell 

wording in § 447.512(b), the Relators have stipulated that these definitions 

are substantively equivalent to the federal definition. We consequently analyze the federal definition of U&C price for purposes of this appeal. 
6 No. 20-2241

within the scope of “U&C price.” Kmart’s generic-drug discount program offered set prices and was open to the public—

any customer could opt in by paying a $10 fee and providing 

personal information. Id. at 643. The discount prices were “the 

lowest prices for which its drugs were widely and consistently available”—over 89% of Kmart’s cash customers received the discount prices. Id. at 635, 645; U.S. ex rel. Garbe v. 

Kmart Corp., 73 F. Supp. 3d 1002, 1018 n.10 (S.D. Ill. 2014). We 

also found it significant that Kmart had offered these prices 

for several benefit years rather than as “a one-time ‘lower 

cash’ price.” Garbe, 824 F.3d at 644. On those facts, we held 

that a pharmacy’s discount-program prices could be its U&C 

prices when the program was offered to the public, even 

though the discount prices were not the retail prices charged 

to all customers. Id. at 645. We remanded Garbe without discussing the FCA’s scienter prong. Although the scienter 

prong is at issue in this appeal, Garbe played a key role in the 

suit against SuperValu.

C. Factual Background

SuperValu, through several subsidiaries, operated or controlled roughly 2,500 grocery stores with over 800 in-store 

pharmacies between 2006 and 2016. In 2006, SuperValu’s national headquarters implemented the discount program underlying this appeal, which ran until December 2016. The 

price-match initiative was an attempt to compete with pharmacies such as Wal-Mart, which had launched a discount program that same year offering hundreds of generic drugs at $4 

per 30-day prescription. SuperValu sought to remain competitive without adopting Wal-Mart’s program. According to SuperValu’s Vice President of Prescription Services, implementing a $4 generics program would cost SuperValu $40–$50 
No. 20-2241 7 

million in losses if $4 was the U&C cost passed on to PBMs. 

Instead, SuperValu employed what it internally characterized 

as a “‘stealthy’ approach.” Corporate officers framed SuperValu’s price-match program as an “‘exception’ for customer 

service reasons” that would not be reported as the U&C price. 

Under SuperValu’s price-match program, its regional 

stores could match lower prices on prescription drugs offered 

by other, local pharmacies within a specific proximity to the 

regional store. But the discount was not automatic. Customers 

had to request a price match. Once SuperValu pharmacists 

verified the competitor’s price, SuperValu automatically applied the discount for that customer on future refills.2 Any 

customer could request a price match, including those with 

insurance or government healthcare plans. When applying a 

price-match cost for insured customers, the pharmacists overrode the price in the pharmacy’s automatic system and manually entered the price-matched cost. SuperValu instructed 

pharmacies to process these price-match sales as cash transactions rather than third-party payor claims that would go directly to insurers.

SuperValu did not report these price-matches when it submitted reimbursement claims to third-party insurers, including Medicare Part D and Medicaid. Rather, SuperValu listed 

its retail price—the price for uninsured cash customers—as its 

U&C price. Many of SuperValu’s PBM contracts contained

U&C price clauses, but the contractual definitions of that term 

varied. Some contracts addressed reporting prices from 

2 SuperValu did not implement its automatic price override until 2008.

All SuperValu’s pharmacies had ceased the price-match program by December 2016, a few months after this Court decided Garbe in May 2016.
8 No. 20-2241

discount programs, either including discount programs as a 

blanket rule or excepting specific types of discounts. Others 

did not mention discounts at all. None of the contracts expressly included price-matching, although one PBM, Medco, 

stated in its 2007–2008 manual that it included a “competitor’s 

matched price” in its definition of U&C price. 

Between 2006 and 2016, sales under SuperValu’s pricematching policy accounted for 26.6% of SuperValu’s cash 

drug sales and 1.69% of its total prescription drug sales—

roughly 6.3 million sales. In 2012, the majority of the cash 

sales for 44 of SuperValu’s top 50 prescription drugs were 

made at a price-match cost rather than SuperValu’s retail 

price.3 SuperValu continued its price-match program until 

December 2016 and did not report its discount prices as its 

U&C prices to any PBM or state agency during that time.

D. Procedural Background

In 2011, the Relators filed this suit against SuperValu under the FCA on behalf of the federal government and several

states.4 They alleged that SuperValu knowingly caused false 

payment claims to be submitted to government healthcare 

programs between 2006 and 2016 by incorrectly reporting 

their U&C drug prices. The Relators’ theory of the case was 

3 The dissent cites this statistic without confining it to fiscal year 2012. 

We note that the Relators have identified no evidence regarding the frequency of price-match sales versus retail cash sales for SuperValu’s top 50 

drugs during any of the other years between 2006-2016 when its pricematch program was active. 

4 In the district court, the parties stipulated to a dismissal of all Medicaid claims on behalf of the states except those on behalf of California, Illinois, Utah, and Washington.
No. 20-2241 9 

that SuperValu price-matched to avoid losing customers to 

competitors with lower drug prices like Wal-Mart and made 

up the difference by charging government healthcare programs its higher, retail price. In effect, the Relators argued, 

SuperValu caused the government to subsidize its market 

competitiveness. The government did not intervene in this 

case. 

The district court, relying on Garbe, granted summary 

judgment to the Relators on the falsity prong.5 It acknowledged that SuperValu’s price-match program required customers to initiate a discount and found that discount sales 

comprised a lower portion of SuperValu’s sales—roughly 2% 

of total transactions and 26.9% of cash sales—compared to 

Kmart’s discounts in Garbe, which amounted to 89% of its 

cash sales. Even so, the court held that the fact that SuperValu

made its price-match policy available to the general public 

throughout a benefit year was determinative. 

In a separate order, the district court sided with SuperValu

on the scienter prong. The court first applied Safeco’s standard 

to the FCA’s scienter prong and held that a failure to establish 

the objective scienter standard precluded liability under the 

FCA. Under the Safeco standard, the court held that SuperValu’s understanding of U&C price, while incorrect, was objectively reasonable at the time. The district court first observed that there were multiple district court decisions endorsing SuperValu’s view of U&C price or recognizing that 

the term was open to interpretation. It also took note of the 

unique circumstance in which Garbe addressed the definition 

5 SuperValu does not contest the district court’s falsity holding in this 

appeal.
10 No. 20-2241

of U&C price. Because the Seventh Circuit added that question to the issues certified for interlocutory appeal, the district 

court suggested that we must have found the matter “sufficiently debatable to be addressed.” 

Based on the available caselaw, the court held that it was 

unclear that SuperValu’s program fell within the U&C definition. Further, the court held that prior to our 2016 decision in 

Garbe, there was no authoritative guidance to warn SuperValu

away from its interpretation of U&C price. In view of these 

conclusions, the district court entered summary judgment for 

SuperValu on all FCA claims, which the Relators now challenge.

II. Discussion

On appeal, the parties ask us to determine whether Safeco

applies to the FCA’s scienter standard and, if so, to what extent. Our answers to those questions will dictate the outcome 

of the final issue in this appeal—whether the district court 

properly granted summary judgment for SuperValu on the 

scienter prong of the FCA claim. We review the district court’s 

determinations on these legal issues de novo and affirm the 

grant of summary judgment to SuperValu. Bigger v. Facebook, 

Inc., 947 F.3d 1043, 1048, 1051 (7th Cir. 2020). 

A. The False Claims Act 

The FCA imposes civil liability on any person who “knowingly presents, or causes to be presented, a false or fraudulent 

claim for payment or approval.” 31 U.S.C. § 3729(a)(1)(A). 

FCA civil claims thus require proof of two primary elements: 

(1) falsity and (2) scienter. The Supreme Court has also interpreted § 3729(a)(1)(A) to require that knowingly false claims 

be material to the government’s payment decision for liability 
No. 20-2241 11 

to attach. Univ. Health Servs., Inc. v. U.S. ex rel. Escobar, 136 S. 

Ct. 1989, 1996 (2016).

Although “Congress did not define what makes a claim

‘false’ or ‘fraudulent,’” the Supreme Court has applied the

common law meaning of fraud to these terms as they are used 

in the FCA. Id. at 1999. Under that definition, a claim may be 

false or fraudulent through either express misrepresentations 

or “misrepresentations by omission.” Id. 

Unlike the falsity prong, the FCA’s scienter requirement is 

statutorily defined. A party who submits a false claim to the 

government is on the hook for FCA liability only if it acted 

knowingly. § 3729(a)(1)(A). The FCA defines knowingly to 

“mean that a person, with respect to information (i) has actual 

knowledge of the information; (ii) acts in deliberate ignorance 

of the truth or falsity of the information; or (iii) acts in reckless 

disregard of the truth or falsity of the information.” 

§ 3729(b)(1)(A). It “require[s] no proof of specific intent to defraud.” § 3729(b)(1)(B). The FCA levies significant consequences against parties found liable under the Act and balances the severity of its penalties by carefully circumscribing

liability, in part through its scienter requirement. See Escobar, 

136 S. Ct. at 1995–96 (observing that FCA civil “liability is essentially punitive in nature” (internal quotation omitted)). 

B. Safeco Insurance Company of America v. Burr

While the FCA lists the range of scienter levels encompassed by “knowingly,” it does not further define those terms. 

SuperValu urges us to look to the Supreme Court’s decision 

in Safeco for guidance. Safeco involved an interpretation of the 

FCRA’s common law scienter requirement, under which 

plaintiffs must show that defendants acted “willfully.” 15 
12 No. 20-2241

U.S.C. § 1681n(a). As defined by the Court, the FCRA’s use of 

that term includes both “knowing” and “reckless disregard.” 

Safeco, 551 U.S. at 52, 59. 

