Court Opinion

ID: 4765447
Source: CourtListenerOpinion
Date Created: 2021-08-12 20:02:57.935375+00
Date Added: 2024-06-11T08:09:10.617239
License: Public Domain

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, con-
tains a novel question for this Circuit: does the Supreme
Court’s interpretation of the Fair Credit Reporting Act’s sci-
enter 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 reimburse-
ments under Medicare and Medicaid. SuperValu listed its re-
tail 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 gen-
eral 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, how-
ever, 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 stand-
ard to the case at hand, SuperValu did not act with the
No. 20-2241                                                 3

requisite knowledge under the FCA. The judgment of the dis-
trict 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 gov-
ernment. Before canvassing the case facts, it is necessary to
provide a brief overview of both the regulatory schemes un-
der Medicare Part D and Medicaid and our FCA precedent
involving those statutes.
A. Medicare Part D and Medicaid
    Medicare and Medicaid are government healthcare pro-
grams administered by the Department of Health and Human
Services through the Centers for Medicare and Medicaid Ser-
vices (“CMS”). Medicare Part D is a prescription drug beneﬁt
providing insurance coverage to beneﬁciaries. The govern-
ment employs a multi-tier system to provide Medicare pre-
scription 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 agree-
ments with pharmacies or with middlemen, known as Phar-
macy 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. § 1395w-
111(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 con-
tract with that pharmacy. Id. If an out-of-network pharmacy
prescribed the drug, the actual cost is the U&C price. Id. Med-
icare 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 co-
operative eﬀorts of the states. 42 U.S.C. § 1396 et seq. The fed-
eral government and participating states jointly ﬁnance Med-
icaid, 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 reim-
bursement methodology must comport with federal require-
ments for Medicaid expenditures. 42 C.F.R. § 447.518(a)–(b).
Relevant here, federal regulations limit the pharmacy reim-
bursement 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 discount-
program 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 gen-
eral 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 an-
alyze 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 dis-
count 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 consist-
ently available”—over 89% of Kmart’s cash customers re-
ceived 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 dis-
cussing 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 con-
trolled roughly 2,500 grocery stores with over 800 in-store
pharmacies between 2006 and 2016. In 2006, SuperValu’s na-
tional headquarters implemented the discount program un-
derlying this appeal, which ran until December 2016. The
price-match initiative was an attempt to compete with phar-
macies such as Wal-Mart, which had launched a discount pro-
gram that same year oﬀering hundreds of generic drugs at $4
per 30-day prescription. SuperValu sought to remain compet-
itive without adopting Wal-Mart’s program. According to Su-
perValu’s Vice President of Prescription Services, implement-
ing 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 Super-
Valu’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 ap-
plied 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 over-
rode the price in the pharmacy’s automatic system and man-
ually entered the price-matched cost. SuperValu instructed
pharmacies to process these price-match sales as cash trans-
actions rather than third-party payor claims that would go di-
rectly to insurers.
     SuperValu did not report these price-matches when it sub-
mitted reimbursement claims to third-party insurers, includ-
ing 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 De-
cember 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 ex-
pressly 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 price-
matching 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 un-
der 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

    3The dissent cites this statistic without conﬁning it to ﬁscal year 2012.
We note that the Relators have identiﬁed no evidence regarding the fre-
quency 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 price-
match program was active.
    4 In the district court, the parties stipulated to a dismissal of all Medi-
caid claims on behalf of the states except those on behalf of California, Il-
linois, 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 pro-
grams 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 acknowl-
edged that SuperValu’s price-match program required cus-
tomers 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 Super-
Valu’s understanding of U&C price, while incorrect, was ob-
jectively reasonable at the time. The district court ﬁrst ob-
served that there were multiple district court decisions en-
dorsing 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

