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False Claims Act Public Disclosure Bar Not Limited to Federal Sources

In a 7-2 decision, the Supreme Court reversed a decision of the Court of Appeals for the Fourth Circuit, because the term "administrative" in the False Claims Act's bar against qui tam actions based on public disclosures applied to state and local, as well as federal, reports, audits, and investigations. The relator, a former county employee, alleged county districts had filed false claims for payment under two government contracts for flood remediation work. The federal district court found the relator did not refute her action was based on publicly disclosed county and state investigative reports and dismissed the case for lack of jurisdiction. The Fourth Circuit reversed, holding the FCA only barred qui tam suits based on disclosures in federal reports or investigations.

"Sandwich Theory"

Resolving a split among the courts of appeals, the Supreme Court addressed the scope of the adjective "administrative" in the bar against qui tam actions based on allegations or transactions that have been made public "in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation" (31 USC 3730(e)(4)(A)). The Court disagreed with the Fourth Circuit's "sandwich theory" application of the interpretive maxim noscitur a sociis, which teaches "a word may be known by the company it keeps." Although the word "administrative" is "sandwiched" between terms that are federal in nature, the list of three distinct items was "too short to be particularly illuminating." Moreover, other sources of information mentioned in 3730(e)(4)(A), such as hearings and news media, are not necessarily federal, and the statute as a whole focuses on the fact of public disclosure, not the federal government's creation or receipt of information. The Court also found no "evident legislative purpose" to guide its interpretation and discounted the relator's policy arguments. According to the Court, the "statutory touchstone" of the provision, which is intended to preclude "predatory" suits, is public disclosure, not whether allegations of fraud had "landed on the desk of a [Department of Justice] lawyer." In addition, it was "strained speculation" to suggest local governments would insulate themselves from qui tam liability through limited disclosures of fraud.

Legislative Override

The Patient Protection and Affordable Care Act (PL 111-148) enacted March 23, 2010, amended 3730(e)(4)(A) to read "[t]he court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim 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." The amendment suggests qui tam actions based on public disclosures in state and local investigations or reports would be allowed. As the majority opinion observed in a footnote, however, "[t]he legislation makes no mention of retroactivity, which would be necessary for its application to pending cases." (Graham County Soil and Water Conservation Dist., et al. v. U.S. ex rel. Wilson, US SCt, 54 CCF 79,296)




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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