The Supreme Court held that a relator’s breach of the seal in a qui tam case does not require mandatory dismissal of the complaint, but the Court declined to articulate what factors are appropriate to consider in determining whether dismissal is appropriate. The Court wrote only that appropriateness of dismissal in a given case should be left to the sound discretion of the district court. The district court in this case had not abused its discretion in declining to dismiss the case, and the appropriate test could be taken up in future cases.

The Court’s opinion in State Farm Fire & Casualty Co. v. United States ex rel. Rigsby resolves one facet of a three-way circuit split as to the appropriate impact of a breach of the seal on a relator’s ability to pursue the action. The opinion effectively amounts to a rejection of the Sixth Circuit’s view that a breach of the seal requires mandatory dismissal, but does not validate or reject either of the two tests identified by other Circuits to determine whether dismissal would be appropriate in the event of a breach. For further discussion of these tests and the circuit split, see our earlier post, here.

Justice Kennedy, writing for the unanimous Court, characterized the requirement that a qui tam complaint be filed under seal as a procedure that a relator must follow in filing, rather than one of the express limits, such as the First-to-File Bar and the Public Disclosure Bar, that the FCA imposes on the relator’s ability to pursue an action. Justice Kennedy noted that the FCA says nothing about a remedy in the event this procedural rule is breached, and that since the statute elsewhere mandates dismissal as a remedy, a mandatory dismissal should not be inferred where Congress did not provide for it. Justice Kennedy further wrote that the text of “3730(b)(2) does not tie the seal requirement to the right to bring the qui tam suit in conditional terms.”

The Court also reasoned that since the seal provision was added to the FCA to encourage more private enforcement suits to help address the problem of the government’s lack of resources to police violations, requiring mandatory dismissal—and thereby depriving the government of private resources in enforcing the FCA—would undermine the very interests that the provision was designed to protect.

In concluding, Justice Kennedy wrote that dismissal remains a possible remedy for a breach of the seal and also noted that the district courts have inherent powers to impose sanctions short of dismissal for a violation, but the appropriateness of a lesser sanction was not preserved for the Court’s determination in the Rigsby case.

To see the full text of the Supreme Court’s opinion, click here.