The case is considered to be important because it could have an impact on the government’s ability to crack down on health care fraud.
Lawsuits brought by whistleblowers allege the two supermarket chains billed the two government programs at artificially high rates while charging most paying customers significantly lower prices under discount schemes. Federal law mandates that pharmacies bill the programs the typical prices they actually make customers pay. The whistleblowers claim the chains knew they were overcharging the government and covered up their pricing policies.
The companies claim they shouldn’t be held liable because they acted in an objectively reasonable manner and did not knowingly commit fraud.
SuperValu Inc. is the respondent (court file 21-1326) in one of the petitions the high court granted Jan. 13; Safeway Inc. is the other respondent (court file 22-111). The court consolidated the two cases and allotted one hour for oral argument on a date yet to be determined.
The cases involve the federal False Claims Act, sometimes called the Lincoln Law, which was enacted in 1863 to deal with defense contractor fraud during the Civil War. The act currently provides that anyone who knowingly files false claims with the government is liable for treble damages plus a $2,000 penalty for each false claim that is linked to inflation. The act allows the government to go after perpetrators on its own, and for private citizens to sue those who defraud the government on behalf of the government in what are known as qui tam suits.
Private citizens who prevail in qui tam actions may be awarded part of what the government recovers. The U.S. Department of Justice reports that it obtained more than $5.6 billion in settlements and judgments from civil cases involving fraud and false claims against the government in fiscal 2021.
Whistleblowers Tracy Schutte and Michael Yarberry claim in their petition that SuperValu knew “its reporting was problematic” and failed to report discounted prices, “charging the government … higher prices.”
In the Safeway case, whistleblower Thomas Proctor said in his petition that “despite ample warning” the company “did not report its discounted prices” to the government and “[t]his allowed Safeway to offer discounts to price-sensitive consumers without sacrificing lucrative reimbursements from the government.” One expert pegged the over-billing at $127 million.
Although the Chicago-based U.S. Court of Appeals for the 7th Circuit found SuperValu and Safeway had overbilled the government, it held that their billing processes were consistent with an “objectively reasonable” interpretation of the law, regardless of their intentions.
The Department of Justice encouraged the Supreme Court to accept the case, arguing the 7th Circuit rulings ran afoul of the purpose of the False Claims Act.
The Epoch Times reached out to counsel for SuperValu and Safeway, John Caviness O’Quinn of Kirkland and Ellis LLP, and counsel for the whistleblowers, Tejinder Singh of Sparacino PLLC, but had not received a reply as of press time.
But Singh told Reuters his side was “glad the court took up this important issue.”
The Epoch Times also reached out to the Justice Department for comment but did not receive a reply by press time.