US Says Recent SCOTUS Ruling Precludes Importer's Scienter Argument in FCA Case on Evaded AD
The False Claims Act's scienter element, which says a person must have "knowingly" made false statements, refers to a defendant's knowledge and subjective beliefs and not to what an objectively reasonable person may have known or believed, the U.S. said in an amicus brief invited by the U.S. Court of Appeals for the 9th Circuit. Citing recent Supreme Court precedent from U.S. ex rel. Schute v. SuperValu, the U.S. said the appeals court should reject importer Sigma Corp.'s arguments to the contrary in a case on whether the company violated the False Claims Act by filing false customs forms to evade antidumping duties (Island Industries v. Sigma Corp., 9th Cir. # 22-55063).
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The government said there is a wealth of evidence showing that Sigma knowingly told CBP that its pipe fitting imports were not subject to the antidumping duties. For instance, the importer said on customs forms that its goods were steel couplings, not covered by the order, while marketing them as covered "welded outlets," the brief said. The U.S. added that to the extent Sigma was unaware of the order, evidence shows that this was only so since the company failed to carry out even "rudimentary inquiries."
Sigma claimed that all of this evidence was irrelevant since a defendant under the FCA has a complete defense if its conduct was in line with an "objectively reasonable view of the applicable requirements." The company said it could not have acted knowingly since the AD order is "objectively ambiguous, and a reasonable person could interpret it as not applying to Sigma's pipe fitings." The U.S. said this defense was upended by SuperValu.
In that case, the defendants said they could not have the requisite knowledge under the FCA since an objectively reasonable person could have interpreted the FCA to allow their conduct. The high court said that the FCA's "scienter element refers to [the defendant’s] knowledge and subjective beliefs -- not to what an objectively reasonable person may have known or believed.”
Sigma said that SuperValu is limited to times where the defendant had "actual contemporaneous knowledge" that its statements were untrue. The government replied that nowhere did the high court adopt this limitation. On the contrary, the court said the FCA refers to three mental states: "actual knowledge," "deliberate ignorance," and "recklessness," and that all three mainly focus on what a defendant thought and believed.
"In short, that an objectively reasonable person might interpret a requirement as permitting certain conduct 'does not by itself preclude a finding of scienter' under any of the FCA’s three mental states, which include but are not limited to 'actual knowledge,'" the brief said. As a result, Sigma's claims that it did what was in line with an objective view of the law's requirements should be rejected, the government argued.