U.S. Supreme Court
May 18, 2011
High Court Limits Whistle-blower Suits
Whistle-blowers can't bring lawsuits against government contractors for fraudulent billing that are based on records obtained through Freedom of Information Act requests, the U.S. Supreme Court held Monday.
Daily Journal Staff Writer
WASHINGTON - Whistle-blowers can't bring lawsuits against government contractors for fraudulent billing when those suits are based on records obtained through Freedom of Information Act requests, a divided U.S. Supreme Court held Monday.
Writing for the five-justice majority, Justice Clarence Thomas wrote that records from FOIA requests trigger a bar preventing qui tam suits - private actions brought in the name of the federal government under the False Claims Act - that rely on publicly disclosed information.
In 1986, Congress added the public disclosure bar to the false claims law, originally enacted in 1863, to prevent parasitic lawsuits based on readily available documents like indictments.
The ruling split the court 5-3 along ideological lines, with the four conservative justices and Justice Anthony M. Kennedy in the majority and the left-leaning justices dissenting. Justice Elena Kagan withdrew from the case, presumably because of her work on it while serving as solicitor general. Schindler Elevator Corp. v. U.S. ex rel. Kirk, 10-188.
Thomas, in an opinion focusing on the text of the law, said FOIA responses fall within the definition of "report." He dismissed concerns about that interpretation deviating from the law's history or encouraging defendants to insulate themselves from liability by making FOIA requests.
Justice Ruth Bader Ginsburg's dissent argued the 2nd U.S. Circuit Court of Appeals "considered the text as well as the context" when it held that the whistle-blower's suit could move forward because the FOIA response was merely the assembly and duplication of records, rather than the product of the government's own investigation.
Ginsburg wrote that the majority's opinion "weakens the force of the [False Claims Act] as a weapon against fraud on the part of government contractors" and "severely limits whistle-blowers' ability to substantiate their allegations before commencing suit." She suggested Congress should consider amending the public disclosure bar to allow FOIA responses.
"I don't think the decision will necessarily change the playing field," said Reuben A. Guttman, a partner at Grant & Eisenhofer PA who represents whistle-blowers. "It clearly is a signal of the court's current posture leaning to protect corporate America, even when those corporations defraud taxpayers or the health care system."
Guttman said the ruling makes it harder for plaintiffs to develop their complaints to meet civil pleading standards, which the court has raised in two recent cases. Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007); Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009).
The ruling stems from a suit brought by Daniel Kirk, an Army veteran who served in Vietnam, against his former employer, Schindler Elevator Corp. Kirk alleged the company falsely certified its compliance with a law requiring contractors to report how many of their employees are veterans.
Kirk used information his wife obtained through FOIA requests to back up his allegations. He claimed Schindler's contracts covered by the veteran law exceeded $100 million.
The majority declined to rule whether Kirk's suit was based on those government reports, a question the 2nd Circuit will consider on remand. <!-- High Court Limits Whistle-blower Suits -->
Robert Iafolla
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