Supreme Court: FCA Actions Cannot Be Based Upon Information Obtained Via FOIA Requests
Since the False Claims Act (FCA) is regularly used in cases involving health care fraud, the Health Care Lawyer Blog covers significant FCA activity.
The Supreme Court held this morning that a federal agency’s written response to a request for records under the Freedom of Information Act (FOIA) constitutes a “report” within the meaning of the FCA's public disclosure bar. The 5-3 decision (Kagan, J. recused herself) resolved a longtime split amongst the circuits and will have significant impact on FCA plaintiffs and their counsel going forward.
Background
Generally, the federal FCA prohibits a private plaintiff (often referred to as a relator or whistleblower) from filing an action that is “based upon the public disclosure of allegations or transaction in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit or investigation, or from the news media.” See 31 U.S.C. 3730(e)(4)(A), amended by the 2010 Patient Protection and Affordable Care Act, this amendment will be discussed in detail below. Frequently referred to as the “public disclosure bar”, this provision was included in the legislation to prevent “parasitic” lawsuits and ensure that cases were only filed by insiders with personal knowledge of fraud against the government.
In Schindler Elevator Corp. v. United States ex rel. Kirk, a private plaintiff filed an FCA lawsuit against defendant Schindler Elevator Corp. Kirk alleged that defendant, a contractor with the Department of Defense, failed to comply with certain regulations and thus all claims submitted to the government for payment were fraudulent. In support of his allegations that the defendant falsely complied with the regulations, Kirk relied on information that his wife had obtained from the Department of Labor in response to three FOIA requests.
Schindler moved to dismiss Kirk’s suit, claiming in pertinent part that the information in the FOIA reports constituted a “public disclosure” and Kirk’s suit was thus barred. The District Court granted the motion, and Kirk appealed to the Second Circuit Court of Appeals.
On appeal, the Second Circuit vacated and remanded, holding that an agency’s response to a FOIA request is neigh a report nor an investigation within the meaning of the public disclosure bar. Schindler appealed.
After the jump - analysis of the Court's opinion and what the case means to FCA cases
Issue Before the Supreme Court
On appeal, Schindler argued that the “report” language contained in the FCA’s public disclosure bar carries its ordinary meaning, and thus the Department of Labor’s written responses were therefore a report. The Supreme Court agreed. Justice Thomas delivered the opinion of the Court, in which Roberts, Scalia, Kennedy and Alito joined. (Justice Ginsburg filed a dissenting opinion, in which Breyer and Sotomayor joined.)
In the majority opinion, the Court reasoned that since the FCA did not define "report", the Court was required to look to the everyday meaning of the word. Dictionaries, for example, define a “report” as something that gives information. Thus, a response to a FOIA request – which gives information – is a report. Additionally, there is no legislative history in the FCA which favored a narrower reading.
What Schindler Elevator Means Going Forward
The application of Schindler Elevator is somewhat limited due to the 2010 amendments to the FCA under the Patient Protection and Affordable Care Act. While Schindler Elevator was decided based on the previous version of the statute, the current version of the public disclosure bar provides that:
(4)(A) The court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed--
(i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party;
(ii) in a congressional, Government2 Accountability Office, or other Federal report, hearing, audit, or investigation; or
(iii) from the news media,
unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
The application of the current public disclosure bar can be illustrated as follows: Suppose Mr. X is a former employee of Acme Enterprises, which is a federal government contractor and supplies widgets to the Department of Defense. Mr. X files a False Claims Act suit against Acme, alleging that Acme was failing to comply to certain mandatory widget safety regulations, and thus the government was paying for faulty widgets, which constituted a false claims. In support of his allegations that Acme was not complying with the regulations, Mr. X included information obtained via a FOIA request to the Department of Defense.
In light of Schindler Elevator, under the previous FCA Acme could have filed a motion to dismiss and Mr. X would have been statutorily barred from moving forward with his lawsuit. Under the current public disclosure bar, however, the government may object to the dismissal, thus sparing Mr. X’s lawsuit. The current public disclosure bar in effect gives the government veto power over a dismissal. However, relators and their counsel should keep in mind that just because the government CAN object does not mean they WILL object. Therefore, FCA plaintiffs and attorneys should proceed with extreme caution when filing a suit where the allegations or transactions were included in a public disclosure.
