On May 16, 2011, the US Supreme Court issued an important decision in Schindler Elevator Corp. v. United States ex rel. Kirk, holding that a federal agency's written responses to Freedom of Information Act (FOIA) requests are "reports" within the meaning of the "public disclosure" bar of the False Claims Act (FCA). The decision provides additional and important support for defendants seeking to dismiss qui tam suits on this frequently litigated ground.
The Schindler Elevator Case
In 2005, Daniel Kirk, a former employee of Schindler Elevator,
filed an FCA action against Schindler alleging that the company had
submitted false claims for payment under federal contracts. (In
particular, the alleged falsity derived from the company's
failure to file certain reports, known as VETS-100 reports,
required under the Vietnam Era Veterans' Readjustment
Assistance Act of 1972, as well as its inclusion of false
information in the reports it did file.) To support his
allegations, Kirk relied on information that his wife received from
the Department of Labor in response to FOIA requests seeking all of
Schindler's VETS-100 reports. The Department responded to those
requests in writing, providing copies of the reports it had on file
and informing Kirk's wife that no reports were found for
certain years.
The company moved to dismiss on multiple grounds, including the
public disclosure bar (as previously codified at 31 U.S.C. §
3730(e)(4)). The district court ruled that the relevant claims were
based on either an administrative "report" or
"investigation" under the statute and were therefore
barred. The Second Circuit reversed, concluding that a federal
agency's response to a FOIA request was neither a
"report" nor an "investigation" under the FCA.
That holding was consistent with the Ninth Circuit's decision
in United States ex rel. Haight v. Catholic Healthcare
West, 445 F.3d 1147 (9th Cir. 2006), but conflicted with the
Third Circuit's decision in United States ex rel. Mistick
PBT v. Housing Authority of Pittsburgh, 186 F.3d 376 (3d Cir.
1999).
The Supreme Court reversed, holding that a federal agency's
written response to a FOIA request constitutes a "report"
as that term is used in the public disclosure bar—and
that "[a]ny records the agency produces along with its written
FOIA response are part of that response." Slip op. 9. (The
Court left open whether agency records that are released under
FOIA, but not attached to a written response, fall within the
public disclosure bar. Id. at 11.) In reaching this
conclusion, the Court explained inter alia that the case
"seems to us a classic example of the 'opportunistic'
litigation that the public disclosure bar is designed to
discourage," because "anyone could have filed the same
FOIA requests and then filed the same suit" or "simply
submit FOIA requests until he discovers a federal contractor who is
out of compliance, and potentially reap a windfall" under the
FCA. Id. at 11. The Court did not reach the broader
question of whether the public disclosure bar precluded Kirk's
suit, leaving for remand whether other statutory requirements of
the bar were met.
Implications
This is the second time in two years that the Supreme Court has
construed the public disclosure bar expansively to foreclose
potential sources of information available to prospective qui
tam relators. In Graham County Soil and Water Conservation
District v. United States ex rel. Wilson, 130 S. Ct. 1396
(2010), the Court held that the bar encompassed reports and
investigations from state or local agencies in addition to those at
the federal level. Together, Graham County and
Schindler Elevator reflect the Court's understanding
of a broad public disclosure bar. In Graham County, the
Court explained that the bar is intended to have "a broad[]
sweep," id. at 1404, and that the statutory
"touchstone" is whether the allegations have, in fact,
been "public[ly] disclose[d]," id. at 1410. In
Schindler Elevator, the Court further explained that the
statute reflected "a wide-reaching public disclosure bar"
and an "intent to avoid underinclusiveness." Slip op.
6.
Shortly after the Court decided Graham County, however,
Congress abrogated that decision by amending the FCA to clarify
that the bar was limited to reports and investigations at the
federal level. See 31 U.S.C. § 3730(e)(4)(A)(i)-(ii).
The dissenting justices in Schindler Elevator likewise
called on Congress to do so again, noting that the Court's
decision "severely limits whistleblowers' ability to
substantiate their allegations" and that the matter was
"worthy of Congress' attention." Unless and until
that occurs, Schindler Elevator provides strong support
for defendants seeking dismissal of qui tam suits under
the public disclosure bar.
Click here to read the Schindler
Elevator decision.
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