In interpreting the FCRA’s scienter prong, the Court first 

observed “the general rule that a common law term in a statute comes with a common law meaning, absent anything 

pointing another way.” Id. at 58. Finding none, it employed 

what amounts to a two-step inquiry for determining reckless 

disregard. Id. at 69. A defendant who acted under an incorrect 

interpretation of the relevant statute or regulation did not act 

with reckless disregard if (1) the interpretation was objectively reasonable and (2) no authoritative guidance cautioned 

defendants against it. Id. at 70. Critically, the Court emphasized that a defendant’s subjective intent is irrelevant for purposes of liability. Id. at 68, 70 n.20. The Court also explained 

that failure to meet this standard would preclude a finding of 

knowing violations as well. Id. at 70 n.20. 

The Court then applied that standard and held that while 

Safeco may have violated the FCRA, it did not do so with 

reckless disregard. The FCRA requires that any person who 

takes an “adverse action” against a consumer based on information in a consumer report notify that consumer. 15 U.S.C. 

§ 1681m(a). An “adverse action” is statutorily defined as including “an increase” in the amount charged for “insurance, 

existing or applied for.” § 1681a(k)(1)(B)(i). The Safeco plaintiffs argued that Safeco violated the FCRA when it offered 

new insurance applicants higher rates without notifying them 

that their credit scores triggered the less favorable policy offers. Safeco, 551 U.S. at 55. Safeco thought initial rate offers to 

new customers fell outside FCRA notice obligations because 
No. 20-2241 13 

it interpreted “increase” to mean rate hikes on existing policies. Id. at 69–70. 

While Safeco’s interpretation was erroneous, the Court 

held that it was objectively reasonable. Why? Because Safeco’s 

“reading ha[d] a foundation” in “the less-than-pellucid 

statutory text.” Id. Further, there was no court of appeals 

decision or authoritative guidance from the Federal Trade 

Commission—the agency charged with enforcing the 

FCRA—that “might have warned it away from the view it 

took.” Id. at 70. Under the Court’s two-step inquiry, these facts 

precluded a finding of reckless disregard. Since this decision, 

four circuit courts have applied the Safeco standard to the 

FCA’s scienter prong.SuperValu asks us to do the same today.

C. Safeco applies to the FCA

To determine what the FCA’s scienter provision requires, 

we “start, as always, with the statutory text.” Escobar, 136 S. 

Ct. at 1999. The FCA defines “knowingly” as encompassing

three common law standards—actual knowledge, deliberate 

indifference, and reckless disregard—but is silent as to what 

those standards mean in the context of this statute.6 Supreme 

Court precedent teaches that “a common law term in a statute 

comes with a common law meaning, absent anything pointing another way.” Safeco, 551 U.S. at 58. That principle informs 

our decision today. Here, the Relators have identified no statutory indicia that Congress intended the familiar, common 

6 The FCA imposes civil liability. We thus reference the civil, not criminal, definitions of these scienter standards throughout our discussion. 

Safeco, 551 U.S. at 60 (acknowledging distinctions between criminal and 

civil uses of the same scienter terms and indicating that criminal law usage 

has no bearing on the definitions of these terms when used in civil laws). 
14 No. 20-2241

law terms used in § 3729 to differ from their common law 

meaning. Indeed, the Supreme Court has confirmed that the 

FCA does employ the common law meaning for other common law terms—“false” and “fraudulent”—and has limited 

the common law definition only to the extent that the statute 

expressly contradicted it. “Congress retained all other elements of common-law fraud that are consistent with the statutory text because there are no textual indicia to the contrary.” 

Escobar, 136 S. Ct. at 1999 & n.2. Given that the common law 

meaning applies to the FCA’s scienter standard, all that remains is to identify that meaning. We need look no further 

than the Supreme Court’s decision in Safeco. 

Safeco defined a similar common law term—“willfully,” as 

used in the FCRA—which the Court interpreted as encompassing the same common law scienter terms used in the FCA

(“knowingly” or “reckless disregard”). Referencing the common law meaning, the Court then announced a standard inquiry for reckless disregard. While reiterating that “knowingly” and “reckless disregard” remain distinct terms, the Supreme Court held that the objective scienter standard it articulated precluded liability under either term. Safeco, 551 U.S. 

at 60, 70 n.20. There is no reason why the scienter standard 

established in Safeco (for violations committed knowingly or 

with reckless disregard) should not apply to the same common law terms used in the FCA.

The dissent suggests that Safeco has no bearing simply because it interpreted a different scienter requirement in a different statute. We respectfully disagree. Safeco articulated an 

objective scienter standard for establishing willful violations, 

which it framed in terms of the scienter floor for that standard—reckless disregard. Likewise, reckless disregard is the 
No. 20-2241 15 

baseline scienter definition encompassed by the FCA’s scienter requirement, “knowingly.” United States v. King-Vassal, 728 

F.3d 707, 712 (7th Cir. 2013) (observing that reckless disregard 

“is the most capacious of the three” terms used to define the 

FCA’s scienter requirement). And Safeco explicitly held that 

the test for reckless disregard would likewise cover violations 

committed “knowingly.” Safeco, 551 U.S. at 70 n.20. In view of 

those parallels, we see no barrier to importing the Safeco

standard to the FCA. See Purcell, 807 F.3d at 284, 290. 

Every other circuit court to discuss the relevance of Safeco’s 

scienter standard to the FCA has arrived at this conclusion. 

United States ex rel. Streck v. Allergen, 746 F. App’x 101, 106 (3d 

Cir. 2018); United States ex rel. McGrath v. Microsemi Corp., 690 

F. App’x 551, 552 (9th Cir. 2017); United States ex rel. Donegan 

v. Anesthesia Assocs. of Kan. City, PC, 833 F.3d 874, 879–80 (8th 

Cir. 2016); United States ex rel. Purcell v. MWI Corp., 807 F.3d 

281, 284 (D.C. Cir. 2015). The dissent claims that the Eleventh 

Circuit declined to apply Safeco to the FCA in United States ex 

rel. Phalp v. Lincare Holdings, Inc., 857 F.3d 1148 (11th Cir. 

2017). But Phalp did not reject Safeco—it did not even cite 

Safeco. To support its conclusion, the dissent points to Phalp’s 

assertion that “scienter is not determined by the ambiguity of 

a regulation, and can exist even if a defendant’s interpretation 

is reasonable.” Id. at 1115. That is not inconsistent with Safeco. 

Under Safeco, an objectively reasonable interpretation of a 

statute or regulation does not shield a defendant from liability 

if authoritative guidance warned the defendant away from 

that interpretation. Regardless of differing views as to 

whether Phalp is consistent with the Safeco standard, the Eleventh Circuit did not reject Safeco’s applicability to the FCA. 

Even though the parties briefed the court on Safeco, that briefing does not convert the Eleventh Circuit’s silence into a 
16 No. 20-2241

decision that Safeco does not apply to the FCA. As it stands, 

no circuit has held Safeco inapplicable to the FCA.

The dissent would part ways with the circuits that have 

applied the Safeco standard to the FCA and look instead to the 

Restatement (Second) of Torts § 526, which makes subjective 

intent relevant to the scienter inquiry. Section 526 defines 

“conditions under which misrepresentation is fraudulent.” It 

does not define “knowingly” (or any of the common law scienter terms listed in § 3729(b)(1)(A)). And it is a different provision than the Restatement provision that the Court referenced in Safeco, 551 U.S. at 69 (relying upon § 500, defining 

“reckless disregard”). We thus disagree that § 526 is relevant 

to the FCA’s scienter provision. Take out “knowingly,” and 

perhaps it makes sense to read general, common law fraudulent scienter into the Act. But here, Congress has willed a specific scienter requirement—knowingly, not “‘knowing’ of falsity,” as the dissent suggests. 

Unlike § 526, § 500 defines a term that the FCA’s definition 

of knowingly expressly includes (“reckless disregard”). The 

dissent insists that because § 500—which defines “reckless 

disregard of safety”—applies to cases involving physical 

harm, it is inapplicable to “reckless disregard” as used in the 

FCA. But the Supreme Court applied this definition outside 

the physical-harm context in Safeco. Ultimately, the crucial 

point is that the Court has articulated a standard for acts committed “knowingly” or with “reckless disregard” that excludes subjective intent. In the absence of textual indicia in the 

FCA supporting that subjective intent matters here, we apply 

Supreme Court precedent to interpret the same common law 

terms addressed in Safeco. 
No. 20-2241 17 

While the dissent claims that its countervailing view is textually mandated, nothing in the language of the FCA suggests 

that a defendant’s subjective intent is relevant. In contrast to 

§ 526, terms such as “believes” or “have [] confidence” are 

conspicuously absent from the FCA, and the only reference to 

intent is an express disclaimer that “specific intent to defraud” is irrelevant. § 3729(b)(1)(B). We decline to graft aspects of common law fraudulent scienter into the FCA when 

Congress chose not to include such requirements. 

The dissent instead looks to legislative history and out-ofcircuit caselaw to support its reading of the FCA. We find neither source persuasive. Legislative history cannot support 

reading in a subjective-intent requirement that goes beyond 

the text of the Act’s scienter provision. See Chamber of Commerce of U.S. v. Whiting, 563 U.S. 582, 599 (2011) (“Congress’s 

authoritative statement is the statutory text, not the legislative 

history.” (internal citation and quotation omitted)). And the 

circuit cases upon which the dissent relies all predate Safeco, 

as well as subsequent caselaw in each of those circuits applying Safeco to the FCA. Neither Restatement § 526 nor legislative history pose a barrier to applying Safeco. 

The Relators challenge Safeco’s viability on a separate basis that likewise fails. They contend that subsequent Supreme 

Court precedent limited Safeco, leaning on a 2016 patent case 

for this premise—Halo Electronics, Inc. v. Pulse Electronics, Inc., 

136 S. Ct. 1923 (2016). Halo Electronics interpreted § 284 of the 

Patent Act, which provides that courts may award treble damages in infringement cases. Section 284 does not specify a scienter standard, and prior to Halo Electronics, the Federal Circuit required plaintiffs to show that an infringer’s conduct 

was “both objectively baseless and brought in subjective bad 
18 No. 20-2241

faith.” Id. at 1932–33. Halo Electronics clarified that § 284 liability does not depend on objective recklessness. 

