The United States District Court for the Southern District of New York recently issued a decision declaring that False Claims Act (FCA) claims dependent upon documents released pursuant to a FOIA request are statutorily barred under the FCA. In so doing, the court poised the Second Circuit to be aligned with the majority of Circuits holding that a document made available via FOIA has been "publicly disclosed" for purposes of the FCA and, therefore, absent evidence that the relator is the original source, the subject matter jurisdiction for the FCA claim will be denied.
The FCA is designed to encourage private citizens to assist the United States government in identifying and prosecuting those who make false claims for money or property to the government. Given the complexity of the regulations underlying contracts with the government, government contractors are particularly vulnerable to FCA prosecution. The FCA encourages private citizens to bring to light any fraud of which they are aware by providing such citizens (referred to as "relators") a portion of any recovery awarded the government. Recovery for FCA violations is often sizeable and can include penalties for each claim filed and up to treble damages.
In an attempt to balance the strong incentives and broad authority granted to private citizens under the FCA, the Act denies a court jurisdiction over any claims brought by a relator that arise from information that has been "publicly disclosed" unless the relator is the original source of the information. Public disclosure can occur via any one of a number of sources enumerated in the statute, including administrative hearings, reports, audits and investigations. Whether or not information obtained through a FOIA request has been "publicly disclosed" through an "enumerated source" (i.e., an administrative agency report or investigation) has been a point of contention among the Circuits.
In Kirk, the relator based his allegations against the Government contractor upon information received from the Department of Labor (DOL) in response to a FOIA request he had submitted. Thus, the trial court had to determine (1) if "a response to a FOIA request qualifies as an administrative investigation or report within the meaning of [the FCA]" and (2) "whether information thereby obtained has been publicly disclosed for purposes of the [FCA's] statutory bar."
The court determined that the DOL was "unquestionably an 'administrative body'" as contemplated in the FCA. Finding that each of the relator's FOIA requests prompted the DOL to conduct an independent inquiry or "investigation" and generate a "report" summarizing its findings, the trial court held that the DOL's FOIA responses constituted administrative investigations and reports as envisioned and enumerated under the FCA.
Once the court established that the DOL's FOIA responses were some of the enumerated sources accounted for in the FCA, the trial court quickly found that the FOIA responses to Kirk's inquiries constituted a "public disclosure" sufficient to trigger the FCA's jurisdictional bar. Citing Second Circuit precedent that holds "potential [not actual] accessibility by those not a party to the fraud is the touchstone of public disclosure," the trial court found that while not "widely disseminated," the information generated in response to Kirk's FOIA requests and, upon which his FCA allegations relied, was in the public domain.
In so holding, the trial court rejected the Ninth Circuit's decision that FOIA responses can be considered publicly disclosed only if they are generated by one of the entities specifically named in the FCA (e.g., a court or other entity responsible for a criminal, civil or administrative hearing, Congress, GAO or the news media). United States ex rel. Haight v. Catholic Healthcare W., 445 F.3d 1147, 1153 (9th Cir. 2006). Instead, the trial court aligned itself with FCA jurisprudence in the Third, Sixth and Tenth Circuits. Like the trial court in Kirk, the Third Circuit has held that information obtained through a FOIA request constitutes an administrative investigation and report and, as such, serves as a public disclosure precluding a relator from recovering under the FCA unless the relator is the original source of the information. United States ex rel. Mistick PBT v. Hous. Auth. Of the City of Pittsburgh, 186 F. 3d 376, 382-84 (3d Cir. 1999). Indeed, the Supreme Court, following similar logic regarding the public nature of information obtained in response to a FOIA request, has held that information obtained in response to a FOIA request constitutes a "public disclosure" for purposes of the Consumer Product Safety Act. Consumer Prod. Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108-09 (1980).
The thorough and thoughtful analysis presented in Kirk appears to pave the way for the Second Circuit to join the majority of Circuits in holding that a relator cannot subject a government contractor to FCA prosecution merely on the basis of information obtained through FOIA requests.