Supreme Court Revives Abbott Whistleblower’s False Claims Suit

The US Supreme Court revived Friday a whistleblower’s False Claims Act suit alleging that Abbott Laboratories Inc., Arriva Medical LLC, and Alere Inc. improperly billed Medicare for diabetic testing supplies.

The Court granted the whistleblower’s petition for writ of certiorari, vacated the judgment of the US Court of Appeals for the Eleventh Circuit, and remanded the case to that appeals court.

This decision follows the Supreme Court’s June 1 opinion in United States ex rel. Schutte v. SuperValu Inc., which said the scienter element under the FCA can be established if a defendant believes its claims are false.

The FCA’s scienter element refers to a defendant’s knowledge and subjective beliefs, not what an objectively reasonable person may have known or believed, Justice Clarence Thomas wrote in a unanimous opinion.

The US Court of Appeals for the Eleventh Circuit ruled in April 2022 that Troy Olhausen didn’t show that the companies knowingly submitted false statements to the government. The Medicare rules he alleged the defendants violated are susceptible to multiple reasonable interpretations, the appeals court said.

According to Olhausen’s petition, the Eleventh Circuit improperly concluded that the complaint didn’t satisfy the scienter standard in the FCA.

The appeals court took an anti-textual approach by allowing defendants that knowingly defrauded the government to evade responsibility by raising “a reasonable post-hoc interpretation of the law they knew or believed they were violating,” Olhausen said.

Olhausen also said the Supreme Court should resolve a circuit split concerning how to interpret the scienter provisions in the FCA in cases where a defendant points to an objectively reasonable interpretation of a statutory or regulatory provision under which its conduct would have been lawful.

Three circuit courts—the D.C., Seventh, and Eighth—understand the FCA’s scienter requirement to implicate an objective assessment of a defendant’s mental state. Four circuit courts—Eleventh, Sixth, Ninth, and Tenth—read it to require a subjective inquiry, Olhausen said.

The defendants said Olhausen waived the ability to challenge this issue by not raising it at the district court or at the Eleventh Circuit. They said there was no circuit split to resolve.

The suit alleged that the defendants defrauded Medicare by sending supplies to patients whose prescriptions on file were invalid, sending supplies without collecting signed patient forms, and shipping supplies without ensuring they were medically necessary.

The US District Court for the Southern District of Florida dismissed the suit in August 2020.

Gallagher & Kennedy PA and Podhurst Orseck PA represented Olhausen. Kirkland & Ellis LLP represented the defendants.

The case is Olhausen v. Arriva Med. LLC, U.S., No. 22-374, 6/30/23.