Yesterday, the Supreme Court handed down its decision in State Farm Fire & Casualty Co. v. United States ex rel. Rigsby, a closely watched case about the False Claims Act (FCA). At issue was the proper remedy for a violation of the FCA’s seal provision—a provision that requires private plaintiffs (known as relators) to keep their FCA complaints under seal for a certain period of time.
In a unanimous opinion by Justice Kennedy, the Court held that the FCA does not mandate dismissal of a relator’s suit when the relator discloses the existence of his complaint in violation of the seal. The Court acknowledged that the seal provision “creates a mandatory rule the relator must follow.” Slip op. 6. But it concluded that the FCA was silent “about the remedy for a violation of that rule.” Id. Given that silence, the Court held that “whether dismissal is appropriate should be left to the sound discretion of the district court.” Id. at 10. The Court declined, however, “to explore” the contours of that discretion, other than to say that “the factors articulated” in an earlier Ninth Circuit decision “appear to be appropriate” for a district court to consider. Id. Those factors are: (1) the actual harm that the violation caused the Federal Government, (2) the severity of the violation, and (3) the evidence that the violation was committed in bad faith. See United States ex rel. Lujan v. Hughes Aircraft Co., 67 F.3d 242, 245-47 (9th Cir. 1995).
Although the Court held that the FCA does not mandate dismissal, it did acknowledge “the reputational harm FCA defendants may suffer” because of seal violations. Slip op. 10. And the Court made clear that its decision does not mean that such harm will go unremedied. First, dismissal “remains a possible form of relief,” even if not a mandated one. Id. FCA defendants may still seek dismissal as a remedy, and in appropriate cases, district courts may grant it. Second, district courts may “impose sanctions short of dismissal for violations of court orders.” Id. FCA defendants that fall victim to seal violations should thus remember that they may seek “monetary penalties or attorney discipline” as alternatives to dismissal. Id.
Hogan Lovells filed an amicus brief in the matter for our clients the American Tort Reform Association and the National Association of Mutual Insurance Companies supporting the position taken by State Farm, the petitioner.