Expanding potential liability under the False Claims Act (“FCA”), the United States Court of Appeals for the Fourth Circuit recently held that information in the government’s possession that could be available to the public through an Open Records request is not the same as information that has been disclosed to the public. United States ex rel. Wilson v. Graham Cnty. Soil & Water Conservation Dist., No. 13-2345, 2015 BL 26339 (4th Cir. Feb. 3, 2015).

Under the FCA, publicly disclosed fraud allegations generally bar a qui tam action. In this case, the defendant argued that because audit and investigative reports were disclosed to federal, state and local agencies that had oversight over the defendant, the allegations had been publicly disclosed and therefore barred. The defendant relied on a Seventh Circuit holding that disclosure to a “competent public official” constituted public disclosure. The Fourth Circuit disagreed on the basis that Congress expressly replaced the FCA’s “Government knowledge” bar with the public knowledge one in 1986, and ultimately held that “public disclosure” requires an affirmative act that places the information in the public domain, and therefore necessitates disclosure outside the government.

The defendant then argued that that the audit and investigative reports were disclosed because they were subject to public information laws. The Court rejected the argument that records available via the submission of a public records request are publicly disclosed on the ground that such records cannot be considered in the public domain if they are neither distributed to, nor intended for a public audience. Accordingly, Judge Motz stated: “To equate eligibility for disclosure with disclosure itself does more than merely place the cart before the horse; it places the cart before a horse that may never follow.”

This decision is consistent with decisions in the First, Ninth, Tenth, Eleventh and D.C. Circuits.The lesson to be learned from this decision is that government contractors will not be shielded from qui tam litigation simply because an internal or government investigation is underway or has been performed. Rather, contractors must develop and implement a proactive plan to prepare for and mitigate whistleblower litigation.