The problem with importing an objective recklessness inquiry into the patent context was that “such a defense insulates the infringer from enhanced damages, even if he did not 

act on the basis of the defense or was even aware of it.” Id. at 

1933. In rejecting that standard, the Court emphasized that 

the Patent Act targets “consciously wrongful” bad action and 

held that “[i]n the context of such deliberate wrongdoing, 

however, it is not clear why an independent showing of objective recklessness ... should be a prerequisite to enhanced 

damages.” Id. at 1932. 

The defendants, citing Safeco, argued that bad faith is irrelevant when there is no showing of objective recklessness. Id.

at 1933 n.*. While acknowledging the Safeco standard, the 

Court declined to apply it. It observed that “willfully is a 

word of many meanings whose construction is often dependent on the context in which it appears.” Id. (internal quotation 

omitted). The Patent Act presented a different context than the 

FCRA: “[O]ur precedents make clear that ‘bad-faith infringement’ is an independent basis for enhancing patent damages.” Id. 

The Supreme Court thus did not walk back Safeco or adopt 

a new standard for objective recklessness. Halo Electronics

simply did not apply objective recklessness in the context of a 

statute focused on defendants’ subjective bad faith. The reasons informing that decision do not apply here. Unlike the Patent Act, the FCA expressly includes a scienter standard and 

limits liability to knowingly false claims. By its own terms, 

Safeco holds that a failure to establish its objective scienter 

standard precludes a finding that a defendant acted 
No. 20-2241 19 

knowingly. We thus hold that Safeco’s scienter standard applies to the FCA. 

D. Failure to meet the Safeco standard precludes liability

Beyond the threshold question of Safeco’s applicability to 

the FCA, the parties also dispute how broadly Safeco reaches. 

We agree with SuperValu that the Safeco standard reaches all 

three of the scienter terms that define “knowingly.” The dissent takes the Relators’ position that even if it is relevant to 

the FCA, Safeco defines only “reckless disregard.” Under this 

view, failure to show that a defendant meets the Safeco standard does not preclude liability under the actual knowledge or 

deliberate ignorance components of the FCA’s scienter definition. The dissent contends that holding otherwise would collapse distinct scienter terms and violate the rule against surplusage. We are unconvinced.

The Supreme Court has already undermined this line of 

reasoning. In Safeco, the Court rejected the defendants’ argument that it was conflating scienter terms and reaffirmed that 

the terms it used to define “willfully” were distinct. Safeco, 551 

U.S. at 60. (“[A]ction falling within the knowing subcategory 

does not simultaneously fall within the reckless alternative.”). 

It nevertheless held that the standard it articulated in the context of “reckless disregard” also functioned as a baseline requirement for establishing the more demanding scienter category of “knowledge.” Id. at 70 n.20 (“Where, as here, the statutory text and relevant court and agency guidance allow for 

more than one reasonable interpretation, it would defy history and current thinking to treat a defendant who merely 

adopts one such interpretation as a knowing or reckless violator.” (emphasis added)). That holding nullifies the dissent’s 

contention. 
20 No. 20-2241

Even aside from Safeco’s dismissal, the dissent’s argument 

rests upon a false equivalence. No one disputes that the three 

scienter terms used to define “knowingly” are distinct and 

bear different meanings. Both actual knowledge and deliberate ignorance indicate higher degrees of culpability and, if implicated in a case, might render reckless disregard inapplicable. See Purcell, 807 F.3d at 288 (observing that reckless disregard is the loosest standard of knowledge under the FCA’s 

scienter requirement). That does not prevent these terms, 

however, from sharing a common requirement. 

Indeed, we do not see how it would be possible for defendants to actually know that they submitted a false claim if 

relators cannot establish the Safeco scienter standard. A defendant might suspect, believe, or intend to file a false claim, 

but it cannot know that its claim is false if the requirements for 

that claim are unknown. The dissent’s primary concern that 

the Safeco standard eliminates culpability for deliberately indifferent defendants is likewise misplaced. The dissent postulates that under the Safeco standard, defendants could escape 

liability by making a “barely plausible” post-hoc argument 

about a statute’s meaning, “even though the defendant ignored repeated and correct warnings.” That fundamentally 

misapprehends Safeco. Under Safeco, a defendant will be successful only if (a) it has an objectively reasonable reading of the 

statute or regulation and (b) there was no authoritative guidance warning against its erroneous view. That test does not 

shield bad faith defendants that turn a blind eye to guidance 

indicating that their practices are likely wrong. Nor does 

Safeco’s standard excuse a company if its executive decisionmakers attempted to remain ignorant of the company’s 

claims processes and internal policies. Safeco covers all three 

of the scienter standards listed in § 3729. When relators cannot 
No. 20-2241 21 

establish the standard articulated in Safeco, there is no liability 

under the FCA.

E. SuperValu’s interpretation of “usual and customary 

price” was objectively reasonable under Safeco

Although the Safeco Court did not express its standard for 

reckless disregard in terms of elements, the Court’s objectively reasonable inquiry involved two distinct questions—

whether the defendant has a permissible interpretation of the 

relevant provision and whether authoritative guidance nevertheless warned it away from that reading.7 

1. Permissible Interpretation

The objectively reasonable inquiry hinges on the text of the 

statute or regulation that the defendant allegedly violated and 

as such is a question of law. Safeco, 551 U.S. at 69; see also Van 

Straaten v. Shell Oil Prods. Co. LLC, 678 F.3d 486, 489–90 (7th 

Cir. 2012). If the plain language of the statute precludes the 

erroneous interpretation, the defendant cannot clear this hurdle. To decide whether SuperValu had a permissible interpretation of U&C price, we must first determine the source of that 

term and relevant definition. 

7 Some courts have divided the Safeco inquiry into three steps, adding 

as a preliminary question whether the relevant text is ambiguous. Donegan, 833 F.3d at 878; Purcell, 807 F.3d at 288. We elect to condense the inquiry into the two issues expressly discussed in Safeco—permissible interpretation and authoritative guidance. The Safeco Court did not require a 

separate determination of ambiguity, and we think that the issue of textual 

ambiguity is subsumed within the permissible-interpretation inquiry. A 

defendant’s erroneous interpretation cannot be reasonable if the meaning 

of the text is unambiguous.
22 No. 20-2241

Medicaid regulations define U&C price without much 

elaboration as the price that a pharmacy “charges to the general public.”8 42 C.F.R. § 447.512(b); see also Garbe, 824 F.3d at 

643–44. Federal regulations do not elaborate beyond that cursory definition or guide pharmacies on identifying the “general public” when they charge customers various prices for 

the same prescription.9 “Usual and customary” might mean 

the price that is “charged” most frequently for a drug, but it 

could also indicate the retail rather than discount price. See 

GAO, Report to Congress on Trends in Usual and Customary 

Prices for Drugs Frequently Used by Medicare and Non8 The Relators argue that for Medicare, pharmacies that have contracted with a plan sponsor or PBM report the “negotiated price” determined by the contract. On appeal, the Relators consequently look to the 

various formulations of U&C price in SuperValu’s PBM contracts. In the 

district court, however, they took the opposite position: “Relators dispute 

that the contracts between PBMs and pharmacies ‘govern the terms’ by 

which Defendants are required to submit claims to the PBMs and in turn, 

whether and how much the PBMs should pay Defendants for dispensing 

drugs to their beneficiaries.” Relators’ Resp. to Defs.’ Mot. for Partial 

Summ. J. at 9 [191-1]. As a result, they have waived any argument on appeal that the contractual definitions of U&C price are distinct from the 

Medicaid regulatory definition. We thus examine only § 447.512(b)’s definition of U&C price and treat the PBM contract definitions of U&C price 

as consistent with it.

9 The Relators also identified four states’ regulations defining U&C 

price, as Medicaid is implemented through the states. The regulations that 

were concurrent with SuperValu’s price-match program used substantially the same definition of U&C price as 42 C.F.R. § 447.512(b). The Relators also claim that they are “consistent with the controlling federal definition and the U&C framework analyzed in Garbe.” We consequently treat 

our analysis of the federal definition of U&C price as extending to these 

states and the FCA claims related to Medicaid.
No. 20-2241 23 

Medicare Enrollees at 1 (Oct. 6, 2004) (“The usual and customary price is the undiscounted price individuals without drug 

coverage would pay.“). “General public” may mean that discount prices qualify only if applied to all consumers or, alternatively, if they constitute the price most frequently charged 

to consumers. But it just as easily might encompass any discount program offered to the public, regardless of whether all 

consumers take advantage of it. Garbe, 824 F.3d at 643. As is, 

the U&C price definition is open to multiple interpretations.

Here, SuperValu interpreted its set, retail price for a prescription drug as the “price it charges to the general public.” 

Unlike its retail price, the discount prices under SuperValu’s 

price-match program depended upon the prices charged by 

local competitors and initially applied only upon customer request. In short, while its program was available to any customer requesting a valid price match, SuperValu would not 

necessarily charge all or most of its customers lower, pricematched costs. SuperValu thus did not view its competitor 

price-matching as the price that it “charged to the general 

public.” That interpretation is not inconsistent with the text of 

the U&C price definition. See Garbe, 824 F.3d at 644 (citing § 

447.512(b)). 

The Relators spend little time discussing the compatibility 

of SuperValu’s interpretation of U&C price with the 

regulatory text. Instead, they contend that Garbe forecloses 

any argument on objective reasonableness. Garbe

characterized the federal regulations at issue here as having a 

“clear” purpose—ensuring that the government receives the 

benefit of the “prevailing retail market price” that pharmacies

provide to consumers. Garbe, 824 F.3d at 644. From this, the 

Relators claim that we have already held that the meaning of 
24 No. 20-2241

U&C price is unambiguous. The flaws in this argument are 

two-fold.

As an initial matter, it overextends our holding in Garbe.

