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Divided Appeals Court Upholds Secrecy of Whistleblower Suits

By Mike Scarcella

The sealing provision of the False Claims Act that keeps whistleblower complaints secret for months--and often years--does not violate the public's right to access court proceedings, a divided U.S. Court of Appeals for the 4th Circuit said today.

The appeals court, in a 2-1 vote, upheld a trial judge's ruling dismissing a suit that three advocacy groups, including the American Civil Liberties Union, filed against the U.S. Justice Department. Click here for the ruling.

The suit in Alexandria federal district court claimed the government is unlawfully blocking public access to judicial proceedings and also prohibiting whistleblowers from speaking out about misconduct. Qui tam suits are filed under seal for at least 60 days to give the government time to evaluate the allegations and decide whether to intervene; most complaints are under seal for months.

The plaintiffs, including the Government Accountability Project and OMB Watch, also said the automatic sealing provision of the FCA violated the separation of powers doctrine by barring judges from deciding on a case-by-case basis whether a particular complaint should be filed under seal. The ACLU said in January 2009 that the secrecy provisions are hiding Iraq war costs and public safety information from the public.

Two judges on the panel?Barbara Milano Keenan and James Dever III, a North Carolina federal district judge who was sitting by designation on the appeals court?ruled against the plaintiffs.

Dever, who wrote the opinion for the majority, said the ?United States has a compelling interest in protecting the integrity of ongoing fraud investigations.? He noted that the seal provision calls for judicial review at the end of the 60-day period.

Also, the court said the law only blocks whistleblowers from disclosing the existence of a qui tam complaint. But nothing in the law stops a whistleblower from talking about the fraud that?s at the center of the suit, the court said.

Dever, of Raleigh federal district court, and Keenan, who joined the court in March, said the plaintiffs?none of whom are whistleblowers?failed to identify a whistleblower who wants to speak out about waste and abuse but cannot due to the mandatory seal. The judges said the plaintiffs lack standing to argue that the law unfairly gags whistleblowers.

?We agree that ?sunlight? and ?openness? are important values that further the functioning of this republic and note that in every FCA case, the qui tam complaint will be unsealed,? Dever said. ?Thus, in every FCA case, the people will be able to see how the Executive and the Judiciary have fulfilled their constitutional and statutory roles.?

Judge Roger Gregory wrote in dissent, saying that ?transparency remains central to combating waste and fraud? and that the ?government fails to justify its First Amendment infringement with compelling interests and narrow tailoring.?

The mandatory sealing of whistleblower complaints and blocking a litigant to speak about a complaint deny the public the ability to monitor False Claims Act enforcement, Gregory said. The seal provision, the judge said, improperly applies to all cases?whether or not secrecy is needed and irrespective or whether an alleged fraudster has already been tipped off to a government investigation.

?More broadly, the freedom to speak about FCA complaints bolsters the public role of relators and pressures the government to rigorously enforce the FCA?or to expeditiously decline to intervene,? Gregory said. ?It also reduces the risk that the government will under-enforce the FCA for political reasons, such as against campaign donors.?

Opacity, the judge said, ?inflicts causalities in the darkened corners of our government, deteriorating the quality of our democracy subtly but surely.? He said the ?lack of transparency has especially stark fiscal implications. Instead of striving to categorically conceal this area of civil dockets, I would more rigorously apply the First Amendment and selectively seal records.?

Full post as published by The BLT: The Blog of Legal Times on March 28, 2011 (boomark / email).