False Claims Act: Supreme Court Holds Knowledge Is Subjective Not Objective: Discussion with Bart Daniel from Nelson Mullins

Episode Date: June 14, 2023

In this episode of Stark Integrity, Bob Wade (“Captain Integrity”) is joined by Bart Daniel, Partner at Nelson Mullins, to discuss a major development in False Claims Act (FCA) enforcement—the Supreme Court’s decision clarifying that knowledge under the FCA is a subjective standard, not an objective one.

Drawing on his deep experience in litigation and enforcement, Bart Daniel provides practical insight into how this decision changes the compliance landscape and what organizations must do to manage risk going forward.

The Supreme Court’s Decision

Bart Daniel explains that the Supreme Court addressed a critical issue: whether FCA liability should depend on what a reasonable person would have believed (objective) or what the defendant actually believed at the time (subjective).

The Court made clear that:

• The FCA is rooted in common law fraud principles
• Knowledge depends on the defendant’s actual state of mind
• A later “reasonable interpretation” cannot justify earlier conduct

This eliminates the ability to rely on after-the-fact rationalizations to defend questionable claims.

No “After-the-Fact” Justifications

A major point emphasized by Bart Daniel is that organizations cannot rely on hindsight to defend their actions.

He explains that:

• You cannot create a justification for a claim after it has been submitted
• Courts will focus on what was known at the time of billing
• Internal uncertainty or doubt may be enough to create exposure

This reinforces that compliance must be based on real-time decision-making, not retrospective legal arguments.

The Importance of “Who Knew What and When”

Bart Daniel highlights that FCA analysis will now focus heavily on timing and awareness.

He explains that:

• Investigations will examine who knew what, and when they knew it
• Internal communications may become key evidence
• Knowledge may be inferred from patterns of behavior or ignored risks

This makes internal processes and escalation mechanisms more important than ever.

The Three Definitions of Knowledge

A key part of the discussion is the FCA’s three recognized standards of knowledge.

Bart Daniel outlines that liability can arise from:

• Actual knowledge
• Deliberate ignorance
• Reckless disregard

These standards reinforce that organizations do not need intentional fraud to face liability—failure to act responsibly can be enough.

Implications for Compliance Programs

Bart Daniel emphasizes that this decision raises the bar for compliance programs.

Organizations should:

• Take ambiguity seriously rather than relying on “reasonable” interpretations
• Ensure that decisions are carefully analyzed and documented
• Address concerns proactively instead of ignoring potential issues

Compliance programs must now demonstrate that decisions were made with awareness and diligence.

Internal Communications as Evidence

Another important takeaway from Bart Daniel’s insights is the role of internal communications.

He notes that:

• Emails, notes, and discussions may be used to establish intent
• Casual or careless statements can create risk
• Organizations must be mindful of how issues are discussed internally

This underscores the importance of a compliance-oriented culture and communication discipline.

Practical Takeaways

The key takeaway from Bart Daniel’s discussion is that subjective knowledge significantly increases the importance of intent and internal awareness. Organizations should:

• Focus on what is known at the time decisions are made
• Avoid relying on after-the-fact legal justifications
• Document decision-making processes clearly
• Address uncertainty and risk proactively
• Ensure internal communications reflect thoughtful compliance consideration

Final Thoughts

This episode highlights—through Bart Daniel’s firsthand legal perspective—that the Supreme Court’s decision represents a meaningful shift in FCA enforcement.

Organizations must now ensure that they are not only reaching defensible conclusions, but also doing so with clear intent, appropriate diligence, and well-documented reasoning at the time of action.

The message is clear: under the FCA, what you knew—and when you knew it—matters more than ever.

Click here to listen to this Stark Integrity Podcast Episode:
https://podcasts.apple.com/us/podcast/false-claims-act-supreme-court-holds-knowledge-is-subjective/id1588939373?i=1000616923761&l=fr-FR