    5SuperValu 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 ques-
tion to the issues certiﬁed for interlocutory appeal, the district
court suggested that we must have found the matter “suﬃ-
ciently 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 deﬁni-
tion. 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 chal-
lenge.
                         II. Discussion
    On appeal, the parties ask us to determine whether Safeco
applies to the FCA’s scienter standard and, if so, to what ex-
tent. 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 “know-
ingly 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 inter-
preted § 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 de-
fraud.” § 3729(b)(1)(B). The FCA levies signiﬁcant conse-
quences against parties found liable under the Act and bal-
ances 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 es-
sentially punitive in nature” (internal quotation omitted)).
B. Safeco Insurance Company of America v. Burr
    While the FCA lists the range of scienter levels encom-
passed 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 stat-
ute 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 objec-
tively reasonable and (2) no authoritative guidance cautioned
defendants against it. Id. at 70. Critically, the Court empha-
sized that a defendant’s subjective intent is irrelevant for pur-
poses 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 infor-
mation in a consumer report notify that consumer. 15 U.S.C.
§ 1681m(a). An “adverse action” is statutorily deﬁned as in-
cluding “an increase” in the amount charged for “insurance,
existing or applied for.” § 1681a(k)(1)(B)(i). The Safeco plain-
tiﬀs 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 of-
fers. 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 poli-
cies. 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 point-
ing another way.” Safeco, 551 U.S. at 58. That principle informs
our decision today. Here, the Relators have identiﬁed no stat-
utory indicia that Congress intended the familiar, common

    6 The FCA imposes civil liability. We thus reference the civil, not crim-

inal, 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 com-
mon 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 ele-
ments of common-law fraud that are consistent with the stat-
utory 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 re-
mains 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 encom-
passing the same common law scienter terms used in the FCA
(“knowingly” or “reckless disregard”). Referencing the com-
mon law meaning, the Court then announced a standard in-
quiry for reckless disregard. While reiterating that “know-
ingly” and “reckless disregard” remain distinct terms, the Su-
preme Court held that the objective scienter standard it artic-
ulated 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 com-
mon law terms used in the FCA.
    The dissent suggests that Safeco has no bearing simply be-
cause it interpreted a diﬀerent scienter requirement in a dif-
ferent 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 stand-
ard—reckless disregard. Likewise, reckless disregard is the
No. 20-2241                                                     15

