Anyone reading this blog probably knows that we represent whistleblowers who file so-called “qui tam” cases under the False Claims Act. The term “qui tam” is a Latin term derived from the longer and ancient legal expression “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” meaning one “who pursues this action on our Lord the King’s behalf as well as his own.” In short hand, that means an action brought by a private citizen on the government’s behalf, whereby the government and the individual will share in any of the money recovered. The False Claims Act is one of the few provisions in federal law that allows a private citizen to file a case on behalf of the government.
Qui Tam Cases
Because qui tam actions are brought on behalf of the government, the government is the “real” plaintiff in the case, and the whistleblower or “relator,” is functioning more like a private attorney general. As a result, the False Claims Act requires that the government have a shot at pursuing the case on its own. To give the government this opportunity, when a relator files a case, it must be filed “under seal” for a period of at least 60 days. That means that the existence of the case remains secret and cannot be disclosed without the court’s permission to anyone other than (a) the relator, (b) the court, and (c) the government.
Relators that violate the seal run serious risks. Among them, his or her case could be dismissed for violating the terms of the statute. Until recently, courts around the US were split on whether a violation of the seal required dismissal of a case or whether dismissal was just one among many sanctions a court could impose against a naughty relator.
This week, the U.S. Supreme Court settled the matter and concluded that dismissal is not required when a relator violates the seal requirement of the False Claims Act. In the case styled State Farm Fire & Casualty Co. v. U.S. ex rel. Rigsby, the Court considered a case from Mississippi about homeowners’ insurance policies and government-backed flood insurance policies issued by State Farm. The relators were both claims adjusters who investigated claims resulting from Hurricane Katrina. According to the claims asserted by relators, State Farm instructed adjusters to classify wind damage as flood damage, in order to shift the liability for paying the claim from State Farm to the federal government. While the case was under seal, the relators’ attorney sent a pleading from the case to various reporters, and the relators discussed the case with a member of Congress. Both the district court and the court of appeal refused State Farm’s attempts to have the case dismissed due to the seal violation.
The Supreme Court concluded that dismissal is not required, because if “Congress intended to require dismissal for a violation of the seal requirement, it would have said so.” Moreover, the seal was intended to “protect the Government’s interests,” not the defendant’s interests. The Court also reasoned that the seal requirement is not in any way tied to the right of a private citizen to file a suit; it is merely a procedural hurdle. As the Court noted, the lower courts have inherent authority to punish parties for violating court orders, and a violation of the seal imposed by the False Claims Act is practically no different than the violation of other court orders. Thus, “[r]emedial tools like monetary penalties or attorney discipline remain available to punish and deter seal violations even when dismissal is not appropriate.”
All of this is not to say that relators should not take the seal requirement seriously. Indeed, a relator who files a qui tam claim should not breathe a word about the case to anyone but his or her attorney and the government investigators, unless he or she wants to anger the court and the government.