In Schindler Elevator Corp. v. United States ex rel. Kirk, the U.S. Supreme Court recently held that False Claims Act (FCA) allegations based on federal agency responses to Freedom of Information Act (FOIA) requests are considered public disclosures under the FCA public disclosure bar. Generally, the FCA's public disclosure bar precludes private parties from bringing whistleblower suits to recover falsely or fraudulently obtained federal payments where those suits are based upon the public disclosure of allegations in a criminal, civil or administrative hearing, in a congressional, administrative or Government Accounting Office report hearing, audit or investigation, or from the news media. In Schindler, the relator alleged that his former employer, Schindler Elevator, had falsely certified compliance with the Vietnam Era Veterans' Readjustment Assistance Act of 1972, which governed certain government contracts held by the company. In support of these allegations, the relator relied on information his wife had received from the U.S. Department of Labor (DOL) in response to three FOIA requests.
Prior to the Supreme Court ruling, the district court concluded that the FCA's public disclosure bar deprived the court of jurisdiction over the relator's allegations because the FOIA responses were considered governmental "report[s]" or "investigation[s]." However, the Second Circuit vacated and remanded, essentially holding that an agency's response to an FOIA request is neither a "report" nor an "investigation." The Supreme Court reversed and remanded the Second Circuit's decision, holding that a federal agency's written response to an FOIA request for records does in fact constitute a "report" within the ordinary meaning of the FCA's public disclosure bar. In doing so, the court noted "anyone 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." The majority found the case to be a "classic example" of such "opportunistic" litigation that the FCA's public disclosure bar was designed to discourage. The dissent disagreed, believing the majority's decision would severely limit whistleblowers' ability to substantiate their allegations before commencing suit, and urged Congress to address the issue.
It is worth noting that this case was based on the pre-Patient Protection and Affordable Care Act (PPACA) version of the public disclosure bar. PPACA weakened this provision by expanding the definition of "original source," narrowing the scope of public disclosures and making the public disclosure bar applicable at the government's discretion, rather than as a jurisdictional impediment. Despite the dilutions, this case likely will remain relevant for post-PPACA FCA litigation because the public disclosure bar, as amended, continues to include the language "report," "hearing" and "audit."