When the Supreme Court decided United States ex rel. Schutte v. SuperValu Inc. in 2023, some hailed it as a significant setback for False Claims Act ("FCA") defendants.

In many cases, alleged FCA violations are premised on the theory that a lack of compliance with other statutory or regulatory requirements render claims for payment to the government legally false.

The Court held that the statute's scienter element turns on what a defendant actually knew or believed — thereby rejecting the argument that the defendant cannot act "knowingly" if its actions were consistent with an objectively reasonable understanding of an ambiguous legal requirement.

Three years on, that holding does not appear to be as damaging as some predicted, thanks to evolving precedent on two key tools that defendants can leverage in FCA cases premised on alleged violations of ambiguous legal requirements: subjective knowledge and objective falsity.

The Fourth Circuit's recent decision in Sheldon serves as a timely introduction to both tools. In Sheldon, a divided panel revived FCA allegations that a pharmaceutical manufacturer knowingly underreported Medicaid "best price" by failing to aggregate multiple discounts. U.S. ex rel. Sheldon v. Allergan Sales, LLC, 170 F.4th 227, 232 (4th Cir. 2026).

The majority held that the relator plausibly alleged that the defendant acted with the requisite scienter — knowledge that its erroneous pricing calculation for certain of its drugs rendered claims for payment false. Id.

Applying SuperValu, the Fourth Circuit emphasized that ambiguity in the governing statute will not, by itself, mean that the defendant lacked knowledge. Id. at 241. The knowledge inquiry, after all, focuses on the defendant's "subjective" "thoughts and beliefs." Id.

Turning to claims' falsity, the court underscored, as many other courts have, that unlike knowledge, falsity presents an objective question requiring the court to interpret the governing statute. Id. at 245.

In SuperValu, the Court unequivocally held that what matters under the FCA is whether the defendant actually knew or believed claims were false. U.S. ex rel. Schutte v. SuperValu Inc., 598 U.S. 739, 749 (2023). In other words, relators and the government cannot prevail by pointing merely to what others in the defendant's position would have known or believed. See id.

And that is true even though the FCA does not require actual knowledge — recklessness suffices. Indeed, even recklessness — usually the crux of the knowledge inquiry because facts rarely show actual knowledge of falsity in claims — demands that the defendant have awareness of a substantial risk that claims are false. Id. at 751.

Along with the First, Fifth, Seventh, Eighth, and Ninth Circuits, the Fourth Circuit in Sheldon helpfully reaffirmed SuperValu's subjective tilt.

It can be difficult for defendants to win arguments on scienter. But the Supreme Court's emphasis on subjectivity — what the particular defendant really thought or believed — could help reinvigorate scienter arguments.

Consider last year's decision in Omni Healthcare. There, the relator alleged that the defendants' urological lab tests were medically unnecessary, such that claims for the tests were unreimbursable by Medicare and therefore false. See generallyU.S. ex rel. Omni Healthcare Inc. v. MD Spine Solutions LLC, 160 F.4th 248 (1st Cir. 2025).

At summary judgment, the relator offered a number of buckets of evidence purportedly suggesting that the defendants knew the tests were medically unnecessary and unreimbursable. Id. at 262.

The lab's co-founder drafted an email to a Medicare Administrative Contractor ("MAC") to start a discussion on how to "'change the current payment system to best accommodate'" the newish technology enabling the tests. Id. at 263. Another co-founder suggested asking the MAC about the tests' medical necessity. Id. And medical literature allegedly indicated that the tests were not medically necessary. Id. at 264.

Extensively quoting SuperValu, the First Circuit affirmed Judge Saris's grant of summary judgment for the defendants on the basis of scienter. Id. at 252, 258-59.

Asking about the "nitty-gritty of billing practices" did not suggest that the co-founder actually "thought" tests were medically unnecessary. Id. at 263. Nor did seeking guidance from the MAC on medical necessity reflect a subjective "awareness" of a "'substantial'" risk that claims were false for lack of medical necessity. Id. And the medical literature — "generalized ... guidance ... available to urology specialists" — did not show that the defendants had reason to doubt the medical necessity of any doctor's orders for the tests. Id. at 264.

In short, the court's strict subjective focus — asking what the evidence demonstrated (or not) about what defendants actually thought — proved dispositive.

Post-SuperValu, scienter is subjective — a defendant cannot point to an objectively reasonable interpretation of an ambiguous statute, regulation, or contractual provision to argue it lacked the requisite knowledge. But a defendant remains free to argue that a correctly construed statute, regulation, or contract was not violated to defeat falsity, an analytically distinct element that SuperValu left untouched.

As Sheldon put it, and as many other courts have recognized, FCA "falsity is an objective inquiry" that turns on the court's own reading of the governing law — even where that law is ambiguous. Sheldon, 170 F.4th at 245. Thus, even a defendant that subjectively thought its conduct rendered claims false can still prevail if it can convince the court that they were not objectively false.

Importantly, how courts interpret a statute for falsity purposes fundamentally changed with the Supreme Court's decision in Loper Bright.

In that case, the Court overruled the forty-year-old Chevron doctrine, holding that courts "must exercise independent judgment in determining the meaning of statutory provisions," and may not defer to an agency's reading of an ambiguous statute simply because it is ambiguous. Loper Bright Enterprises v. Raimondo, 603 U.S. 369, 396 (2024).

An agency's view now retains only whatever persuasive force its reasoning earns it — not automatic deference. For FCA defendants, that means a court deciding falsity premised on the alleged violation of a statute or regulation will reach its own, independent conclusion about what an ambiguous statute requires, no matter the agency's reading.

Judge Keenan's dissent in Sheldon illustrates what this might look like in practice. Rather than join the majority's scienter analysis, Judge Keenan would have resolved the case entirely on falsity, concluding that the defendant's own reading of "best price" — the single lowest price available to a single purchaser, not a figure produced by aggregating discounts across the distribution chain — was correct. Id. at 246-47 (Keenan, J., dissenting).

In reaching that conclusion, she refused to give the Centers for Medicare and Medicaid Services' rulemaking history any interpretive weight, reasoning that once a statute's plain meaning is clear, "any contrary agency regulation is irrelevant." Id. at 248 n.6.

The predictions that SuperValu would be a significant hurdle to FCA defendants have not proven true. Decisions like Omni Healthcare, Sheldon, and Loper Bright confirm that even after SuperValu rejected objectivity in the knowledge inquiry, subjective knowledge and objective falsity can be potent tools, including in the presence of legal ambiguity.

Subjective knowledge can short-circuit claims where the plaintiff cannot prove what the defendant actually believed, while objective falsity empowers the defendant to show, independent of its belief, that claims were not, in fact, false. From this perspective, SuperValu looks less like the defeat the defense bar feared in 2023, and more like a shift in where the real fights will take place.