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UNITED STATES EX REL. SCHUTTE v. SUPERVALU INC. 

Syllabus 

that, by not reporting them, SuperValu submitted false claims.  How-
ever,  the  court  granted  SuperValu  summary  judgment  based  on  the 
scienter element, holding SuperValu could not have acted “knowingly.” 
In a separate case, the court granted Safeway summary judgment on 
that same basis.  The Seventh Circuit affirmed in both cases, relying 
heavily on Safeco Ins. Co. of America v. Burr, 551 U. S. 47—a case that 
interpreted the term “willfully” in the Fair Credit Reporting Act.  As 
the Seventh Circuit read Safeco, the companies could not have acted 
“knowingly” if their actions were consistent with an objectively reason-
able  interpretation  of  the  phrase  “usual  and  customary.”    Thus,  the 
Seventh Circuit concluded, the companies were entitled to summary
judgment  even  if  they  actually  thought  that  their  discounted  prices 
were  their  “usual  and  customary”  prices  (and  thus  thought  their 
claims were false). 

Held: The FCA’s scienter element refers to a defendant’s knowledge and 
subjective beliefs—not to what an objectively reasonable person may 
have known or believed.  Pp. 8–17. 

(a) The  FCA’s  text  and  common-law  roots  demonstrate  that  the 
FCA’s scienter element refers to a defendant’s knowledge and subjec-
tive  beliefs.  The  FCA  sets  out  a  three-part  definition  of  the  term 
“knowingly”  that  largely  tracks  the  traditional  common-law  scienter 
requirement  for  claims  of  fraud:  Actual  knowledge,  deliberate  igno-
rance, or recklessness will suffice.  See §3729(b)(1)(A).  Each term fo-
cuses on what the defendant thought and believed: “Actual knowledge” 
refers to what the defendant is aware of.  “Deliberate ignorance” en-
compasses defendants who are aware of a substantial risk that their 
statements are false, but intentionally avoid taking steps to confirm 
the statements’ truth or falsity.  And “[r]eckless disregard” captures 
defendants who are conscious of a substantial and unjustifiable risk
that their claims are false, but submit the claims anyway.  These forms 
of scienter track the common law of fraud, which generally focuses on 
the defendant’s lack of an honest belief in the statement’s truth.  Re-
statement (Second) of Torts §526, Comment e.  The focus is on what a 
defendant  thought  when  submitting  a  claim—not  what  a  defendant 
may have thought after submitting it.  Pp. 8–11.

(b) Even though the phrase “usual and customary” may be ambigu-
ous on its face, such facial ambiguity alone is not sufficient to preclude 
a finding that respondents knew their claims were false.  That is be-
cause the Seventh Circuit did not hold that respondents made an hon-
est mistake about that phrase; it held that, because other people might 
make an honest mistake, defendants’ subjective beliefs became irrele-
vant  to  their  scienter.    Respondents  make  three  main  arguments  to 
support that theory, but the Court finds none to be persuasive.    

First, the facial ambiguity of the phrase “usual and customary” does