Financial Services Employment Law News, Updates, and Insights for Financial Services Employers

U.S. Supreme Court Reins-In The Scope of Whistleblower Lawsuits Filed Under the False Claims Act

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By: Stuart M. Gerson

On May 16, 2011, the U.S. Supreme Court decided the case of Schindler Elevator Corp. v. United States ex rel. Kirk (pdf), holding that the public disclosure bar of the False Claims Act (FCA) is triggered by a federal agency’s written response to a Freedom of Information Act (FOIA) request. This important, and much awaited, decision makes it clear that an agency’s FOIA response constitutes a “report” for purposes of the FCA’s public disclosure bar, which forecloses private parties from bringing qui tam whistleblower suits to recover falsely or fraudulently obtained federal payments where those suits are "based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media." 31 U. S. C. §3730(e)(4)(A).

The Respondent in the underlying case, a Vietnam War Veteran, brought a qui tam lawsuit under the FCA, alleging that his former employer submitted hundreds of false claims for payment under federal contracts that were subject to certain reporting requirements under the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA). Specifically, the Respondent alleged that his former employer failed to adequately report the number of veterans it employed to the U.S. Department of Labor (DOL). In support of his allegations, the Respondent relied upon three written responses to FOIA requests, which his wife received from the DOL, which supplied the reports filed by the company, or lack thereof. 

The U.S. Court of Appeals for the Second Circuit, reversing an order of dismissal from the U.S. District Court for the Southern District of New York, held that the DOL’s response was neither a “report” nor an “investigation,” as contemplated by the FCA’s public disclosure bar. The Supreme Court reversed per Justice Thomas, writing for himself, Chief Justice Roberts and Justices Scalia, Kennedy and Alito.  Justice Ginsburg, joined by Justices Breyer and Sotomayor, dissented. Justice Kagan took no part in this case.