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Supreme Court rules on False Claims Act, FOIA

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  1. Freedom of Information
Documents obtained under the federal Freedom of Information Act cannot be used as the basis for a lawsuit under the…

Documents obtained under the federal Freedom of Information Act cannot be used as the basis for a lawsuit under the federal False Claims Act, the U.S. Supreme Court held Monday in Schindler Elevator Corp. v. United States ex rel. Kirk. Records obtained through FOIA constitute "reports" under the False Claims Act and are, therefore, subject to the public disclosure bar, the Court held.

The False Claims Act allows citizens to bring suit on behalf of the U.S. government against others who "submit false or fraudulent claims for payment to the United States" when the government itself has chosen not to intervene in a case. Citizens who successfully sue under the act are entitled to 25 to 30 percent of the recovered amount. To prevent excessive litigation, the act prevents citizens from bringing a case based on information that has been publicly disclosed by the government.

The public disclosure bar prevents litigation in cases where the case is "based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative or [GAO] report, hearing, audit, or investigation, or from the news media, unless . . . the person bringing the action is an original source of the information."

Kirk, a former employee of Schindler Elevator Corp., brought a False Claims Act suit against the company after suspecting that Schindler was falsifying documents submitted to the government under the Vietnam Era Veterans' Readjustment Assistance Act of 1972, which provides incentives for companies to employ Vietnam veterans. To support his suspicions, Kirk, a Vietnam veteran himself, had his wife FOIA the documents the company filed to show its compliance with the act. Kirk based his complaint, in large part, on the documents he received from his wife's requests.

Justice Clarence Thomas, writing for the five-justice majority — Justices Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor dissented, with Justice Elena Kagan abstaining — held that the definition of "report," not statutorily defined, was broad enough to encompass FOIA responses. "A 'report' is 'something that gives information' or a 'notification,'" the opinion held.

A broad definition is consistent with the rest of the False Claims Act because the other sources of information listed are themselves wide in scope, the Court held. "The other sources of public disclosure in [the act], especially 'news media,' suggest that the public disclosure bar provides 'a broad sweep,'" the majority opinion said.

"The sort of case that Kirk has brought seems to us a classic example of the 'opportunistic' litigation that the public disclosure bar is designed to discourage," the Court added.

A FOIA response is a "report" because responding to a FOIA request requires the agency to do research, notify the subject of the request and to then transmit the final response to the requester, the Court held. "Such an agency response plainly is 'something that gives information,' a 'notification,' and an 'official or formal statement of facts.'"

In addition, the records attached to the FOIA response are part of the reports and not separate documents, making the actual form or contents of the responsive records irrelevant, according to the Court.

The Court did not rule on whether proactive disclosures made by agencies under FOIA would also be subject to the public disclosure bar.

Kirk argued that allowing FOIA responses to trigger the bar would enable potential defendants to escape liability by making a FOIA request for incriminating documents. The Court dismissed Kirk's argument as "pure speculation" and said that litigation would still be possible through other avenues, such as if a citizen obtained the information elsewhere or was the original source, which allows for standing under the False Claims Act even if the information has been publicly disclosed.

The Court reversed the lower court decision and remanded the case back to the U.S. Court of Appeals in New York City (2nd Cir.) to determine whether Kirk still has a claim without the inclusion of the documents obtained through FOIA. The Second Circuit previously held that FOIA documents were not "reports" under the False Claims Act because the records were merely duplicated and assembled records, not documents that "synthesize the documents or their contents with the aim of . . . . gleaning any insight or information" as the other sources of information listed in the public disclosure bar.

In a dissent joined by Breyer and Sotomayor, Ginsburg advocated adopting the decision of the Second Circuit. The dissent also expressed concern regarding the impact this decision would have on whistle-blowers. "[T]he Court weakens the force of the FCA as a weapon against fraud on the part of the Government contractors. Why should a whistleblower . . . be barred from court if he seeks corroboration for his allegations, as Kirk did, through a FOIA request simply for copies of a contractor's filings?"

The federal government filed an friend-of-the-court brief with the Court in support of Kirk's position.