SuperValu Case: When Honest Mistakes Aren’t Fraud

 A Turning Point in Federal Fraud Law

The 2023 Supreme Court decision in United States ex rel. Schutte & Proctor v. SuperValu Inc. changed how courts assess fraud under the False Claims Act (FCA). This landmark case redefined the scienter element—what it means to act “knowingly”—in cases where businesses are accused of submitting false claims to the government. Petitioners sued retail pharmacies under the False Claims Act (FCA), 31 U.S.C. §3729 et seq.

The FCA permits private parties to bring lawsuits in the name of the United States against those whom they believe have defrauded the Federal Government, §3730(b), and imposes liability on anyone who “knowingly” submits a “false” claim to the Government, §3729(a). Here, petitioners claim that respondents—SuperValu and Safeway—defrauded two federal benefits programs, Medicaid and Medicare.

For government contractors, healthcare professionals, and corporations under investigation, SuperValu offers a critical defense principle: a simple mistake or good-faith misunderstanding of law does not equal fraud. What truly matters is whether the defendant actually believed their claims were false.

If you are under investigation, this ruling could mean the difference between criminal liability and exoneration. That’s where an experienced False Claims Act defense lawyer or government contract fraud attorney becomes indispensable.

What Is the False Claims Act and the Scienter Standard?

The FCA imposes penalties on anyone who “knowingly” submits false statements or claims for payment to the federal government. Scienter is the mental state requirement—it distinguishes intentional fraud from honest errors or reasonable interpretations.

The Court said that “.. sometimes the rule is less clear. If a law authorized payment for only “customary” medical tests, some doctors might be confused when it came time for billing. And, while some doctors might honestly mistake what that term means, others might correctly understand whatever “customary” meant in this context—and submit claims that were inaccurate anyway. Compared to what federal prosecutors, after the fact, use as a standard in jury trials as to what a reasonable person may, this case takes a different position because the standard is what you knew and or believed at the time the claim was submitted (this is a subjective intent standard -driven by the facts).

“..The question presented is thus whether respondents could have the scienter required by the FCA if they correctly understood the standard and believed their claims were inaccurate. We hold that the answer is yes: What matters for an FCA case is whether the defendant knew the claim was false. “

Under 31 U.S.C. § 3729(b)(1), a person acts “knowingly” if they:

• Have actual knowledge of falsity,

• Act in deliberate ignorance of the truth, or

• Display reckless disregard for the truth.

Before SuperValu, some courts allowed defendants to escape liability by arguing that their actions were objectively reasonable—even if they had subjective knowledge that their claims were untrue. The Supreme Court firmly rejected that standard.

The SuperValu Case and Its Message

In SuperValu, two retail pharmacy chains—SuperValu Inc. and Safeway Inc.—were sued under the FCA for allegedly reporting higher drug prices to Medicare and Medicaid while concealing discounts offered to customers.

The Supreme Court unanimously held that liability turns on the defendant’s subjective belief, not whether their legal interpretation could be seen as reasonable by others.

Justice Thomas wrote:

“The FCA’s scienter element refers to a defendant’s knowledge and subjective beliefs—not to what an objectively reasonable person may have known or believed.”

Key Takeaway

Even when a law or regulation is ambiguous, what the defendant actually believed at the time of submission decides scienter. If a company honestly misunderstood the rule but acted transparently, the court cannot assume fraud.

This Court decision impacts your choice of hiring a False Claims Act defense attorney. While the SuperValu decision makes a tougher case for the prosecutor, it is also likely to affect your effort to try to get the case dismissed early for lack of scienter. You can’t just say subjective belief. You have to prove your subjective beliefs at the time claims were submitted, which is necessarily heavy document-intensive task for litigation. It also may place a high burden on defendants to demonstrate they did not take an unjustifiable risk in submitting claims.

Why This Matters: Honest Mistakes Aren’t Fraud

The SuperValu decision gives defendants tangible hope. Many healthcare providers and contractors accused of fraud simply made documentation, billing, or pricing errors.

The Supreme Court clarified that to prove scienter, the government must show that the defendant knew their claim was false or acted in conscious disregard of its accuracy.

• Simple oversight or differences in interpretation do not establish scienter.

• Ambiguous rules in government billing and pricing systems must be viewed in light of an individual’s understanding at the time.

• Courts must consider subjective awareness and good-faith interpretations of regulations.

