A federal agency's response to a request for documents under the Freedom of Information Act ("FOIA") constitutes a "report" triggering the public disclosure bar of the False Claims Act ("FCA"), according to the U.S. Supreme Court's holding on May 16, 2011, in Schindler Elevator Corp. v. United States ex rel. Kirk (No. 10-188). The decision disarms would-be relators and their attorneys of a powerful weapon in investigating and developing claims of fraud against health care providers and other government contractors.
Daniel Kirk, a Vietnam-era Army veteran, had been an employee of Schindler Elevator Corporation ("Schindler") from 1978 until 2003, when he resigned. Since 1999, Schindler had entered into hundreds of contracts with the federal government subject to the reporting requirements of the Vietnam Era Veterans' Readjustment Assistance Act of 1972 ("VEVRAA"). Among other things, the VEVRAA requires contractors, such as Schindler, to certify to the Secretary of Labor how many of its employees are "qualified covered veterans" under the statute. Kirk came to suspect that Schindler was including false information in its VEVRAA reports. Following his resignation, he filed a qui tam suit against Schindler under the FCA.
In support of his allegations, Kirk relied upon information and documents that had been provided to his wife by the Department of Labor in response to several FOIA requests. Based upon this information, Kirk argued that Schindler's certifications of VEVRAA compliance were false, rendering its claims for payment under its numerous government contracts "false claims" under the FCA.
The Supreme Court, in an opinion authored by Justice Thomas, held that the FOIA responses were "reports" triggering the public disclosure bar. The FCA does not specifically define the term "report," so the Court began with the premise that "report" is ordinarily defined to mean "'something that gives information' or a ‘notification,' or ‘an official or formal statement of facts or proceedings.'" That broad meaning, the Court said, "is consistent with the generally broad scope of the FCA's public disclosure bar." And a FOIA response falls within that broad ordinary meaning, the Court held, because it "plainly is ‘something that gives information,' a ‘notification,' and an ‘official or formal statement of facts.'"
The Court rejected Kirk's argument that he had used the FOIA responses only to bolster his own suspicions, noting that "anyone could have filed the same FOIA requests and then filed the same suit. Similarly, 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." Such suits should be barred, the Court said, as they represent "a classic example of the ‘opportunistic' litigation that the public disclosure bar was designed to discourage." The Court likewise rejected as "pure speculation" the suggestion that potential defendants would make periodic FOIA requests for incriminating documents so as to insulate themselves from future FCA liability.
The Schindler decision's scope is not without limits. The majority specifically noted that the Patient Protection and Affordable Care Act had amended the public disclosure bar, and its decision in Schindler did not address the statute, as amended, but rather "as it existed when the suit was filed." Further, the Court cautioned that because it concluded that the FOIA responses constituted "reports" within the bar, it need not address whether they also constituted investigations."
Nonetheless, because of the Schindler decision, would-be relators can no longer use FOIA as a means to gather evidence against health care providers and other government contractors. Only those with independent information may avail themselves of the FCA's qui tam provisions.