baseline scienter deﬁnition encompassed by the FCA’s scien-
ter 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 Elev-
enth Circuit did not reject Safeco’s applicability to the FCA.
Even though the parties briefed the court on Safeco, that brief-
ing 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 sci-
enter terms listed in § 3729(b)(1)(A)). And it is a diﬀerent pro-
vision than the Restatement provision that the Court refer-
enced 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 fraudu-
lent scienter into the Act. But here, Congress has willed a spe-
ciﬁc scienter requirement—knowingly, not “‘knowing’ of fal-
sity,” 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 com-
mitted “knowingly” or with “reckless disregard” that ex-
cludes 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 tex-
tually 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 de-
fraud” is irrelevant. § 3729(b)(1)(B). We decline to graft as-
pects 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-of-
circuit caselaw to support its reading of the FCA. We ﬁnd nei-
ther 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 Com-
merce 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 apply-
ing Safeco to the FCA. Neither Restatement § 526 nor legisla-
tive history pose a barrier to applying Safeco.
    The Relators challenge Safeco’s viability on a separate ba-
sis 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 dam-
ages in infringement cases. Section 284 does not specify a sci-
enter standard, and prior to Halo Electronics, the Federal Cir-
cuit 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 liabil-
ity does not depend on objective recklessness.
    The problem with importing an objective recklessness in-
quiry into the patent context was that “such a defense insu-
lates 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 ob-
jective recklessness … should be a prerequisite to enhanced
damages.” Id. at 1932.
   The defendants, citing Safeco, argued that bad faith is irrel-
evant 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 depend-
ent 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 infringe-
ment’ is an independent basis for enhancing patent dam-
ages.” 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 rea-
sons informing that decision do not apply here. Unlike the Pa-
tent 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 ap-
plies 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 dis-
sent 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 stand-
ard does not preclude liability under the actual knowledge or
deliberate ignorance components of the FCA’s scienter deﬁni-
tion. The dissent contends that holding otherwise would col-
lapse distinct scienter terms and violate the rule against sur-
plusage. We are unconvinced.
    The Supreme Court has already undermined this line of
reasoning. In Safeco, the Court rejected the defendants’ argu-
ment 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 con-
text of “reckless disregard” also functioned as a baseline re-
quirement for establishing the more demanding scienter cat-
egory of “knowledge.” Id. at 70 n.20 (“Where, as here, the stat-
utory text and relevant court and agency guidance allow for
more than one reasonable interpretation, it would defy his-
tory and current thinking to treat a defendant who merely
adopts one such interpretation as a knowing or reckless viola-
tor.” (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 deliber-
ate ignorance indicate higher degrees of culpability and, if im-
plicated in a case, might render reckless disregard inapplica-
ble. See Purcell, 807 F.3d at 288 (observing that reckless disre-
gard 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 de-
fendants to actually know that they submitted a false claim if
relators cannot establish the Safeco scienter standard. A de-
fendant 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 in-
diﬀerent defendants is likewise misplaced. The dissent postu-
lates 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 ig-
nored repeated and correct warnings.” That fundamentally
misapprehends Safeco. Under Safeco, a defendant will be suc-
cessful only if (a) it has an objectively reasonable reading of the
statute or regulation and (b) there was no authoritative guid-
ance 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 deci-
sionmakers 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 objec-
tively reasonable inquiry involved two distinct questions—
whether the defendant has a permissible interpretation of the
relevant provision and whether authoritative guidance nev-
ertheless 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 hur-
dle. To decide whether SuperValu had a permissible interpre-
tation 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. Done-
gan, 833 F.3d at 878; Purcell, 807 F.3d at 288. We elect to condense the in-
quiry into the two issues expressly discussed in Safeco—permissible inter-
pretation 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 gen-
eral 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 cur-
sory deﬁnition or guide pharmacies on identifying the “gen-
eral 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 Non-

     8 The Relators argue that for Medicare, pharmacies that have con-
tracted with a plan sponsor or PBM report the “negotiated price” deter-
mined 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 ap-
peal that the contractual deﬁnitions of U&C price are distinct from the
Medicaid regulatory deﬁnition. We thus examine only § 447.512(b)’s deﬁ-
nition 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 substan-
tially the same deﬁnition of U&C price as 42 C.F.R. § 447.512(b). The Rela-
tors also claim that they are “consistent with the controlling federal deﬁ-
nition 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 custom-
ary price is the undiscounted price individuals without drug
coverage would pay.“). “General public” may mean that dis-
count prices qualify only if applied to all consumers or, alter-
natively, if they constitute the price most frequently charged
to consumers. But it just as easily might encompass any dis-
count 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 pre-
scription 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 re-
quest. In short, while its program was available to any cus-
tomer requesting a valid price match, SuperValu would not
necessarily charge all or most of its customers lower, price-
matched 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 in-
cluded 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 ob-
jectively 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 Super-
Valu’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 reasonable-
ness against the clarity of a statute or regulation’s policy ob-
jective. 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 (hold-
ing that Safeco’s erroneous interpretation was reasonable be-
cause 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 Super-
Valu’s erroneous interpretation of U&C price was unreasona-
ble.
   Apart from the Relators’ arguments based on Garbe, the
dissent suggests a more fundamental concern with Super-
Valu’s interpretation of U&C price. It argues that for an erro-
neous interpretation to be objectively reasonable, the
No. 20-2241                                                           25

