On May 16, 2011, the U.S. Supreme Court, in a 5-3 opinion delivered by Justice Thomas, held that a federal agency’s response to a request for records under the Freedom of Information Act (FOIA) constitutes a “report” within the meaning of the public disclosure bar of the Federal False Claims Act. Schindler Elevator Corp. v. U.S., ex. rel. Kirk, 131 S. Ct. 1885, 1889 (2011).
Under the Federal False Claims Act (FCA), qui tam (or whistleblower) actions are expressly barred if “substantially the same allegations or transactions . . .were publicly disclosed (i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party; (ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or (iii) from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.” 31 U.S.C. § 3730(e)(4)(A).
The purpose of the public disclosure bar has been tersely described as a means “to strike a balance between encouraging private persons to root out fraud and stifling parasitic lawsuits.” Graham County Soil & Water Conservation Dist v. U.S. ex. rel. Wilson, 130 S. Ct. 1396, 1407 (2010).
In Schindler, the relator (or whistleblower) filed a qui tam action against his former employer, Schindler Elevator Corporation (“Schindler”), alleging that Schindler had submitted hundreds of false claims for payment under government contracts and had violated certain provisions of the Vietnam Era Veterans' Readjustment Assistance Act of 1972 requiring contractors to report certain information to the Department of Labor, including the number of its employees who are qualified veterans under the Act. Schindler, 131 S.Ct. at 1889-90. In support of his allegations, the relator pointed to information that his wife had obtained from the Department of Labor in response to three FOIA requests seeking information about Schindler’s veteran reporting. Id. at 1890.
Schindler filed a motion to dismiss on a number of grounds, including that the District Court lacked jurisdiction based on the FCA’s public disclosure bar. Id. The District Court granted Schindler’s motion concluding, in part, that the relator’s claims were based upon public disclosure of the allegations in a “report” or “investigation.” Id. (citing U.S. ex. rel. Kirk v. Schindler Elevator Corp., 606 F. Supp. 2d 448 (S.D.N.Y. 2009)). The Court of Appeals for the Second Circuit vacated, effectively holding that a response to a FOIA request is neither a “report” nor an “investigation” within the meaning of the FCA’s public disclosure bar. Id. (citing U.S. ex. rel. Kirk v. Schindler Elevator Corp., 601 F.3d 94 (2d Cir. 2010)).
Because the FCA does not define “report” within the meaning of the public disclosure bar, the Court looked to its ordinary meaning and dictionary definitions, including “something that gives information” or a “notification,” “[a]n official or formal statement of facts or proceedings,” and “[a]n account brought by one person to another.” Id. at 1891 (alterations in original) (citations omitted).
The Court then concluded that “[a] written agency response to a FOIA request falls within the ordinary meaning of ‘report.’” Id. at 1893. The Court reasoned that “FOIA requires each agency receiving a request ‘to notify the person making such request of [its] determination and the reasons therefore.” Id. at 1893 (alteration in original) (citing 5 U.S.C. § 522(a)(6)(A)(i)). The Court also noted that the Department of Labor and other agencies have adopted more detailed regulations for responding to FOIA requests in writing. Id. (citations omitted).
In addition to concluding that such written responses constitute “reports,” the Court further concluded that the records produced by the agency along with its written response to the three FOIA requests at issue were also reports within the meaning of the FCA’s public disclosure bar. Id. at 1893, 1896.
On remand, the Second Circuit is to consider whether the relator’s qui tam suit was “‘based upon . . . allegations or transactions’ disclosed in those reports.” Id. at 1896.
Of note, the Court left open the possibility that a relator who learns of the information contained in a FOIA request from another source may not be barred or that the relator may be excepted as an “original source,” id. at 1895, defined by the FCA as “an individual who either (i) prior to a public disclosure under subsection (e)(4)(a), has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based, or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing an action under this section,” 31 U.S.C. § 3730(e)(4)(B).
Given the Court’s broad definition of “report” as a public disclosure bar under the FCA, one can only imagine how courts might apply the “news media” section of the public disclosure bar in a world of ever-increasing blogging, social networking and “news sites” that can be updated by almost anyone with the click of a mouse.
Although at least one state false claims act specifically provides that information is not “‘publicly disclosed’ in the ‘news media’ merely because information of allegations or transactions have been posted on the internet or on a computer network,” New York False Claims Act, N.Y. State Fin. Law §190(9)(b)(iii), the FCA does not define the term “news media” or enumerate any exceptions to it.
Thus, in addition to being mindful of one’s internet reputation, generally, and refraining from disclosing confidential information to others during the pendency of a qui tam action, an individual thinking of filing a false claims action should be mindful of publicly available information on the world wide web as a potential bar to suit. At the same time, Schindler serves as an important reminder that a qui tam lawsuit must be based on independent knowledge or information of fraud on the government, not on public disclosures.
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Melanie Garner is an attorney at Waters & Kraus, LLP, in the firm's Baltimore office. She focuses her practice on toxic tort, product liability, and qui tam (whistleblower) cases.
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