Today, the Supreme Court held that a government agency’s response to requests for information under FOIA is a “report” within the meaning of the False Claims Act’s “public disclosure” bar. See Schindler Elevator Corp. v. United States ex rel. Kirk, No. 10-188 (May 16, 2011). Under the FCA’s public disclosure provision, qui tam suits that are based on “allegations or transactions . . . in a congressional, administrative, or Government [Accountability] Office report” are foreclosed unless the qui tam relator is an “original source” of the underlying information. In Schindler Elevator, the Court reversed the Second Circuit’s decision applying a narrower definition of “report” under this bar and remanded the case to see if the relator nevertheless qualifies as an “original source” of the information. Justice Thomas’s majority opinion reinforced the Court’s unanimous decision last term in Graham County II that adopted a broad interpretation of the enumerated sources of public disclosure under the statute. See Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson, 130 S. Ct. 1936 (2010). Justice Ginsburg wrote a dissenting opinion, joined by Justices Breyer and Sotomayor. (Justice Kagan did not participate). The majority specifically noted, but left undecided, several other “public disclosure” bar disputes.
Schindler Elevator entered into hundreds of contracts with the United States that were subject to certain provisions of the Vietnam Era Veterans’ Readjustment Assistance Act of 1972. In particular, VEVRAA required contractors to report certain information to the Secretary of Labor, including the number of employees who were “qualified veterans.” VEVRAA regulations required Schindler Elevator to agree in its contracts that it would annually submit so-called VETS-100 reports.
The relator, Kirk, filed a qui tam suit alleging that Schindler Elevator filed false VETS-100 reports in some years and failed to file reports in other years, all while falsely certifying compliance with VEVRAA. Prior to filing his action, however, Kirk obtained copies of Schindler’s VETS-100 reports through FOIA requests to DOL and described that information in his complaint. Schindler Elevator moved to dismiss the qui tam suit on the ground that Kirk’s claims were based upon public disclosures in DOL’s response to Kirk’s FOIA requests. DOL’s FOIA response stated that the agency found no VETS-100 reports from Schindler Elevator for certain years, and it provided a total of 99 reports that Schindler Elevator filed in other years. Holding that the FOIA response was a “report” that publicly disclosed the allegations within the meaning of the public disclosure bar in Section 3730(e)(4)(A), the district court granted Schindler Elevator’s motion and dismissed the action. On appeal, the Second Circuit vacated and remanded, finding that the FOIA response was neither a “report” nor an “investigation” within the meaning of Section 3730(e)(4)(A). Applying a narrow definition of those terms, the Second Circuit agreed with the Ninth Circuit’s interpretation, but disagreed with the Third Circuit. See United States ex rel. Haight v. Catholic Healthcare West, 445 F.3d 1147 (9th Cir. 2006); United States ex rel. Mistick PBT v. Hous. Auth. of Pittsburgh, 186 F.3d 376 (3d Cir. 1999).
The Majority’s Broad Interpretation of the Public Disclosure Bar
Because the FCA does not define “report,” the Supreme Court looked to other sources to find the ordinary meaning of the term and found that, according to its dictionary meaning, a “report” is “something that gives information” or a “notification.” Likewise, Black’s Law Dictionary defines “report” as “[a]n official or formal statement of facts or proceedings.” The majority concluded that giving “report” its ordinary meaning is consistent with the Court’s broad interpretation of the other enumerated sources of “public disclosure” in Graham County II, particularly given the “broa[d] sweep” of the “news media” category of public disclosure that the Court identified in that decision. The majority also re-emphasized that this plain meaning interpretation was consistent with the “sole touchstone” of the bar―“public disclosure.” The majority rejected the Second Circuit’s narrower definition as being in conflict with Graham County II’s reasoning that “all sources listed” in the public disclosure bar provided interpretive guidance on the scope of this provision.
The Majority Makes Clear That Opportunistic Qui Tam Litigation is Disfavored
While perhaps not central to the holding, Justice Thomas made sure to emphasize that Kirk’s suit appeared to be a “classic example of the ‘opportunistic’ litigation that the public disclosure bar is designed to discourage.” Characterizing qui tam suits based on the information disclosed in FOIA responses as plainly opportunistic, the Court recognized the potential for overbreadth in qui tam enforcement of FCA liability that could be based on a multitude of potential false certifications:
[A]nyone could identify a few regulatory filing and certification requirements, submit FOIA requests until he discovers a federal contractor who is out of compliance, and potentially reap a windfall in a qui tam action under the FCA. See Brief for Chamber of Commerce of the United States of America et al. as Amici Curiae 20 (“Government contractors . . . are required to submit certifications related to everything from how they dispose of hazardous materials to their affirmative action plans” (citing 40 U.S.C. §3142 and 29 U.S.C. §793)).
Indeed, the potential for broad liability based on false certifications is a continuing problem under the FCA. See John T. Boese, Civil False Claims and Qui Tam Actions §2.03[G] (Wolters Kluwer Law & Business) (4th ed. 2011). See also FraudMail Alert Nos.10-11-03 and 10-09-29.
In her dissent, Justice Ginsburg challenged the record evidence for the majority’s description of Kirk as an “opportunistic” qui tam relator, noting instead that Kirk’s FOIA responses merely confirmed what he “had cause to believe” based on his employment at Schindler Elevator. Justice Ginsburg also argued that the Second Circuit had properly concluded that FOIA responses should not automatically qualify as a “public disclosure.” According to Justice Ginsburg, the majority opinion had “weaken[ed]” FCA enforcement by “severely limit[ing] whistleblowers’ ability to substantiate their allegations before commencing suit.” Justice Ginsburg took the unusual step of suggesting that these issues are worthy of Congress’s attention.
As a practical matter, the actual impact of the Court’s ruling may be less dramatic. There is no indication that the decision will lead to the dismissal of qui tam suits that are based on nothing more than information obtained via FOIA requests. In fact, given the uncertainty of the law in this area, many qui tam lawyers already had taken steps to ensure that they did not base allegations on FOIA material. For those relators who could not state FCA claims without the assistance of government records obtained via FOIA, however, this decision makes clear that they are more closely aligned than ever with the type of “opportunistic” plaintiffs that the Court disfavors.
Significant Public Disclosure Issues Left Undecided
The Court pointed out that its decision concerned the proper interpretation of the public disclosure bar prior to its amendment under the Patient Protection and Affordable Care Act (“PPACA”) in 2010. The fact that the word “report” remains in the amended language―though it is limited to “federal reports”―means that today’s decision will likely extend beyond pending cases to cover post-PPACA conduct. The majority specifically noted, however, that a number of other issues raised under the public disclosure provision remain open and undecided, including circuit splits on the question of how “based upon” is defined and whether a relator must “voluntarily disclose” the information to the government prior to the public disclosure. See, e.g., Glaser v. Wound Care Consultants, Inc., 570 F.3d 907, 915 (7th Cir. 2009) (“based upon”); United States ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13, 22 (1st Cir. 2009) (“voluntarily provided”). Because PPACA’s amendments do not resolve these issues, they await future determination by the Court.