Qui Tam

The Impact of Supreme Court Decision on future False Claims Act cases

By LaBovick Law

Did use of information obtained by the Freedom of Information Act (FOIA) just become a little less free? The recent Supreme Court Schindler Elevator Corporation vs. US ex rel. Kirk decision in a False Claims Act (FCA) case sheds some light on this topic. The Supreme Court ruled five to three that information obtained via the FOIA cannot be used for pursuing a claim under the FCA.

To understand the meaning of the Supreme Court's ruling and its potential impact on the role of whistleblowers, it may help to better understand the three parts of this case: The Freedom of Information Act, the False Claims Act, and the specific circumstances of the Schindler vs. Kirk case.

Freedom of Information Act
The Freedom of Information Act went into effect in 1967. It allows for disclosure, in full or in part, of information that has previously been unreleased by the federal government. Under the law, most documents produced by the federal government are available for scrutiny. Exclusions include anything that might threaten national security, hinder law enforcement efforts, or reveal commercial or financial trade secrets, amongst other things.

False Claims Act
Enacted during the Civil War, when many people were fleecing the Union Army, this law allows an individual person to act on behalf of the federal government to file actions against a company trying to falsely bill or exploit the government. This provision is called qui tam and in the case of a successful suit by the government, the person who files the claim receives a portion of what the government receives. In essence, the law rewards whistleblowers with a portion of whatever money the government recoups.

There is a caveat in this law, though: Suits cannot be based on public information about a company, such as information from the news media or a hearing. This 'public disclosure bar' is meant to prevent opportunistic lawsuits against companies.

Schindler Elevator Corporation vs. US ex rel. Kirk
To make a complex legal story short, Daniel Kirk filed a qui tam suit against his former employer, the Schindler Elevator Corporation. Mr. Kirk, a Vietnam vet, felt that the company was in violation of a 1972 law that required companies not to lock veterans out of jobs and promotions.

Mr. Kirk's claims against his former employer were based in his own experience, but also through reports his wife obtained via the Freedom of Information Act. In the Supreme Court's recent 5-3 decision, they dismissed Kirk's case citing that this latter source of information violated the public disclosure bar of the FCA.

Impact
This case will have quite an impact on future qui tam/ whistleblower cases. The dissenting judges seem to concur. In Justice Ruth Bader Ginsberg's dissent, she stated the following: 

"The decision "severely limits whistleblowers' ability to substantiate their allegations before commencing suit." 

Whistleblowers bringing future False Claims Act cases must use their own experience. Their claim can't rely upon information obtained via the FOIA. The majority opinion of the Supreme Court argued that this will prevent parasitical lawsuits; the dissenting members of the Supreme Court fear that the outcome of this case.

We encourage whistleblowers not to be disheartened by this recent decion. If you have firsthand knowledge about fraud against the government, come forward and report the fraud.  Due to whistleblowers stepping forward the government has collected billions in revenue from penalties and fines from the wrongdoers. Also, whistleblower rewards are in place for whistleblowers bringing information that is helpful in uncovering the fraud.

Click on the following link to read more on  Supreme Court Makes it Harder to Hold Contractors Accountable for Fraud - HuffingtonPost.com
 
Understanding How The False Claims Act Works - Whistleblower Law Blog

Full post as published by Whistleblower Law Blog on June 17, 2011 (boomark / email).