Garbe held that the correct interpretation of U&C price included certain discount program prices—it did not hold that 

this was the only objectively reasonable interpretation of the 

term. In fact, Garbe did not discuss Safeco at all. We had no 

reason to do so because we explicitly did not address the 

FCA’s scienter prong. The decision that we did reach in 

Garbe—interpreting “U&C price”—does not influence the objectively reasonable inquiry here, either. Safeco’s scienter 

standard has bite only if a defendant’s interpretation may be 

objectively reasonable even if it is erroneous. That SuperValu’s interpretation of U&C price is incorrect under Garbe

does not de facto render its interpretation unreasonable.

The Relators also err by calibrating objective reasonableness against the clarity of a statute or regulation’s policy objective. Their Garbe argument rests on the assumption that any 

regulation with a clear purpose cannot be ambiguous. But 

Safeco tethered the objectively reasonable inquiry to the legal 

text, not its underlying policy. Safeco, 551 U.S. at 69–70 (holding that Safeco’s erroneous interpretation was reasonable because it had a foundation in the “less-than-pellucid” statutory 

text). The Relators’ failure to engage with the regulatory text 

is fatal to their objections. They have not shown that SuperValu’s erroneous interpretation of U&C price was unreasonable.

Apart from the Relators’ arguments based on Garbe, the 

dissent suggests a more fundamental concern with SuperValu’s interpretation of U&C price. It argues that for an erroneous interpretation to be objectively reasonable, the 
No. 20-2241 25 

defendant must have held that view at the time that it submitted its false claim.10 Otherwise, the dissent insists, defendants 

can avoid liability by concocting “post-hoc arguments” to justify their conduct under an objectively reasonable reading of 

the applicable regulation—even if they acted in bad faith. The 

dissent essentially argues that SuperValu believed it was violating the requirement to report its U&C price and arrived at 

its “interpretation” of U&C price after the fact. 

Even if the Relators can raise an issue of fact on this point, 

it is irrelevant. The FCA establishes liability only for knowingly

false claims—it is not enough that a defendant suspect or believe that its claim was false. See Purcell, 807 F.3d at 288 (holding that defendants did not violate the FCA because they 

“could reasonably have concluded” that their conduct complied with the law, even though they believed—and testified 

that they “knew”—it did not). Indeed, Safeco emphasized that 

a defendant’s subjective intent does not matter for its scienter 

analysis—the inquiry is an objective one. This standard reflects the limits of FCA liability. See Escobar, 136 S. Ct. at 2003 

(“The False Claims Act is not an all-purpose antifraud statute 

or a vehicle for punishing garden-variety breaches of contract 

or regulatory violations.” (cleaned up)). We apply the standard as we find it and hold that SuperValu has offered an objectively reasonable interpretation of U&C price.

10 The dissent does not—and cannot—rely on Safeco for this assertion. 

Safeco made no mention of a temporal requirement when it articulated the 

objectively reasonable inquiry. The Relators cited Halo Electronics when 

they raised this same argument on appeal. But as explained previously, 

we reject the applicability of that case to the FCA.
26 No. 20-2241

2. Authoritative Guidance

This moves SuperValu but halfway across the scienter line. 

Safeco makes clear that a permissible interpretation is no defense if there existed authoritative guidance that should have 

warned defendants away from their erroneous interpretation.11 “Authoritative guidance,” as the moniker implies, must 

come from a source with authority to interpret the relevant 

text. Safeco also suggests that the guidance must be sufficiently specific to the defendant’s incorrect interpretation.

The Supreme Court did not flesh out the boundaries of authoritative guidance, but at minimum, Safeco supports that it 

must come from a governmental source—either circuit court 

precedent or guidance from the relevant agency.12 Safeco, 551 

U.S. at 70. We are not alone in this view. Other circuit courts 

likewise have limited authoritative guidance to these two 

sources. See Purcell, 807 F.3d at 289 (considering only circuit 

court caselaw and guidance from the controlling agency);

Streck, 746 F. App’x at 106, 108 (same). Our reading of Safeco

automatically excludes one of the three sources of guidance 

proposed by the Relators—the PBM contract definitions of 

U&C price. The Relators also identify federal and state regulations defining U&C price, but we have considered the relevant regulatory definition above and determined that it does

11 The authoritative-guidance inquiry is a question of law in this case, 

as it entails only the interpretation of regulatory guidance.

12 The parties agree that Garbe is no help to the Relators on this front, 

despite its status as circuit court precedent that would otherwise constitute authoritative guidance. Recall that we decided that case in May 2016, 

the same year that SuperValu shelved its discount program. The Supreme 

Court did not deny the Garbe certiorari petition until 2017.
No. 20-2241 27 

not preclude SuperValu’s interpretation. As a result, those 

definitions cannot constitute warnings that SuperValu’s interpretation was erroneous. 

The remaining source of guidance identified by the 

Relators is the CMS Medicare Prescription Drug Benefit 

Manual (“CMS manual” or “manual”). The Relators contend 

that the manual constitutes authoritative guidance which 

should have warned SuperValu that its discount prices 

amounted to U&C prices. SuperValu responds that it did not, 

for two reasons. First, SuperValu suggests that the manual is 

not “authoritative” guidance as defined by Safeco. It reads 

Safeco to require that authoritative agency guidance not only 

originate from the agency charged with implementing the 

relevant statute but that it be binding on the agency, such as 

notice-and-comment rulemaking or agency adjudication. The 

circuits that have addressed Safeco’s applicability to the FCA 

appear split on this question. But we need not—and do not—

decide this matter today because we agree with SuperValu’s 

second argument: the CMS manual was not sufficiently 

specific to warn SuperValu that its program likely would fall 

within the definition of U&C price.

Safeco suggests that authoritative guidance must have a 

high level of specificity to control an issue. In Safeco, the 

agency guidance at issue was an FTC letter to Safeco explaining that an adverse action “occurs when ‘the applicant will 

have to pay more for insurance at the inception of the policy 

than he or she would have been charged if the consumer report had been more favorable.’” Safeco, 551 U.S. at 70 n.19 (internal citation omitted). That guidance certainly related to the 

question on appeal—whether an “increase” in insurance rates 

based on a consumer report could “be understood without 
28 No. 20-2241

reference to prior dealing (allowing a first-time applicant to 

sue).” Id. at 64–65. Nevertheless, the Supreme Court rejected 

the FTC letter in part because the Court thought that it “did 

not canvass the issue.”13 Id. at 70 n.19. 

Upon review of the CMS manual, we conclude that it is 

similarly flawed. Footnote one of the manual is most salient 

and reads in relevant part as follows:

We note that in cases where a pharmacy offers a 

lower price to its customers throughout a benefit year, this would not constitute a “lower cash 

price” situation that is the subject of this guidance. For example, Wal-Mart recently introduced a program offering a reduced price for 

certain generics to its customers. The low WalMart price on these specific generic drugs is 

considered Wal-Mart’s “usual and customary” 

price, and is not considered a one-time “lower 

cash” price. Part D sponsors consider this lower

amount to be “usual and customary” and will 

reimburse Wal-Mart on the basis of this price. 

CENTERS FOR MEDICARE & MEDICAID SERVICES, Chapter 14—

Coordination of Benefits, in MEDICARE PRESCRIPTION DRUG 

BENEFIT MANUAL 19 n.1 (2006), https://perma.cc/MW6AH4P6.

The footnote clarifies that a pharmacy’s consistent, lowerprice offers are included within U&C prices. But it says nothing about price-match programs like that employed by 

13 The Court’s other reason for considering the letter unauthoritative 

was that the FTC had expressly stated that it was not binding on the 

agency. Safeco, 551 U.S. at 70 n.19.
No. 20-2241 29 

SuperValu. Further, the majority of the footnote discusses a 

specific example—Wal-Mart’s $4 generics program—which 

differed in significant respects from SuperValu’s price-match 

guarantee. Wal-Mart’s program employed a set lower price

($4 for 30-day generic prescriptions) automatically applied to 

any customer. By contrast, SuperValu’s discount prices could 

vacillate. Its discounts depended upon the pricing of local 

competitors, which could vary between SuperValu’s regional 

stores. SuperValu’s discounts also were customer-initiated in 

the first instance. The manual did not put SuperValu on notice 

that this type of discount program fell within the definition of 

U&C price—at least, not with the specificity required to be 

authoritative guidance. We hold that no authoritative guidance warned SuperValu away from its permissible interpretation of U&C price. The district court correctly granted summary judgment to SuperValu on the question of scienter.

III. Conclusion

Our resolution of this case is controlled by Safeco. Today,

we hold that Safeco’s standard both applies to the FCA’s scienter requirement and precludes liability under it, regardless 

of whether relators premise their case on reckless disregard 

or the other scienter terms. Because SuperValu had an objectively reasonable understanding of the regulatory definition 

of U&C price and no authoritative guidance placed it on notice of its error, the Relators have not shown that SuperValu

acted knowingly. The district court’s judgment is 

AFFIRMED. 
30 No. 20-2241 

HAMILTON, Circuit Judge, dissenting. We should reverse 

summary judgment for defendant SuperValu. The relators 

have come forward with evidence that SuperValu knowingly 

misled the government’s agents about its “usual and customary” prices for a significant number and volume of prescription drug sales. For forty-four of the fifty top-selling drugs, 

SuperValu was charging the government prices eight to fifteen 

times higher than the prices it was actually charging a majority 

of the relevant customers. Binding circuit precedent holds 

that those price claims were false. SuperValu’s defense is that 

it did not “know” its “usual and customary” price claims 

were false. When the False Claims Act is properly understood, 

however, genuine factual disputes over SuperValu’s conduct 

and state of mind should preclude summary judgment. 

This appeal presents a broad and important issue for the 

False Claims Act. The issue is whether the Act can reach businesses that submit false claims for government payment but

claim there is some legal ambiguity that kept them from

“knowing” for certain that their claims were false. Under the 

text and history of the Act, the answer should be yes. 