defendant must have held that view at the time that it submit-
ted its false claim. 10 Otherwise, the dissent insists, defendants
can avoid liability by concocting “post-hoc arguments” to jus-
tify 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 vio-
lating 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 be-
lieve that its claim was false. See Purcell, 807 F.3d at 288 (hold-
ing that defendants did not violate the FCA because they
“could reasonably have concluded” that their conduct com-
plied 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 re-
ﬂects 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 stand-
ard as we ﬁnd it and hold that SuperValu has oﬀered an ob-
jectively 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 de-
fense if there existed authoritative guidance that should have
warned defendants away from their erroneous interpreta-
tion. 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 suﬃ-
ciently speciﬁc to the defendant’s incorrect interpretation.
    The Supreme Court did not ﬂesh out the boundaries of au-
thoritative 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 regu-
lations deﬁning U&C price, but we have considered the rele-
vant 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 consti-
tute 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 inter-
pretation 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 explain-
ing 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 re-
port had been more favorable.’” Safeco, 551 U.S. at 70 n.19 (in-
ternal 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 bene-
          ﬁt year, this would not constitute a “lower cash
          price” situation that is the subject of this guid-
          ance. For example, Wal-Mart recently intro-
          duced a program oﬀering a reduced price for
          certain generics to its customers. The low Wal-
          Mart 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, lower-
price oﬀers are included within U&C prices. But it says noth-
ing 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 guid-
ance warned SuperValu away from its permissible interpreta-
tion of U&C price. The district court correctly granted sum-
mary 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 sci-
enter 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 objec-
tively reasonable understanding of the regulatory deﬁnition
of U&C price and no authoritative guidance placed it on no-
tice 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 custom-
ary” prices for a signiﬁcant number and volume of prescrip-
tion 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 busi-
nesses 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 major-
ity’s new safe harbor even makes subjective bad faith “irrele-
vant” in fraud cases. Ante at 25. That undermines the 1986
amendments to the False Claims Act and turns the Act up-
side-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 sup-
porting 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 his-
tory. Part III explains the majority’s two fundamental errors
in reading the statute. First, rather than focusing on the statu-
tory 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 def-
inition 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 Medi-
caid. Congress has not allowed the government to do what
private insurance companies do: use bargaining power to ne-
gotiate 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 insur-
ance. 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 pro-
vided to Medicare and Medicaid patients.
   Starting in 2006, Walmart began oﬀering cash sales of ge-
neric drug prescriptions for four dollars for a one-month sup-
ply and ten dollars for a three-month supply. SuperValu re-
sponded to Walmart’s move with an aggressive, widely-ad-
vertised 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 “Pro-
viders’ usual and customary charges to the general public.”
42 C.F.R. § 447.512(b)(2). Regulations also include this deﬁni-
tion: “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 ﬁnd-
ing that SuperValu made these many false claims “know-
ingly.”
    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 sum-
mary judgment. As applied to these facts, though, it should
be easy to ﬁnd that SuperValu’s claims were false and that Su-
perValu 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 competi-
tor’s lower prices. Then imagine that the seller tells its phar-
macists and cashiers to oﬀer the discounted prices to all cus-
tomers paying cash for drugs (i.e., without insurance or gov-
ernment 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 availa-
ble to any members of the general public, who were encour-
aged 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 rel-
evant money is. For forty-four of those top ﬁfty drugs, Super-
Valu 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 de-
ﬁne “usual and customary” under the inﬁnite variety of situ-
ations 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 Super-
Valu 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 re-
imbursement 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 dis-
connect 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 custom-
ary” prices did not escape notice by executives. Documents
show that they paid close attention to the results of the price-
matching program. That’s no surprise. The program re-
sponded 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 Medi-
care and Medicaid sales of those drugs. The executives esti-
mated 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 “in-
tegrity” 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 Super-
Valu 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 govern-
ment, yet went forward anyway.
    The False Claims Act requires proof that a defendant
knowingly submitted false claims. It deﬁnes “knowing” of fal-
sity 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 Super-
Valu’s widespread adoption of price-matching on a scale far
beyond an “exception” was at least a deliberate choice to re-
main 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 obvi-
ous 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 Su-
