Haynes and Boone, LLP
  May 23, 2011 - United States of America

Supreme Court Holds FOIA Responses Trigger FCA Public Disclosure Bar
  by Sarah Teachout, Jeremy D. Kernodle, Ben Johnson

The Supreme Court recently held that a federal agency’s response to a Freedom of Information Act (FOIA) request could bar a later False Claims Act case based on the information disclosed. In Schindler Elevator Corp. v. United States ex rel. Kirk, 563 U.S. __ (2011),1 the Court held that a response to a FOIA request is a “public disclosure” in an “administrative report” under the False Claims Act. This means that the only party that can file an FCA suit based upon that information is the government or an “original source” – a person with independent knowledge of the information disclosed. This marks the fifth time since 2007 that the Court has ruled against private whistleblowers in False Claims Act cases.

Background

Daniel Kirk, a Vietnam Veteran, brought an FCA claim against his former employer, Schindler Elevator Corp., for filing false reports pursuant to the Vietnam Era Veterans’ Readjustment Assistance Act. Before the suit was brought, Kirk’s wife filed FOIA requests with the Department of Labor seeking the reports, and Kirk later used those reports to support his allegations. Schindler Elevator moved to dismiss the lawsuit, arguing that the government’s release of the reports triggered the FCA’s public disclosure bar. That bar forecloses suits “based upon the public disclosure of allegations or transactions. . .in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation.” 31 U.S.C. § 3730(e)(4)(A). The trial court dismissed the case, but the Second Circuit reversed, holding that FOIA responses are not reports for purposes of the FCA.

The Supreme Court granted certiorari to decide whether a federal agency’s written response to a FOIA request is a “report” for purposes of the public disclosure bar.

Supreme Court Decision

A divided Court said “Yes,” reversing the Second Circuit. In doing so, the Supreme Court again broadened the public disclosure bar’s application and cut off a favored route for plaintiffs to track down information to support their claims. Much of the opinion is devoted to a textual analysis of the statute, and the Court found that the Second Circuit focused too narrowly on a small section of a larger statute to define “report.” Rather than focus narrowly on the immediately surrounding words, the Court considered “all of the sources of public disclosures listed in” the provision. The Court held that “report” within the context of the public disclosure bar carried no special definition apart from its ordinary meaning: something that gives information.

The Court grounded its interpretation in the history of the FCA. The public disclosure bar is a Congressional attempt to protect both the government’s interest in guarding against fraudulent claims and in avoiding “parasitic” lawsuits. The Court viewed Kirk’s suit as a classic example of the type of “opportunistic” litigation the public disclosure bar is meant to discourage. While the majority noted that Kirk claimed to have become suspicious as a result of his own experiences as a Vietnam veteran working at Schindler, the Court noted that anyone who filed the FOI
 requests could also have filed the suit.

The Court expressly noted a concern that future whistleblowers may seek to bring qui tam claims by merely identifying regulatory filings and certification requirements and filing FOIA requests until they find a company out of compliance. These whistleblowers could then reap a windfall by just mining information already available to the public and the government.

Implications of the Decision

The Schindler Elevator decision reaffirms the Court’s expansive view of the public disclosure bar and provides additional support for defendants to seek dismissal of qui tam suits on this ground. The Court, however, left open several important questions concerning the public disclosure bar, including the scope of the “original source” exception to the bar. While this case represents the fifth time in the last five years that the Supreme Court has ruled against whistleblowers in FCA cases, this decision is unlikely to slow the rising tide of FCA suits. With the qui tam provisions that allow private whistleblowers to bring cases on behalf of the government and the severe penalty and treble damage provisions in the Act, the steady increase of FCA litigation is expected to continue.

For more information, please visit the False Claims Act litigation page of the Haynes and Boone, LLP Web site, or contact one of the attorneys listed below.

Ronald W. Breaux
214.651.5688
[email protected]

 

Sarah Teachout
214.651.5038
[email protected]

 

Jeremy Kernodle
214.651.5159
[email protected]

 

Stacy L. Brainin
214.651.5584
[email protected]

Bill Morrison
214.651.5018
[email protected]

Ben Johnson
214.651.5979
[email protected]




Footnotes:

1 The opinion is available here.



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