The False Claims Act’s “public disclosure bar” calls for dismissal of complaints by qui tam plaintiffs (or “relators”) whose allegations have already been publicly disclosed. The primary aim of the bar is preventing parasitic suits based on public information. Courts generally agree that disclosure to the government alone does not count as disclosure to the “public” for purposes of the bar.
The Seventh Circuit, however, has been a standout since a 1999 decision and is the lone circuit taking the opposite view in a circuit split over the issue. But a recent decision suggests it is open to siding with its sister circuits on the issue and thus ending the circuit split.
The initial False Claims Act — enacted in 1863, during the Civil War, to combat fraud and abuse in government contracting — did not include any bars on relators’ sources of information. It also did not require relators to provide new information to bring suit. In the 1930s and ’40s, relators began filing “parasitic” suits that merely copied information uncovered in government investigations, primarily pulling allegations from criminal indictments.
To counteract these copycat suits, Congress amended the act in 1943. The primary change was the addition of an absolute bar against jurisdiction over suits based upon information already known by the government. This “government-knowledge bar” served its purpose, but it also ended up preventing legitimate private suits.
For a number of reasons, major changes were made to the act in 1986. Relevant here, the changes included replacing the overly restrictive government-knowledge bar with a bar to jurisdiction over suits based upon publicly disclosed information — a “public disclosure bar.” This new bar sought to balance the tension between preventing parasitic suits and still encouraging private individuals to come forward with information about fraud and abuse involving government funds.
Congress again amended the public disclosure bar in 2010. The changes included the addition of a provision giving the federal government the power to veto a public disclosure bar dismissal by opposing it.
Recent Seventh Circuit Decision
Under the current public disclosure bar, seven circuits subscribe to the view that Congress’ use of “public” in the statutory language means an act of disclosure to the general public outside of the government.
The only circuit taking a different view is the Seventh. It agrees with the obvious conclusion that disclosure to the general public at large satisfies the requirement. But it also holds that disclosure to a competent government official qualifies as public disclosure, a view it has expressed in several prior decisions. In particular, it considers internal government administrative reports and investigations to be sufficient to demonstrate disclosure to the public.
On Feb. 29, 2016, the Seventh Circuit affirmed dismissal of a False Claims Act case because the plaintiff’s allegations had already been publicly disclosed through an audit report made available online to the general public. This result itself is not particularly interesting or unique, as it relies on the first, obvious category of disclosure to the general public.
But before the court considered this obvious disclosure and reached its conclusion, it reviewed its prior holdings that disclosure to the government alone satisfies the “public” requirement. It then assessed whether a different disclosure in the case — a federal agency investigation and resulting letter to the subject of the investigation — was sufficient. It found that, under its precedent, a letter from the federal agency describing its “in-depth review” was “placed in the public domain” when it was sent to the subject.
Interestingly, the court then acknowledged and fully outlined the other circuits’ views that disclosure to the government alone does not satisfy the “public” requirement. It noted, “There is significant force in the position of the other circuits.” It next expressed that, if the government letter disclosure were the only one before the court, respect for the other circuits would have warranted “in-depth reconsideration of our precedent.” Ultimately, it declined to address the issue further and relied on the obvious general public disclosure alone to satisfy the “public” requirement.
Although the Seventh Circuit did not end up reversing its prior holdings, its decision serves as an open invitation to challenge the standard in district court cases within the circuit and on appeal. And the full voice the court gave to its sister circuits’ view, its acknowledgement of the “significant force” of that view, and its suggestion that “in-depth reconsideration” would be warranted, all indicate that the court may be open to joining the other circuits and ending the split over this issue.
This development will embolden False Claims Act plaintiffs in the Seventh Circuit, who will feel confident pressing claims in spite of ample government review simply because the government’s efforts have not been disclosed to the general public.
Ultimately, when the Seventh Circuit confronts this issue again, the court should strongly consider upholding its precedent. Interpreting government disclosures as “public” is consistent with the public disclosure bar’s primary purpose of discouraging opportunistic suits by plaintiffs leeching off already known information. And, unlike the repealed government-knowledge bar that stymied even legitimate whistleblower cases, the original source exception to the current public disclosure bar protects and encourages those with valuable, new information to come forward even if some of their allegations have already been disclosed to the government or the general public. Moreover, under the post-2010 public disclosure bar, if the government wants a case to continue, it is now empowered to veto a public disclosure bar dismissal by simply opposing it.
If the Seventh Circuit does follow its sister circuits, the issue will be settled for the judicial branch, absent an appeal to the U.S. Supreme Court or another circuit taking a stand. In that case, it will be up to Congress to decide if the current application of the bar still serves the purposes of the act. If not, it may be time to amend the act once again.
Petition for Rehearing En Banc
As it turns out, the Seventh Circuit already has an opportunity to reconsider its prior holdings. On March 14, 2016, in the case discussed above, the relator petitioned the Seventh Circuit for a rehearing en banc of its decision. The petition provides three separate reasons for the rehearing. The first two target the court’s holdings regarding the general public disclosure. Applicable here, the third applies to the government letter disclosure, arguing that the court’s holding that it was sufficient under its precedent conflicted with decisions of seven other circuits.
It is unlikely the Seventh Circuit will view this third reason alone as sufficient for a rehearing. In its decision, the court took the time to explore the view of the other circuits and acknowledged the resulting need for a reconsideration of its prior holdings. But it explicitly stated that it did not need to do so at that time because it did not rely on the government letter disclosure — and instead relied solely on the general public disclosure — to satisfy the “public” requirement of the bar.
The case is Cause of Action v. Chicago Transit Authority, No. 15-1143, 2016 WL 767345 (7th Cir. Feb. 29, 2016).