The majority answers no. It thus creates a safe harbor for 

deliberate or reckless fraudsters whose lawyers can concoct a 

post hoc legal rationale that can pass a laugh test. The majority’s new safe harbor even makes subjective bad faith “irrelevant” in fraud cases. Ante at 25. That undermines the 1986 

amendments to the False Claims Act and turns the Act upside-down, losing touch with the statutory text and its history 

and links to the common law of fraud. I respectfully dissent. 

Part I of this opinion explains the relators’ claims and supporting evidence. Part II explains the better understanding of 

the False Claims Act’s “knowledge” standard based on the 
No. 20-2241 31 

statutory text, the common law of fraud, and statutory history. Part III explains the majority’s two fundamental errors 

in reading the statute. First, rather than focusing on the statutory text, history, and purpose of the False Claims Act itself, 

the majority reads far too much into Safeco Insurance Co. v. 

Burr, 551 U.S. 47 (2007), where the Supreme Court interpreted

a different term under a different statute. Second, the majority 

turns into surplusage two-thirds of the False Claims Act’s definition of “knowing” added in 1986. 

I. The Relators’ Claims

A. The Relators’ Evidence

The majority explains helpfully the important role of 

“usual and customary” drug prices in Medicare and Medicaid. Congress has not allowed the government to do what 

private insurance companies do: use bargaining power to negotiate for lower drug prices. Instead, the government tries to 

take advantage of private competition in so-called “cash” 

sales of prescription drugs. See United States ex rel. Garbe v. 

Kmart Corp., 824 F.3d 632, 644 (7th Cir. 2016). Those are sales 

to customers whose drug purchases are not covered by insurance. Under the statutes and regulations, SuperValu’s “usual 

and customary” drug prices for those cash sales were caps on 

what the government would pay SuperValu for drugs provided to Medicare and Medicaid patients. 

Starting in 2006, Walmart began offering cash sales of generic drug prescriptions for four dollars for a one-month supply and ten dollars for a three-month supply. SuperValu responded to Walmart’s move with an aggressive, widely-advertised price-matching program. The result, giving relators 

the benefit of reasonable inferences from the evidence, was 
32 No. 20-2241

dramatic reductions in the prices SuperValu charged most 

“cash” customers for many drugs for over a decade.

The applicable regulation describes the price cap as “Providers’ usual and customary charges to the general public.” 

42 C.F.R. § 447.512(b)(2). Regulations also include this definition: “Usual and customary (U&C) price means the price that 

an out-of-network pharmacy or a physician’s office charges a 

customer who does not have any form of prescription drug 

coverage for a covered Part D drug.” 42 C.F.R. § 423.100. 

In this appeal, SuperValu does not dispute that under 

now-binding circuit precedent, a discounted price can be the 

“usual and customary” price. See Garbe, 824 F.3d at 644–45. 

SuperValu also does not dispute that it pushed its price match

as a matter of company policy and that it usually charged the 

four-dollar price for many drugs. 

Relators offered evidence that SuperValu told the federal 

government for years that its “usual and customary” prices 

were much higher than those that it actually charged most 

cash customers for many drugs. The question here is whether 

plaintiffs have come forward with evidence to support a finding that SuperValu made these many false claims “knowingly.”

There is room for reasonable disagreement about exactly

how to interpret “usual and customary” prices when a seller 

matches a competitor’s prices to keep a customer. That room 

for argument, says the majority, entitles SuperValu to summary judgment. As applied to these facts, though, it should 

be easy to find that SuperValu’s claims were false and that SuperValu knew they were false. 
No. 20-2241 33 

At one end of a spectrum, imagine a local mom-and-pop 

pharmacy that occasionally grants a few customers’ informal 

requests for lower prices after some comparison shopping. At 

the other end, imagine a nationwide chain with a nationwide

program advertising that the seller will match any competitor’s lower prices. Then imagine that the seller tells its pharmacists and cashiers to offer the discounted prices to all customers paying cash for drugs (i.e., without insurance or government coverage). And then imagine that the seller makes a 

majority of its cash drug sales at the discounted rates, not at 

the much higher prices that it officially tells the government 

are “usual and customary.” Relators’ evidence here fits this 

end of the spectrum—SuperValu’s price matches were available to any members of the general public, who were encouraged to ask for them.

Then consider relators’ evidence about the results of this 

nationwide, decade-long program. Focus on SuperValu’s 

sales of the fifty highest-volume drugs, where most of the relevant money is. For forty-four of those top fifty drugs, SuperValu was making a majority of its cash sales for less than its 

claimed “usual and customary” prices. For thirty of those 

drugs, SuperValu was making more than eighty percent of its 

cash sales for less than its claimed “usual and customary” 

prices. 

Then consider that SuperValu was claiming that its “usual 

and customary” prices for those drugs were as much as eight 

to fifteen times the discounted prices it was actually charging 

most of the time. See Dew Rebuttal Report at 7–8. Given those 

facts, a reasonable jury could easily find both that SuperValu’s 

claims for reimbursement based on its “usual and customary” 
34 No. 20-2241

prices were false under any reasonable interpretation of the 

term and that SuperValu knew its claims were false. 

B. Ambiguity and Knowing Fraud

Smart lawyers and judges can debate exactly how to define “usual and customary” under the infinite variety of situations we might hypothesize. But with respect, I do not see 

room for reasonable disagreement about whether claimed 

prices eight to fifteen times the actual cash prices that SuperValu charged most of the time were in any sense “usual and 

customary.” Without even reaching the direct evidence of 

knowledge, discussed below, a reasonable jury could infer 

that SuperValu’s decade-long practice of claiming higher reimbursement levels by disregarding the much higher prices it 

actually charged a majority of the time was a “knowing” 

fraud on the government. See 31 U.S.C. § 3729(a)(1). The disconnect between its representations (the higher prices were 

usual and customary) and reality (much lower prices were 

charged most of the time) is great enough that a jury could 

infer knowledge, as the term is defined in the False Claims 

Act, on that basis alone.

Then we come to the more direct evidence that SuperValu 

knew that what it was doing was fraudulent. The huge gaps 

between actual sale prices and claimed “usual and customary” prices did not escape notice by executives. Documents 

show that they paid close attention to the results of the pricematching program. That’s no surprise. The program responded to a major disruption in retail drug markets, with a

big financial impact on cash sales. The executives also knew it 

had huge implications for the even higher volume of Medicare and Medicaid sales of those drugs. The executives estimated that the correct application of “usual and customary” 
No. 20-2241 35 

prices could cost SuperValu tens of millions of dollars per 

year. 

Executives recognized that widespread price-matching 

could undermine what they euphemistically called the “integrity” of SuperValu’s “usual and customary” price claims

for government reimbursement as price-matching became 

more than an “‘exception’ for customer services reasons.” 

And in the face of that concern, they chose what one called in 

an email the “stealthy” approach (scare-quotes in the SuperValu original) to ensure that word about this “exception” did 

not reach too many customers. The problem, of course, is that 

SuperValu’s price-matching was not only widespread but also 

advertised in all its stores. It knew that these practices were 

undermining the “integrity” of its certifications to the government, yet went forward anyway.

The False Claims Act requires proof that a defendant 

knowingly submitted false claims. It defines “knowing” of falsity to include acting “in deliberate ignorance of the truth or 

falsity” of the information submitted to the government. 31 

U.S.C. § 3729(b)(1). A jury could reasonably find that SuperValu’s widespread adoption of price-matching on a scale far 

beyond an “exception” was at least a deliberate choice to remain ignorant about whether its ongoing claims based on 

supposedly “usual and customary” prices were false. A jury 

could also reasonably infer actual knowledge from the obvious and known effects of the gap between most actual sale 

prices under the nationwide price-matching and the claimed 

“usual and customary” prices. See Farmer v. Brennan, 511 U.S. 

825, 836 (1994) (obvious risk of harm justifies inference of 

knowledge), cited in Safeco Insurance, 551 U.S. at 68. 
36 No. 20-2241

SuperValu of course has arguments and evidence pointing 

toward its honesty and innocence. But we are reviewing a 

grant of summary judgment. The account set forth above is a 

reasonable view of the evidence in the light most favorable to 

the non-moving relators. A reasonable jury could find that SuperValu either actually knew or deliberately chose to keep itself in ignorance that it was submitting false, hugely inflated 

claims for reimbursement.

SuperValu does not dispute that it was selling forty-four 

of the top fifty drugs most of the time for much less than it 

claimed to the government were its “usual and customary” 

prices. Nor does it dispute that it was selling thirty of those 

drugs more than eighty percent of the time for much less than 

its claimed “usual and customary” prices. Instead, SuperValu 

points out that relators’ case is not limited to those high-volume drugs (“cherry-picked examples,” says SuperValu). Perhaps, but even if the relators tried to reach too far with other 

drugs, that would not mean their claims based on the “cherrypicked” drugs lack merit. The evidence of SuperValu’s actions 

and state of mind regarding those “cherry-picked” drugs can

also shed light on others. After all, the price-match program 

covered lots of drugs over the decade it was in place. 

Relators’ case here is factually complex because of time, 

geography, and the number of drugs involved. Their claims 

span a decade, during which SuperValu’s price-matching 

practices changed in arguably important ways. Their claims 

also span drug sales across a host of local and regional retail 

markets with different competitors and matched prices. And 

their claims cover hundreds of different drugs. That complexity should not distract us from the sound theory at the core of 

relators’ case. Where the price-matching program produced a 
No. 20-2241 37 

majority of actual sales at prices below the claimed “usual and 

customary” prices, the claimed prices could no longer be honestly deemed “usual and customary.” 

II. Knowledge Under the False Claims Act

SuperValu and the majority do not dispute this evidence 

or even the inferences that relators seek to draw from it. Instead, SuperValu and the majority say the evidence of SuperValu’s actual knowledge and intentions is “irrelevant.” Ante 

at 25. If that’s correct, this case creates a safe harbor for fraudsters who claim taxpayer funds in bad faith, but whose barelystraight-faced lawyers offer an innocent explanation for their 

conduct. The majority even says it is irrelevant whether SuperValu actually believed and/or relied upon the post hoc justifications offered in litigation. “[I]t is not enough that a defendant suspect or believe that its claim was false.” Id., citing 

United States ex rel. Purcell v. MWI Corp., 807 F.3d 281, 288 

(D.C. Cir. 2015); ante at 20 (“A defendant might suspect, believe, or intend to file a false claim, but it cannot know that its 

claim is false if the requirements for that claim are unknown.”). 

