The US Supreme Court will hear oral arguments in two important cases in April, involving the interpretation of a crucial element of the False Claims Act (FCA) and the Fair Credit Reporting Act (FCRA). In hearing these cases, the Court will consider the knowledge requirement of the FCA. In addition, the Court will decide whether a defendant’s belief of performing legal conduct proves pertinent to determining whether they deliberately violated the False Claims Act.

The central issue of the cases is the knowledge requirement of the FCA, and whether a defendant’s belief in the lawfulness of their conduct is legally relevant to whether they “knowingly” violated the FCA. The question before the Court is whether the “objective knowledge standard” from Safeco Insurance Co. v. Burr case¬†regarding FCRA violations applies to the FCA’s explicit knowledge requirement in cases where the purported falsity of a claim turns on an ambiguous legal obligation.

In the Safeco case, the Court used long-standing common law principles. As such, it confirmed the case concerned FCRA violations. The results led to “reckless disregard,” equating to “willfulness.” The lawsuit also noted that the existence of infringements had a contextually driven matter.

However, the Safeco case concerned violations of the FCRA, not the FCA and statutory construction. The FCRA does not contain an explicit knowledge requirement, whereas the FCA does. For example, FCRA matters to consider the defendant’s knowledge when deciding whether they willfully violated the Act. As such, questions have surfaced about whether the Safeco case holds relevant precedent in a knowledge determination following the specific terms of the FCA.

Though the FCA and FCRA have knowledge requirements for claims, they employ different enforcement standards. For example, a government-initiated FCA enforcement generally has criminal and civil facets. They also often charge false claims under several statutes, increasing potential sanctions and motivating defendants to settle quickly.

The government may apply sanctions in most criminal cases. However, these typically require a culpable state of mind for the government to prove a criminal violation. In FCA cases, it is only necessary for the individual to know of the claim’s falsity, meaning they knowingly made a false claim. In such situations, the FCA defines “knowingly” as:

  • Clear knowledge of the claim being false
  • Intentional ignorance of falsity
  • Maintaining a claim with “reckless disregard.”

In many cases, the government has proven less than consistent with the standard for the knowledge requirement. Therefore, some courts have used the Safeco standard. Correspondingly, the circuits using this standard have used it consistently. Unfortunately, this does not help the businesses that operate in different circuits. However, once the Supreme Court makes a decision on this issue, this may change.

The recent Supreme Court case on the knowledge requirement of the FCA and FCRA highlights the complexity of federal regulations, particularly those related to FCRA regulations for background checks. Non-compliance with these requirements can result in significant penalties. To ensure compliance, it is advisable to partner with a reputable background check company with in-depth knowledge of federal and local requirements. By doing so, you can obtain high-quality results for your company while avoiding costly mistakes.

Information provided here is for educational and informational purposes only and should not constitute as legal advice. We recommend you contact your own legal counsel for any questions regarding your specific practices and compliance with applicable laws.