perValu either actually knew or deliberately chose to keep it-
self 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-vol-
ume drugs (“cherry-picked examples,” says SuperValu). Per-
haps, but even if the relators tried to reach too far with other
drugs, that would not mean their claims based on the “cherry-
picked” 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 complex-
ity 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 hon-
estly 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. In-
stead, SuperValu and the majority say the evidence of Super-
Valu’s actual knowledge and intentions is “irrelevant.” Ante
at 25. If that’s correct, this case creates a safe harbor for fraud-
sters who claim taxpayer funds in bad faith, but whose barely-
straight-faced lawyers oﬀer an innocent explanation for their
conduct. The majority even says it is irrelevant whether Su-
perValu actually believed and/or relied upon the post hoc jus-
tiﬁcations oﬀered in litigation. “[I]t is not enough that a de-
fendant 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, be-
lieve, or intend to ﬁle a false claim, but it cannot know that its
claim is false if the requirements for that claim are un-
known.”).
    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 oﬃc-
ers could say they did not “know”—not really—that the earn-
ings 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 law-
suits and prosecutions are not seminars in such radical epis-
temological doubt. Federal courts routinely give “ostrich” in-
structions 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 inter-
pretation conﬂicts with the statutory text of the False Claims
Act, its common-law foundations, and its history and pur-
poses. 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 pay-
ment 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 de-
ﬁnes 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 treat-
ment of fraudulent scienter, used by the Supreme Court to in-
terpret 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 com-
mon law of fraud. Ante at 14, quoting Universal Health Ser-
vices, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 1999 &
n.2 (2016). That’s certainly correct. Escobar relied on the Re-
statement (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 sci-
enter. 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 rep-
resentations to the United States government that its certiﬁca-
tions 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 Misrep-
resentation, the Chapter on Misrepresentation and Nondisclosure Caus-
ing Pecuniary Loss, the Topic on Fraudulent Misrepresentation (Deceit),
and Title A, Fraudulent Character of Misrepresentation. Section 526 is ti-
tled “Conditions Under Which Misrepresentation is Fraudulent (Scien-
ter).,” 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 com-
mon 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 Su-
preme 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 in-
tent 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 “know-
ing” and “knowingly” without elaboration. When Congress
added the deﬁnitions in 1986, it acted in response to court de-
cisions 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 re-
sponse 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 sci-
enter 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 decid-
ing as it did because there was “no indication that Congress had some-
thing 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 iden-
tify 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 liabil-
ity 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 claim-
ants, acting in bad faith, to evade liability through legal tech-
nicalities about the deﬁnition of “knowledge.” See S. Rep. 99-
345 at 7, 21.
    The result of these earlier court decisions had been pre-
dictable: unscrupulous claimants could structure claim-pro-
cessing 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, decision-
makers could insulate themselves from liability by ignoring
problems that even a cursory investigation would have un-
covered. 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 Com-
mittee 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 ac-
       tual knowledge that the information is false, but
       also to confer liability upon those individuals
       who deliberately ignore or act in reckless disre-
       gard 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 Govern-
       ment not only to eﬀectively prosecute those per-
       sons 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 “os-
triches” 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 “rea-
son 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 deﬁni-
tion 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. Super-
Valu knew that the “integrity” of its “usual and customary”
prices would be suspect if price-matching were not the “ex-
ception” but the rule, yet it kept submitting those claims
through a nationwide price-matching campaign anyway, net-
ting 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 pre-
cluded by a defendant’s identiﬁcation of a reasonable inter-
pretation of an ambiguous regulation that would have per-
mitted 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 sci-
enter 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 lia-
ble 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. Sci-
ence 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 notwithstand-
ing “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, [defend-
ant’s] petition arguing that the sky will fall upon government
contractors if they are precluded from relying on a ‘reasona-
ble 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 ar-
gument 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 de-
fendants 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 re-
sponses to crabbed judicial interpretations, the majority opin-
ion takes a very diﬀerent approach. It borrows the Supreme
Court’s treatment of a diﬀerent term, “willfully,” under a dif-
ferent statute, the Fair Credit Reporting Act, in Safeco Insur-
ance 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 reck-
less 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 nei-
