Supreme Court finds FOIA requests ineligible to support qui tam suits
May 17, 2011 - Comments Off
In a 5-3 ruling, the Supreme Court has tightened the restrictions to qualify as a relator under the False Claims Act. The False Claims Act allows an individual with access to sensitive information regarding their employer’s finances to sue them on behalf of the United States for defrauding the federal government, in what is known as a qui tam suit, and provides for the whistleblower to receive a significant portion of the recovered amount. Importantly, the FCA does not allow whistleblowers to bring qui tam suits on the basis of publicly available information, including government reports, in order to prevent frivolous or opportunistic suits. The question before the Supreme Court in Schindley Elevator Corp v. United States ex. rel. Kirk was whether information derived under Freedom of Information Act (FOIA) requests are considered public information, and so can be used to file qui tam lawsuits.
Daniel Kirk worked at Schindler Elevator, and suspected that the company was falsifying reports to the federal government stating the number of veterans it employed in government contract work. Kirk’s wife filed a FOIA request, and obtained documents which supported his claim. Kirk then filed a qui tam lawsuit against Schindler Elevator on behalf of the federal government. Schindler sought to dismiss the case, arguing that FOIA requests are effectively public reports made by the government, and thus general information not suitable for a qui tam whistleblower reward. The U.S. Court of Appeals for the 2nd Circuit found in favor of Kirk, and Schindler appealed to the Supreme Court.
The Supreme Court reversed the lower court’s decision, finding in favor of Schindler in a 5-to-3 decision (Justice Kagan did not participate). Writing for the majority, Justice Thomas reasoned that the ordinary meaning of a government “report” includes FOIA requests, stating “anyone could have filed the same FOIA request and then filed the same suit.” Thomas further called Kirk’s suit “a classic example of the opportunistic litigation,” the False Claims Act forbids. Writing for the minority, Justice Ginsburg dissented, warning that the majority opinion “weakens the force of the FCA as a weapon against fraud on the part of government contractors.”
“The Supreme Court’s ruling can only discourage whistleblowers from coming forward to report fraud on the U.S. government, and will thus mean less money recovered by the taxpayers,” said KMB partner David J. Marshall, who specializes in whistleblower lawsuits. “Even where the qui tam relator has first-hand knowledge of a fraud, it may be hard to separate this information from whatever the whistleblower learns through FOIA requests that he or she uses to conduct further research.”