From 40,000 feet, that interpretation of the False Claims 

Act, or any cause of action for fraud, is extraordinary. It is a 

standard of knowledge we do not accept in any other areas of 

law, including criminal law. How many chief financial officers could say they did not “know”—not really—that the earnings reports were inflated, even if they suspected or believed 

they were? How many drug couriers could assert they did not 

really “know” that they were carrying drugs? Federal lawsuits and prosecutions are not seminars in such radical epistemological doubt. Federal courts routinely give “ostrich” instructions in response to such defenses, even in criminal cases: 
38 No. 20-2241

“You may find that the defendant acted knowingly if you find 

beyond a reasonable doubt that he believed it was highly 

probable that [state fact as to which knowledge is in question, 

e.g., ‘drugs were in the suitcase,’ ‘the financial statement was 

false,’] and that he took deliberate action to avoid learning 

that fact.” Seventh Circuit Pattern Criminal Jury Instructions 

4.10 (2020). We would never accept a defense theory based on 

such Cartesian doubt, and certainly not as a matter of law, in 

any other case requiring proof of knowledge of the key facts.

A. Statutory Text and the Common Law

Looking at the analysis more closely, the majority’s interpretation conflicts with the statutory text of the False Claims 

Act, its common-law foundations, and its history and purposes. Let’s start with the text of the Act. The key language 

imposes liability on a person who “knowingly presents, or 

causes to be presented, a false or fraudulent claim for payment or approval” or who “knowingly makes, uses, or causes 

to be made or used, a false record or statement material to a 

false or fraudulent claim.” 31 U.S.C. § 3729(a)(1). 

The scienter standard is “knowingly,” and the Act then defines the term:

(b) Definitions. For purposes of this section– 

(1) the terms “knowing” and “knowingly”– 

(A) mean that a person, with respect to information– 

(i) has actual knowledge of the information;

(ii) acts in deliberate ignorance of the truth or falsity of 

the information; or

(iii) acts in reckless disregard of the truth or falsity of 

the information; and
No. 20-2241 39 

(B) require no proof of specific intent to defraud....

31 U.S.C. § 3729(b). 

The three prongs of the statutory definition closely track 

the most authoritative summary of the common law’s treatment of fraudulent scienter, used by the Supreme Court to interpret the False Claims Act. The Restatement (Second) of 

Torts § 526 (1977) also offers three prongs:

A misrepresentation is fraudulent if the maker

(a) knows or believes that the matter is not as he 

represents it to be,

(b) does not have the confidence in the accuracy 

of his representation that he states or implies, or

(c) knows that he does not have the basis for his 

representation that he states or implies.

The majority itself emphasizes that the Supreme Court has 

interpreted the False Claims Act consistently with the common law of fraud. Ante at 14, quoting Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 1999 & 

n.2 (2016). That’s certainly correct. Escobar relied on the Restatement (Second) of Torts, as did Safeco in interpreting the 

Fair Credit Reporting Act. 551 U.S. at 69.1 

1The majority thinks § 526 is irrelevant in interpreting the False 

Claims Act’s scienter standard, and that § 500 is a better guide because 

that’s what Safeco cited for “reckless disregard.” Ante at 16, citing Safeco, 

551 U.S. at 69. That reasoning is circular. Section 500 addresses reckless 

disregard for the safety of another person. In other words, the majority is 

relying on the common law of reckless driving, not the common law of 

fraud. Safeco seems to have cited § 500 for lack of anything more pertinent

to violations of the technical notice requirements of the Fair Credit 
40 No. 20-2241

As Restatement § 526 shows, the common law definition 

of fraud makes subjective bad faith central to fraudulent scienter. Yet the majority concludes that bad faith is irrelevant ... 

in a fraud case! I would follow the Restatement, as echoed in 

the text of the False Claims Act itself. A reasonable jury could 

infer that SuperValu “knew” or “believed” that its higher 

prices were not its usual and customary prices, or, at the very 

least, did “not have the confidence in the accuracy” of its representations to the United States government that its certifications stated or implied. But see ante at 20 (“A defendant might 

suspect, believe, or intend to file a false claim, but it cannot 

know that its claim is false if the requirements for that claim 

are unknown.”).

Reporting Act. But § 526 appears in the Restatement Division on Misrepresentation, the Chapter on Misrepresentation and Nondisclosure Causing Pecuniary Loss, the Topic on Fraudulent Misrepresentation (Deceit), 

and Title A, Fraudulent Character of Misrepresentation. Section 526 is titled “Conditions Under Which Misrepresentation is Fraudulent (Scienter).,” Each of its three prongs is phrased in terms of what the maker of 

the misrepresentation “knows.” Thus, for the common-law understanding 

of the False Claims Act’s definition of “knowing,” § 526 is right on target. 

(In Escobar, the Supreme Court relied on § 529, from the same topic on 

fraudulent misrepresentations. 136 S. Ct. at 1999.) And I confess to being 

baffled by the majority’s assertion: “We decline to graft aspects of common law fraudulent scienter into the FCA when Congress chose not to 

include such requirements.” Ante at 17. With respect, given the majority’s 

stated adherence to common-law understandings, what the maker of the 

false claims believes or suspects fits squarely into both the second and 

third prongs of 31 U.S.C. § 3729(b) and Restatement (Second) of Torts 

§ 526. The common law of reckless driving (§ 500) does not provide the 

relevant scienter standard for a fraud case or a fraud statute.
No. 20-2241 41 

B. Origins of the Statutory Definition

The majority fails to appreciate the importance of the False 

Claims Act’s textual definitions of “knowingly” and their 

common-law roots. The majority instead focuses on the Supreme Court’s interpretation of a different term in a different 

statute. That’s a mistake. The False Claims Act’s three-part 

definition of knowingly, with the disclaimer that specific intent to defraud is not required, did not come from nowhere. 

It was a clear instruction from Congress to courts to relax their 

restrictive interpretations of “knowing” under the Act.

Before 1986, the False Claims Act used the terms “knowing” and “knowingly” without elaboration. When Congress 

added the definitions in 1986, it acted in response to court decisions that were making it difficult to bring claims against 

dishonest claimants absent clear evidence of actual 

knowledge of the falsity of the claim. We should not ignore 

this history. The statutory text and history show Congress’s 

clear intent to allow False Claims Act lawsuits to proceed 

against businesses that fail to do basic due diligence in response to warning signs that their government payments are

ill-gotten.2

2 The majority asserts it is an error to rely on statutory history to go 

“beyond the text” of the statute. Ante at 17. If the statutory text were clear 

as applied to this case, I might agree, but the majority obviously does not 

believe the statutory text of § 3729 is clear. Otherwise the majority would 

not need to rely on Safeco, addressing a different statute and different scienter standard. Since the text is not self-explanatory, it makes good sense 

to use reliable evidence to figure out what problem Congress was trying 

to solve. See also Safeco itself, where the Supreme Court said it was deciding as it did because there was “no indication that Congress had something different in mind.” 551 U.S. at 69. The Court’s comment invites 
42 No. 20-2241

The amended three-pronged definition of “knowledge” in 

the False Claims Act was added in 1986 as part of a broader 

revision to the Act. As sponsor Senator Grassley explained, 

the government needed “lots of help” from Congress to identify fraudsters and bring them to justice. 132 Cong. Rec. 

S11243 (Aug. 11, 1986). Expanding the statute’s definition of 

“knowledge” to reach broader degrees of culpability was an 

important tool to reach that goal. Id. 

The problem, as explained in the Senate Committee report, 

was that courts had applied too narrow a definition of

“knowledge,” often requiring actual literal knowledge of a 

claim’s falsity or even specific intent to defraud to find liability under the Act. S. Rep. 99-345 at 7, citing United States v. 

Aerodex, 469 F.2d 1003 (5th Cir. 1972) (collecting cases). Given 

the “remedial” goals of the False Claims Act, the Committee 

sought to prevent courts from allowing unscrupulous claimants, acting in bad faith, to evade liability through legal technicalities about the definition of “knowledge.” See S. Rep. 99-

345 at 7, 21. 

The result of these earlier court decisions had been predictable: unscrupulous claimants could structure claim-processing procedures so that false claims could be filed without 

the relevant decision-makers truly “knowing” of the fraud. Id.

at 7. Even if hints of possible wrongdoing surfaced, decisionmakers could insulate themselves from liability by ignoring 

problems that even a cursory investigation would have uncovered. Id.

reliance on statutory history to answer these questions where the text is 

not entirely clear.
No. 20-2241 43 

In explaining the statutory text, the House Judiciary Committee noted the problems from the lack of a definition of 

“knowledge” and reported:

By adopting this [three-pronged] definition of 

knowledge, the committee intends not only to 

cover those individuals who file a claim with actual knowledge that the information is false, but 

also to confer liability upon those individuals 

who deliberately ignore or act in reckless disregard of the falsity of the information contained 

in the claim. It is intended that persons who ignore 

“red flags” that the information may not be accurate 

or those persons who deliberately choose to remain 

ignorant of the process through which their company 

handles a claim should be held liable under the Act.

This definition, therefore, enables the Government not only to effectively prosecute those persons who have actual knowledge, but also those 

who play “ostrich.” 

H. Rep. 99-660 at 21 (emphasis added). 

The Senate Committee also focused on proverbial “ostriches” who stick their heads in the sand instead of verifying 

that they are not cheating taxpayers. S. Rep. 99-345 at 7, 15, 21. 

