Commercial Litigation Update

On June 1, 2023, the U.S. Supreme Court unanimously settled a long-standing dispute over a subjective versus objective standard for scienter under the False Claims Act (FCA), holding that a defendant’s own subjective belief is relevant to scienter, rather than what an “objectively reasonable” person may have known or believed.

The case in question, U.S. ex rel. Schutte v. SuperValu Inc., consolidated from two lower court decisions, involved allegations that the defendants, two retail pharmacy chains, overcharged the government for prescription drugs in violation of ...

It should come as no surprise to constitutionalists, practitioners under the Federal False Claims Act (31 U.S.C. §§3729–3733) (FCA), and auditors of the oral argument in the case that the Supreme Court has held that the federal government may move to dismiss an FCA action under §3730(c)(2)(A) whenever it has intervened—whether during the seal period or later on. United States ex rel. Polansky v. Executive Health Resources, Inc. To assert this right, the government must actually intervene (which is not difficult since the statute allows it at any time before final judgment, even on appeal), and the propriety of dismissal is to be adjudicated pursuant to Fed. R. Civ. P. 41(a), the rule generally governing voluntary dismissal of suits in ordinary civil litigation, and dismissal should be granted in all but the most extraordinary cases. 

Continuing the issuance of opinions as to which the Justices are largely of one mind, the Court today handed down three decisions. Each gives important guidance to litigators on both sides of the ball. The first of these is a unanimous opinion settling the hotly debated question of whether intent under the federal False Claims Act (FCA) is a subjective or objective matter. It is the former. The second decision, also unanimous, clarified what a plaintiff must plead and prove to establish securities fraud regarding a stock offering through a direct listing. The third case offers a lone dissent over a majority and concurring opinions rejecting a labor union’s argument that the National Labor Relations Act (NLRA) preempts a state court tort action concerning workers sabotaging a company’s concrete trucks.