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Court Rules on False Claims Act’s Public Disclosure Bar

Chicago – In a case that has been before the Court of Appeals for the third time and before the United States Supreme Court twice, the relator appealed the district court’s dismissal of her qui tam case based on the False Claims Act’s public disclosure bar.  Fortunately, for the relator, the Court of Appeals reversed.  United States ex rel. Wilson v. Graham County Soil & Water Conservation District, (4th Cir. Feb. 3, 2015)

The facts of the case begin in February 1995, when a storm caused flooding and erosion in North Carolina.  The United States Department of Agriculture agreed to help through a program known as the Emergency Watershed Protection Program.  The Graham County Soil & Water Conservation District, the Defendant, was responsible for to managing the Emergency Watershed Protection Program.

Karen Wilson, a part-time secretary at Graham County SWCD, and the relator reported her suspected misconduct to the USDA.  The USDA report created in response to Ms. Wilson’s allegations was distributed to several state and federal law enforcement agencies with a warning not to distribute the report outside of your agency without the approval of the USDA.

The qui tam provisions of the False Claims Act allow a private citizen to bring a lawsuit on behalf of the United States.  For this appeal, the issue was whether those USDA reports were public disclosures.  The False Claims Act’s public disclosure bar was revised in 2010.  The Pre-2010 version, which is applicable here, states, “[n]o court shall have jurisdiction over an action under this section based upon the public disclosure of allegations . . . unless . . . the person bringing the action is an original source of the information.”   §3730(e)(4)(A)(1986) .  While the 2010 version of the FCA states, “[t]he court shall dismiss an action or claim under this section . . . unless . . . the person bringing the action is an original source of the information.” §3730(e)(4)(A) (2010).

The purpose of the public disclosure bar is to prevent parasitic lawsuits while the qui tam provisions of the False Claims Act are to encourage private citizens to expose and prosecute frauds committed against the United States.

The district court found that an Audit Report and USDA Report had been publically  disclosed, that Ms. Wilson based her False Claims Act claims on those reports, and that Ms. Wilson was not an original source. The district court then dismissed her complaint and Ms. Wilson appealed.

The Court of Appeals sought to determine whether the Audit Report and USDA Report were publically disclosed before Ms. Wilson filed her qui tam lawsuit.

The Court of Appeals ruled that under the plain meaning to the public disclosure bar these reports were not publically disclosed.  The Court looked to the dictionary definition of disclosure and found that a disclosure means an affirmative act.  The Court of Appeals also ruled that the disclosure must be made to the public at large and held that neither the Audit Report nor the USDA Report were disclosure to or intended to be disclosed to the public.

The district court however relied on the Seventh Circuit Court of Appeals case, United States v. Bank of Farmington, 166 F.3d 853 (7th Cir. 1999).  The Farmington court held that there had been a public disclosure when the information was disclosure to a “competent public official.”  Fortunately, no other Circuit has followed the Seventh Circuit’s view of what constitutes a public disclosure and five other Circuits specifically rejected the Seventh Circuit’s view including the D.C., 9th, 1st, 10th, and 11th Circuits.

Thus, the Court reversed and district court’s dismissal of this False Claims Act case based on the public disclosure bar.

For more information about the False Claims Act and the public disclosure bar, contact Michael C. Rosenblat, P.C.