These ostriches need not have “conscious culpability” of 

wrongdoing: people who submit claims that they have “reason to know” are potentially false run the risk of violating the 

Act if they “fail[] to inquire” as to the falsity of the claims. 132 

Cong. Rec. S11243–44 (Aug. 11, 1986; statement of Senator 

Grassley).
44 No. 20-2241

The Committee reports explained that the added definition was aimed at claimants who acted in bad faith by failing 

to investigate potential problems: “those doing business with 

the Government have an obligation to make a limited inquiry 

to ensure the claims they submit are accurate.” S. Rep. 99-345 

at 7. Congress chose statutory language that could have been 

custom-tailored for SuperValu’s approach in this case. SuperValu knew that the “integrity” of its “usual and customary” 

prices would be suspect if price-matching were not the “exception” but the rule, yet it kept submitting those claims 

through a nationwide price-matching campaign anyway, netting tens of millions of dollars of public funds annually.

This is the same standard that the Eleventh Circuit 

adopted in United States ex rel. Phalp v. Lincare Holdings, Inc., 

857 F.3d 1148 (11th Cir. 2017), another case involving arguable 

regulatory ambiguity. After considering the statutory text and 

legislative history, the court concluded that “scienter is not 

determined by the ambiguity of a regulation, and can exist 

even if a defendant’s interpretation is reasonable.” Id. at 1155, 

citing the Senate Committee Report indicating Congressional 

intent to require claimants to engage in “limited inquiry.” 

Phalp also squarely rejected the majority’s position here: “The 

district court’s conclusion that a finding of scienter can be precluded by a defendant’s identification of a reasonable interpretation of an ambiguous regulation that would have permitted its conduct is erroneous.” Id. (Phalp’s treatment of this 

issue refutes the majority’s attempt to explain it away. See 

ante at 15.) The Phalp court’s interpretations of the Act’s scienter definition should be obviously correct.

In fact, before the Safeco progeny cited by the majority, our 

colleagues in other circuits followed the amended text of the 
No. 20-2241 45 

False Claims Act and common sense: a claimant could be liable under the Act notwithstanding a purported regulatory 

ambiguity if the defendant deliberately ignored the falsity of 

the claim or otherwise acted in bad faith. United States v. Science Applications International Corp., 626 F.3d 1257, 1272–73 

(D.C. Cir. 2010) (affirming verdict for United States; jury could 

infer that defendant knew its claims were false notwithstanding “regulatory divide” in how to interpret a regulation); 

United States ex rel. Oliver v. Parsons Co., 195 F.3d 457, 464 (9th 

Cir. 1999) (reversing summary judgment: “In short, [defendant’s] petition arguing that the sky will fall upon government 

contractors if they are precluded from relying on a ‘reasonable interpretation’ is not only unsupported by case law, it is 

also ungrounded in reality.”); see also Minnesota Ass’n of 

Nurse Anesthetists v. Allina Health System Corp., 276 F.3d 1032, 

1053 (8th Cir. 2002) (citing Parsons for the proposition that 

“any possible ambiguity of the regulations is water under the 

bridge” where contractor’s misinterpretation is “knowing”).3

In this case, the relators’ evidence shows that SuperValu 

knew it was claiming high “usual and customary” prices that 

it was charging less than half the time, often less than one fifth 

3 We took a similar approach in United States ex rel. Sheet Metal Workers 

Int'l Ass’n, Local Union 20 v. Horning Investments, LLC, 828 F.3d 587 (7th 

Cir. 2016). The defendant argued that it relied on advice of professional 

experts in determining that its claims were not false. We rejected that argument on grounds inconsistent with the majority approach here. Rather 

than treat a professional’s ability to find ambiguity as a defense in itself, 

we applied a much more demanding five-part test that required proof of

timely, good-faith, and full disclosure to competent experts. Id. at 594–95. 

We ultimately affirmed summary judgment for the defendants, but on a 

different ground, that the relator simply did not have evidence that defendants were on notice that their claims were false. Id. at 595.
46 No. 20-2241

of the time. SuperValu knew that its practices raised questions 

about the “integrity” of its “usual and customary” prices but 

nonetheless ignored those concerns. The False Claims Act’s 

statutory definition of “knowing” reaches those who know 

their claims are false or who act in deliberate ignorance of 

whether their claims were true or false. We should reverse 

summary judgment for SuperValu. 

III. The Majority’s Safeco Tangent

Rather than focusing on the language of the False Claims 

Act itself, and its origins in the common law of fraud and responses to crabbed judicial interpretations, the majority opinion takes a very different approach. It borrows the Supreme 

Court’s treatment of a different term, “willfully,” under a different statute, the Fair Credit Reporting Act, in Safeco Insurance Co. v. Burr, 551 U.S. 47 (2007). The majority adopts 

Safeco’s treatment of reckless disregard for law as a branch of 

“willful” misconduct. The majority then goes even further 

and concludes that relators must meet that standard for reckless disregard for any False Claims Act case, even if they rely 

on the actual-knowledge or deliberate-ignorance prongs of 

the Act’s definition of knowing. 

The majority makes two fundamental mistakes. First, the 

reliance on Safeco to understand “reckless disregard” is neither necessary nor fitting for the False Claims Act. The Act 

draws on a different branch of the common law (of fraud, not 

reckless driving), and the history of the statutory amendments shows that Congress thought it was enacting a standard quite different from the majority’s. Second, by saying relators must satisfy the Safeco reckless-disregard standard in 

any case, the majority effectively nullifies two-thirds of the 

statutory definition of “knowing.” To explain:
No. 20-2241 47 

The question in Safeco was whether an insurer’s decision 

about an initial premium rate for an insured could qualify as 

an “adverse action” based on a credit report that could require 

notice to the consumer in question. The Supreme Court ultimately held that it could but also held that Safeco had not 

“willfully” violated that Act because the statute and regulation were not clear as applied to initial premium decisions, so 

that Safeco had not acted willfully. 

The Fair Credit Reporting Act does not define “willfully,” 

which the Court described as a “word of many meanings 

whose construction is often dependent on the context in 

which it appears.” 551 U.S. at 57, quoting Bryan v. United 

States, 524 U.S. 184, 191 (1998). Without more specific guidance for interpreting the term in that act, the Safeco Court had 

little choice but to construct a working definition from multiple sources. The Court focused on civil law, noting that in several civil contexts, willful violations of statutes could be 

shown by recklessness, which was consistent with commonlaw use of the term. Id. Then, because there was “no indication 

that Congress had something different in mind,” and because the 

term “recklessness” is not “self-defining,” the Court announced an application of that scienter standard to the Fair 

Credit Reporting Act. Id. at 57–58, 68–69. 

The Court then drew on common-law definitions of “recklessness” that apply to actions putting others in physical danger. The Court described recklessness as action entailing “an 

unjustifiably high risk of harm that is either known or so obvious that it should be known,” id. at 68, quoting Farmer v. 

Brennan, 511 U.S. 825, 836 (1994), and conduct involving “unreasonable risk of physical harm ... substantially greater than 

that which is necessary to make his conduct negligent. Id. at 
48 No. 20-2241

69, quoting Restatement (Second) of Torts § 500 (also regarding putting another person in physical danger). The Court 

summarized its view for the Fair Credit Reporting Act:

There being no indication that Congress had something different in mind, we have no reason to deviate from the common law understanding in 

applying the statute. Thus, a company subject to 

FCRA does not act in reckless disregard of it unless the action is not only a violation under a 

reasonable reading of the statute’s terms, but 

shows that the company ran a risk of violating 

the law substantially greater than the risk associated with a reading that was merely careless.

551 U.S. at 69 (emphasis added; citation omitted). Along the 

way, the Court added footnote 20, saying that evidence of 

subjective bad faith would not be relevant to the definition of 

willfulness in 15 U.S.C. § 1681n(a) where a company followed 

an objectively reasonable interpretation of the Fair Credit Reporting Act.

The majority here and four other circuits have borrowed 

this reasoning from Safeco and grafted it onto the False Claims 

Act. Two of those circuits did so in non-precedential decisions. The two precedential decisions are United States ex rel. 

Purcell v. MWI Corp., 807 F.3d 281 (D.C. Cir. 2015), and United 

States ex rel. Donegan v. Anesthesia Associates of Kansas City, 833 

F.3d 874 (8th Cir. 2016). The Eleventh Circuit reached a different conclusion in Phalp, 857 F.3d 1148, discussed above. (The 

Phalp opinion did not discuss Safeco or Purcell, but both cases 

were briefed extensively, including by the United States in an 

amicus brief arguing that Safeco provided no meaningful 

guidance for False Claims Act cases. There is no doubt that 
No. 20-2241 49 

the Eleventh Circuit rejected Purcell’s borrowing of Safeco. It 

did not cite Safeco because, for reasons explained here, Safeco

simply is not needed to interpret the scienter requirement of 

the False Claims Act.)

In the absence of better guidance for the False Claims Act 

and common law, reliance on Safeco might be understandable, 

if a bit of a stretch. The majority here errs, however, by overlooking Safeco’s directive: first check to see if “Congress had 

something different in mind.” 551 U.S. at 57, 69. With the False 

Claims Act, we do have meaningful guidance from the statutory text, the common law, and legislative history, as discussed above. 

If the majority limited its reliance on Safeco to the recklessdisregard prong of the False Claims Act’s definition of knowing, its mistake would be more understandable. It’s the majority opinion’s next move that is more extraordinary and 

much more damaging. The majority concludes that a relator 

under the False Claims Act must satisfy the Safeco definition 

of reckless disregard—show that no reasonable understanding of law could justify the defendant’s action, or show that 

the defendant disregarded “authoritative guidance”—in every 

case, even those relying on the actual-knowledge and deliberate-ignorance prongs of the definition of “knowingly.” As a 

result, the majority holds in effect that those two-thirds of the 

statutory definition add zero meaning to the statute.

The majority’s major premise is that “reckless disregard” 

is the broadest of the three prongs. Its minor premise is that 

any case of “actual knowledge” or “deliberate ignorance” 

would always fall within “reckless disregard,” as that term was 

defined in Safeco. That too-simple heuristic may be useful in 
50 No. 20-2241

some easy cases, but its application here is inconsistent with 

how courts should read statutes.