ther 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 amend-
ments shows that Congress thought it was enacting a stand-
ard quite diﬀerent from the majority’s. Second, by saying re-
lators 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 ulti-
mately held that it could but also held that Safeco had not
“willfully” violated that Act because the statute and regula-
tion 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 guid-
ance for interpreting the term in that act, the Safeco Court had
little choice but to construct a working deﬁnition from multi-
ple sources. The Court focused on civil law, noting that in sev-
eral civil contexts, willful violations of statutes could be
shown by recklessness, which was consistent with common-
law 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 an-
nounced 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 “reck-
lessness” that apply to actions putting others in physical dan-
ger. The Court described recklessness as action entailing “an
unjustiﬁably high risk of harm that is either known or so ob-
vious that it should be known,” id. at 68, quoting Farmer v.
Brennan, 511 U.S. 825, 836 (1994), and conduct involving “un-
reasonable 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 regard-
ing putting another person in physical danger). The Court
summarized its view for the Fair Credit Reporting Act:
       There being no indication that Congress had some-
       thing diﬀerent in mind, we have no reason to de-
       viate from the common law understanding in
       applying the statute. Thus, a company subject to
       FCRA does not act in reckless disregard of it un-
       less 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 asso-
       ciated 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 Re-
porting 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 deci-
sions. 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 diﬀer-
ent 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 over-
looking 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 statu-
tory text, the common law, and legislative history, as dis-
cussed above.
    If the majority limited its reliance on Safeco to the reckless-
disregard prong of the False Claims Act’s deﬁnition of know-
ing, its mistake would be more understandable. It’s the ma-
jority 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 understand-
ing 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 deliber-
ate-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 nec-
essarily also be covered by Safeco-reckless disregard. There is
no basis for that assumption, which leads away from the com-
mon 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 con-
tractor 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-frivo-
lous 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 ma-
jority’s approach, there is no need for a defendant to show
that it actually “followed” any “objectively reasonable” inter-
pretation 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, “irrele-
vant.” 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” con-
duct. And it’s also contrary to the common-law scienter stand-
ard 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 sup-
ports its new safe harbor where subjective state of mind is ir-
relevant. 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 reck-
lessly 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 ren-
der 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 read-
ing 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 dif-
ferent 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 foot-
note 20 to the False Claims Act.
    Returning to False Claims Act cases, consider, for exam-
ple, United States ex rel. Prather v. Brookdale Senior Living Com-
munities, 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 “con-
cerns about the defendants’ compliance with Medicare regu-
lations, 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 defend-
ants to inquire whether they were actually in compliance with
regulations. The Sixth Circuit concluded the allegations sup-
ported “knowledge” under both the deliberate-ignorance and
reckless-disregard prongs of the deﬁnition. Id. at 838. Yet un-
der the majority’s approach here, that case would have been
dismissed so long as an attorney could later oﬀer a barely-
plausible theory of innocence, even though the defendant ig-
nored repeated and correct warnings that it was violating the
No. 20-2241                                                    53

regulations. Worse yet, the majority here would have dis-
missed 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 vi-
olates one of the most common tools of statutory interpreta-
tion. It renders the actual-knowledge and deliberate-igno-
rance 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 Interpreta-
tion from the Inside—an Empirical Study of Congressional Draft-
ing, 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 common-
law prongs for fraudulent scienter. Congress adopted them to
give courts clearer guidance because Congress was disap-
pointed with courts’ interpretations of the undeﬁned “know-
ing.” Congressional leaders on the subject, such as Senator
Grassley and Representative Berman, were concerned that
courts would continue to misinterpret the statute. They ex-
plained 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 dis-
tinct prongs in the same paragraph of the statutory text was
unmistakably an eﬀort to be both thorough and broad. Con-
gress 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 reasona-
ble deﬁnition of “usual and customary” that means “some-
thing 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 Rep-
resentative Fish singled out as applying a too-narrow deﬁni-
tion 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 regu-
latory 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 expand-
ing.
    To sum up, relators have come forward with substantial
evidence of knowing fraud, as SuperValu claimed reimburse-
ment 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 remedy-
ing fraudulent raids on taxpayer dollars, Congress or the Su-
preme Court or both will need to respond to this line of cases.