How Courts Applied SuperValu in New Cases

United States ex rel. Aldridge v. Corporate Mgmt. Inc., 133 F.4th 395 (5th Cir. 2025)

The Fifth Circuit reaffirmed SuperValu, ruling that subjective intent governs scienter. The case involved a hospital system accused of Medicare fraud. The court found no liability where the defendant had honestly believed its method complied with CMS guidance.

United States v. Medtronic, Inc., 144 F.4th 551 (4th Cir. 2024)

The Fourth Circuit applied SuperValu to a healthcare fraud case, emphasizing that lack of proven intent bars FCA liability. Medical device manufacturers cannot be punished for reasonable, good-faith interpretations of ambiguous safety reporting rules.

United States ex rel. Torres v. HealthTrust, LLC, 787 F. Supp. 3d 1308 (S.D. Fla. 2024)

The Southern District of Florida echoed SuperValu: ambiguity does not equal falsity. If a defendant lacked awareness that their reports were false, intent cannot be presumed. The court stressed the role of internal compliance protocols as evidence of honest belief.

Practical Implications for Government Contractors

For federal contractors and SDVOSB-certified companies, SuperValu is a game-changer. Complex regulations from the Small Business Administration (SBA) and FAR/DFARS often leave room for error.

Under 13 C.F.R. § 128.203, for example, determining service-disabled veteran ownership and control can be nuanced. Post-SuperValu, if a contractor reasonably believed they met the eligibility requirements, lack of intent could block criminal or civil fraud claims.

Key Point: If your company relied on SBA guidance, agency communications, or a good-faith reading of contract terms, SuperValu strengthens your defense.

Recommended Steps:

• Document all communications with contracting officers.

• Keep records of internal legal interpretations or compliance opinions.

• Engage a government contract fraud lawyer early if you receive a subpoena or CID.

Implications for Healthcare Providers

Healthcare billing and regulatory compliance often involve gray areas. Hospitals, clinics, and physicians can face FCA allegations for coding, referrals, or reporting mistakes.

Following SuperValu:

• Billing errors caused by unclear CMS guidance do not automatically equal fraud.

• A scienter defense can succeed if you show consistent compliance programs, training, and honest interpretation of reimbursement language.

• Courts will examine whether you believed your claims were accurate, not whether you guessed wrong.

For healthcare entities, this decision underscores the importance of documenting internal compliance reviews to demonstrate good faith.

Building a Scienter Defense: Strategies That Work

A well-crafted defense under the FCA starts with demonstrating a lack of intent (Scienter). After SuperValu, defense lawyers can anchor their arguments in your subjective good-faith belief.

Effective Defense Strategies

• Show documentation reflecting confusion or conflicting guidance.

• Produce emails, memos, and training materials proving reliance on agency interpretations.

• Highlight voluntary self-disclosure or remedial action taken.

• Challenge broad government claims that rely solely on objective ambiguity.

Your False Claims Act defense lawyer should use SuperValu precedents to prove that, at the time of submission, your company acted transparently and in good faith.

Why Retain an Experienced Government Fraud Lawyer

Facing an FCA investigation is daunting—especially when federal agencies like DOJ, HHS, or DOD accuse you of knowingly submitting false claims.

At times, prosecutors interpret business decisions through hindsight. But as SuperValu teaches, hindsight cannot rewrite intent. You need counsel who understands how to frame your actions as reasonable and compliant with the facts you knew at the time.

Our government contract fraud lawyers and healthcare fraud defense attorneys are experienced in defending clients under FCA investigations, criminal indictments, and civil enforcement.

Common Scenarios:

• Government contract cost-pricing disputes

• Medicare or Medicaid billing audits

• SDVOSB set-aside eligibility challenges

• Noncompliance allegations under FAR provisions

In each, SuperValu gives your defense new strength.

Key Takeaway: Hope for FCA Defendants

The SuperValu decision restores fairness in FCA enforcement. If you or your organization acted in good faith and lacked knowledge of falsity, you stand on solid ground. The legal system now requires the government to prove subjective awareness of wrongdoing, not just ambiguity.

Business errors, billing disputes, and regulatory confusion are not crimes—they’re administrative issues, not fraudulent acts.

Contact Our False Claims Act Defense Lawyers Today

If your company has received a subpoena, audit notice, or target letter under the False Claims Act, you need strategic representation from experienced federal fraud defense attorneys.

Contact our False Claims Act defense lawyers, healthcare fraud attorneys, or government contract fraud lawyers today for immediate help preserving your rights, your business reputation, and your future. Call 1.866.601.5518.