The key logical error lies in the minor premise, that any 

case of actual knowledge or deliberate ignorance would necessarily also be covered by Safeco-reckless disregard. There is 

no basis for that assumption, which leads away from the common law of fraud, where subjective bad faith is central.

Consider a hypothetical close to this case. A government 

contractor submits claims believing, subjectively, that the 

claims are probably false. The agency has not yet provided 

what Safeco would call “authoritative guidance,” but the contractor reads the controlling regulation (correctly) to preclude 

its claim. Still, it decides to stay quiet, hoping it will not get 

caught, or at least not too quickly. In that situation, judges and 

jurors can say that claims were fraudulent and the contractor 

knew it, even if a creative lawyer can later make a non-frivolous legal argument for its innocence. Likewise, the contractor 

acted with fraudulent intent because it “believed” the claims 

were false and submitted claims in which it did not have the 

“confidence” it claimed. See 31 U.S.C. § 3729(b); Restatement 

(Second) of Torts § 526. 

This bad-faith “catch us if you can” approach to public 

funds is exactly what Congress thought it was outlawing 

when it decided in 1986 that it needed to define “knowledge” 

more specifically for the False Claims Act, including to reach 

deliberate ignorance of falsity. Recall also that under the majority’s approach, there is no need for a defendant to show 

that it actually “followed” any “objectively reasonable” interpretation of the law that would supposedly save the claims 

from being false. See ante at 25. 
No. 20-2241 51 

The majority’s logic thus takes the False Claims Act in a 

direction 180 degrees away from common-law fraud. It makes 

subjective bad faith, including deliberate ignorance, “irrelevant.” Id. That’s contrary to both the actual-knowledge and 

deliberate-ignorance prongs of the Act’s textual definition. It 

loses sight of the fact that the Act applies to “fraudulent” conduct. And it’s also contrary to the common-law scienter standard in the Restatement (Second) of Torts, which is satisfied if 

the defendant “knows or believes that the matter is not as he 

represents it to be,” or if he “does not have the confidence in 

the accuracy of his representation that he states or implies....” 

§ 526 (emphasis added).

The majority rests heavily on Safeco’s footnote 20 to supports its new safe harbor where subjective state of mind is irrelevant. See ante at 19. With respect, the majority reads far 

too much into that footnote, which by its own terms is limited 

to “determining whether a company acted knowingly or recklessly for purposes of § 1681n(a).” By the majority’s reading, 

that footnote in an opinion on credit reporting requirements, 

which borrowed from the common law of reckless driving, 

upended the common law of fraud, one of the paradigmatic 

intentional torts, where state of mind is critical. The Safeco

Court gave no sign that its footnote intended to reach beyond 

§ 1681n(a) or that it was creating a new element for fraud 

claims—the absence of any plausible reading that would render the false statement true. The majority’s too-broad reading 

leads it to depart from the text of the False Claims Act and 

loses sight of Congress’s clear intent.

In fact, the Supreme Court itself has warned against reading Safeco’s footnote 20 so broadly. It did so in Halo Electronics, 

Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923, 1933 n.* (2016). The
52 No. 20-2241

Court declined to extend the Safeco definition of “willfully” to 

treble-damage awards for patent infringement under 35 

U.S.C. § 284. Subjectively bad-faith infringement, focused on 

the defendant’s state of mind when it acted, had long been an 

independent basis for enhanced patent damages. 136 S. Ct. at 

1933 & n.*. As the majority points out here, ante at 17–18, in

Halo Electronics, differences in the two statutes produced different scienter standards. Exactly the same reasoning should 

apply here. The differences between the texts and histories of 

the Fair Credit Reporting Act and False Claims Act should 

lead us to decline to extend the Safeco standard and its footnote 20 to the False Claims Act.

Returning to False Claims Act cases, consider, for example, United States ex rel. Prather v. Brookdale Senior Living Communities, Inc., 892 F.3d 822, 837–38 (6th Cir. 2018), where the 

Sixth Circuit reversed dismissal of a relator’s complaint. The 

complaint alleged that the relator and other nurses had “concerns about the defendants’ compliance with Medicare regulations, but were told to ignore any problems.” When relator 

raised issues about regulatory compliance, executives told her 

on multiple occasions that “‘[w]e can just argue in our favor 

if we get audited’ as a solution to any compliance issues.” The 

Sixth Circuit reasoned that the allegations about notice of 

compliance problems imposed an obligation on the defendants to inquire whether they were actually in compliance with 

regulations. The Sixth Circuit concluded the allegations supported “knowledge” under both the deliberate-ignorance and 

reckless-disregard prongs of the definition. Id. at 838. Yet under the majority’s approach here, that case would have been 

dismissed so long as an attorney could later offer a barelyplausible theory of innocence, even though the defendant ignored repeated and correct warnings that it was violating the 
No. 20-2241 53 

regulations. Worse yet, the majority here would have dismissed the case even if the supervisors had admitted that they 

knew their submissions were non-compliant.

The majority’s bottom line—that only objectively reckless 

disregard matters, and subjective bad faith does not—also violates one of the most common tools of statutory interpretation. It renders the actual-knowledge and deliberate-ignorance prongs of the statutory definition utterly superfluous. 

See City of Chicago v. Fulton, 141 S. Ct. 585, 591 (2021) (“The 

canon against surplusage is strongest when an interpretation 

would render superfluous another part of the same statutory 

scheme.”), quoting Yates v. United States, 574 U.S. 528, 543 

(2015) (plurality); National Ass’n of Mfrs. v. Dep’t of Defense, 

138 S. Ct. 617, 632 (2018), quoting Reiter v. Sonotone Corp., 442 

U.S. 330, 339 (1979); In re Southwest Airlines Voucher Litig., 799 

F.3d 701, 710 (7th Cir. 2015); Antonin Scalia & Bryan Garner, 

Reading Law: The Interpretation of Legal Texts 174 (2012) 

(“The surplusage canon holds that it is no more the court’s 

function to revise by subtraction than by addition.”).

The canon against surplusage is not absolute, of course. 

Sometimes drafters of legal documents may “intentionally err 

on the side of redundancy to ‘capture the universe.’” Sterling 

Nat’l Bank v. Block, 984 F.3d 1210, 1218 (7th Cir. 2021), quoting 

Abbe R. Gluck & Lisa Schultz Bressman, Statutory Interpretation from the Inside—an Empirical Study of Congressional Drafting, Delegation, and the Canons: Part I, 65 Stan. L. Rev. 901, 934 

(2013); accord, e.g., Rimini Street, Inc. v. Oracle USA, Inc., 139 

S. Ct. 873, 881 (2019); White v. United Airlines, Inc., 987 F.3d 

616, 622 (7th Cir. 2021). 

The False Claims Act definition of “knowingly” is about 

as strong a case for the canon against surplusage as one is 
54 No. 20-2241

likely to find. The three prongs mirror three distinct commonlaw prongs for fraudulent scienter. Congress adopted them to 

give courts clearer guidance because Congress was disappointed with courts’ interpretations of the undefined “knowing.” Congressional leaders on the subject, such as Senator 

Grassley and Representative Berman, were concerned that 

courts would continue to misinterpret the statute. They explained exactly how the definition of “knowing” should be 

applied, as did the respective committees. The three prongs 

may overlap in many cases, but the adoption of the three distinct prongs in the same paragraph of the statutory text was 

unmistakably an effort to be both thorough and broad. Congress said as clearly as it could that the False Claims Act 

should reach just this kind of case.

I close with two final observations about the majority’s 

misguided holding. First, even under the Safeco standard, a 

reasonable jury could find that SuperValu’s more extreme 

conduct here was not reasonable. There is simply no reasonable definition of “usual and customary” that means “something we do less than half the time and that we instruct our 

employees not to do.” Defining “usual and customary” to 

mean the opposite of what those two words actually mean is 

simply not reasonable.

Second, the majority’s approach actually leaves the False 

Claims Act definition of knowledge narrower than when the 

1986 amendment was passed. Consider, for example, United 

States v. Mead, 426 F.2d 118, 122–23 (9th Cir. 1970), which Representative Fish singled out as applying a too-narrow definition of knowledge. 132 Cong. Rec. H6480 (Sept. 9, 1986); see 

also Aerodex, 469 F.2d at 1007, cited negatively in S. Rep. 99-

345 (collecting Mead as an example of then-operative 
No. 20-2241 55 

knowledge standard). In Mead, the court explained that where 

regulatory language is uncertain and even the district court

misinterpreted the regulations, scienter is still a question of 

fact. If the government had shown that Mead knew his regulatory interpretation was wrong or had fraudulent intent, he 

would still be liable under the Act. See also United States v. 

Ueber, 299 F.2d 310, 314 (6th Cir. 1962), cited negatively in S. 

Rep. 99-345 (where contract distinguished between “direct” 

and “indirect” labor costs, falsity of claims for “direct” labor 

costs and defendant’s knowledge of their falsity are questions 

of fact for trial; remanding for further fact-finding). Whatever 

“reckless disregard” means, we should not use it to narrow the 

definition of knowledge that Congress thought it was expanding.

To sum up, relators have come forward with substantial 

evidence of knowing fraud, as SuperValu claimed reimbursement at supposedly “usual and customary” prices for drugs 

that were as much as eight to fifteen times higher than the 

prices it was actually charging the general public a majority 

of the time. The evidence supports a reasonable inference of 

actual knowledge or at least deliberate ignorance or reckless 

disregard for whether its reimbursement claims were false. 

We should reverse summary judgment and remand for trial 

on relators’ claims. With respect, I believe that both Congress 

and the Supreme Court will be surprised by this decision and 

the others extending Safeco to the False Claims Act. If the False 

Claims Act is to remain effective in discouraging and remedying fraudulent raids on taxpayer dollars, Congress or the Supreme Court or both will need to respond to this line of cases.