Sheldon: No. ELH-14-2535, 2026 WL 1868781 (D. Md. June 29, 2026) | White: 2026 WL 1864033 (D. Mass. June 29, 2026)

Executive Summary

Decided on the same day, United States ex rel. Sheldon v. Allergan Sales, LLC and United States ex rel. White v. Gainwell Technologies LLC are two district-court opinions applying the Supreme Court’s landmark False Claims Act (FCA) scienter decision, United States ex rel. Schutte v. SuperValu Inc., 598 U.S. 739 (2023). Schutte held that the FCA’s “knowing” requirement is subjective: it turns on what the defendant actually knew or believed, not on what an objectively reasonable person would have understood. The Sheldon court applied that standard to move a twelve-year-old Medicaid drug-rebate case — that had previously been dismissed on the theory that the manufacturer’s reading of an ambiguous statute was objectively reasonable — to discovery. In contrast, in White, the same subjective standard was not enough to save the relators, whose complaint against a Medicaid fiscal agent failed to plead non-conclusory facts about that defendant’s own knowledge, and the case was dismissed with prejudice. Read together, the two decisions show that Schutte‘s holding denies FCA defendants the “reasonable interpretation” shield, but it does not relieve relators of pleading concrete, plausible facts about the particular defendant’s state of mind.

Why It Matters

For anyone advising healthcare providers, drug manufacturers, pharmacy-benefit managers, and claims processors, these cases are examples of where the FCA scienter battle now takes place. After Schutte, a defendant can no longer win dismissal simply by showing that its reading of an ambiguous legal requirement was objectively reasonable — the question is what the defendant subjectively believed, which is rarely resolvable on the pleadings. That raises the litigation and settlement exposure of any FCA defendant relying on an “everyone read it that way” defense, as Sheldon vividly shows. At the same time, White confirms that the subjective standard is not a free pass for relators: conclusory allegations that a defendant “knew” or “recklessly disregarded” the truth will still be dismissed, especially against downstream intermediaries whose role is processing someone else’s claims. For settlement counsel and neutrals, the practical upshot is that valuing an FCA case now turns less on the reasonableness of the legal position and more on the strength of the evidence of the specific defendant’s knowledge — a fact-intensive inquiry that rewards early, candid evaluation.

Detailed Discussion of the Facts

These cases are good examples of how the district courts are applying Schutte v. SuperValu Inc., where the Supreme Court construed the FCA’s scienter element — “actual knowledge,” “deliberate ignorance,” or “reckless disregard” of the truth or falsity of a claim. The Court held that this standard is subjective, referring to “the defendant’s knowledge and subjective beliefs — not to what an objectively reasonable person may have known or believed.” Schutte thereby abrogated the widely used defense — drawn from Safeco Insurance Co. of America v. Burr — that a defendant who adopted an objectively reasonable interpretation of an ambiguous requirement could not have acted “knowingly,” regardless of its actual beliefs.

Sheldon is a qui tam action under the Medicaid Rebate Statute alleging that Allergan misreported its drug “Best Price” — omitting price concessions — to reduce the rebates it owed state Medicaid programs. The case has a long history. The district court originally dismissed it, and the Fourth Circuit affirmed (Sheldon II, 24 F.4th 340 (2022)), holding that Allergan’s interpretation of the ambiguous Best Price requirement was objectively reasonable and therefore defeated scienter. After Schutte, the Supreme Court vacated that judgment and remanded; on remand the Fourth Circuit (Sheldon VII, 170 F.4th 227 (2026)) applied the subjective standard and revived the case, holding that statutory ambiguity does not defeat scienter where a defendant may have subjectively known its reading was wrong. Back in the district court — now in the case’s twelfth year — Allergan asked, under Rule 54(b), for leave to file a third motion to dismiss.

White is a qui tam action against Gainwell Technologies, the private fiscal agent that processes Medicaid claims for Rhode Island. The relators alleged that Gainwell facilitated a years-long scheme by Eleanor Slater Hospital (ESH) — a Rhode Island state hospital — to submit false and inflated Medicaid bills. The United States declined to intervene. The court had dismissed the first amended complaint and allowed a single narrow theory to proceed on amendment; on the second amended complaint it had earlier found the relators plausibly alleged reckless disregard, while noting that “the facts point to the state of Rhode Island, not Gainwell, as the source of ESH’s fraud.” Gainwell again moved to dismiss.

Legal Analysis

Applying Schutte‘s subjective standard, the two courts reached opposite conclusions — a contrast that maps the post-Schutte terrain:

• The subjective standard is the common ground. Both courts applied Schutte‘s rule that FCA scienter turns on the defendant’s own knowledge and beliefs. The question is no longer whether a hypothetical reasonable person could have read the requirement the defendant’s way, but whether this defendant actually knew, was deliberately ignorant of, or recklessly disregarded the truth.
• Sheldon: ambiguity no longer ends the case at the pleadings. Because Schutte removed the objective-reasonableness shield, whether Allergan subjectively believed its Best Price reporting was correct is a fact question that cannot be resolved on a motion to dismiss. The court denied Allergan’s Rule 54(b) request to file a third motion to dismiss, holding that a twelve-year-old case should proceed to discovery rather than absorb another round of pre-discovery motion practice, and declined to let Allergan re-litigate Rule 9(b) falsity at this late stage.
• White: the subjective standard still demands particularized facts. The relators’ complaint “failed to plausibly allege that Gainwell possessed the requisite scienter under the subjective standard established by the Supreme Court in SuperValu.” It pleaded no non-conclusory facts about Gainwell’s subjective knowledge of the adequacy of the hospital’s billing, and no particularized facts showing a scheme to defraud by Gainwell rather than by the hospital or the State.
• Causation compounds the problem for intermediaries. As the recipient and processor of the hospital’s claims — with no substantive input into them — Gainwell could not have “knowingly caused” the submission of false claims. The scienter and causation inquiries converged: without facts showing Gainwell’s own culpable state of mind, there was no basis to hold the fiscal agent liable for the hospital’s fraud.
• Opposite procedural outcomes. Sheldon proceeds to discovery, its scienter question preserved for a factual record; White was dismissed with prejudice, the relators having neither sought nor warranted further amendment.
• The synthesis — Schutte focuses on facts. Post-Schutte, the decisive FCA question has migrated from “was the defendant’s interpretation reasonable?” — a legal issue courts could resolve on the pleadings — to “what did this defendant actually know or believe?”, a fact-specific inquiry. That migration makes ambiguity-based dismissals far harder for defendants, but it puts a premium on the relator’s ability to plead the specific defendant’s knowledge with particularity.

Holding

In Sheldon, the court denied Allergan’s Rule 54(b) motion and refused to permit a third motion to dismiss, holding that under Schutte the subjective-scienter question could not be resolved on the pleadings and the case should proceed to discovery. In White, the court held that the second amended complaint failed to plausibly allege that Gainwell acted with the subjective scienter Schutte requires — or that it knowingly caused the submission of false claims — granted the motion to dismiss, and entered judgment dismissing the case with prejudice.

John Libby is a mediator and arbitrator focused on healthcare and commercial disputes, including False Claims Act, Stark Law, and Anti-Kickback matters. This summary is offered for general informational purposes and does not constitute legal advice.