December 9, 2016 - Posts

Supreme Court: Not Every Slip of the Tongue Requires Dismissal of a Sealed Whistleblower Lawsuit

Under the federal False Claims Act, whistleblowers looking to pursue cases for fraud against the government must file their lawsuits under seal. These cases are often referred to as qui tam lawsuits, and once the case is filed the whistleblower cannot reveal the details, or even the existence of that lawsuit to anyone, not even to close friends or family. In a major win for whistleblowers this week, the U.S. Supreme Court has ruled that failing to keep a fraud case completely confidential does not require dismissal of that whistleblower’s case. State Farm Fire and Casualty Co. v. U.S. ex rel. Rigsby, No. 15-513 (Dec. 6, 2016).

What happens if a whistleblower breaks that rule – even accidentally?

The False Claims Act requires these cases to be filed under seal and kept confidential. But what happens if the seal is breached? For example, what if the whistleblower slips up and mentions the case to a spouse or a close friend? Prior to this week, different courts had different answers to that question, with some courts holding that any violation of the seal requires dismissal of the whistleblower’s case, no matter how small or innocent that violation may have been. The Supreme Court, however, has now rejected that approach. Instead, based on its unanimous opinion, the Supreme Court has endorsed a case-by-case analysis that looks, among other things, at whether the United States’ interests in investigating fraud have actually been harmed by violation. After all, the policy behind this confidentiality provision is to give the government an opportunity to investigate the case before the company accused of fraud is “tipped off.”

What is the takeaway from the Supreme Court’s decision?

This ruling is victory for pragmatism and common sense, and it should give whistleblowers some comfort to know that the time and energy that they spend and the risks that they take in preparing and litigating cases for fraud against the government cannot just be wiped out by some stray comment or other accidental violation of the seal requirement. Of course, under new ruling, district courts still have discretion to dismiss fraud cases for violations the seal, so whistleblowers must still take great care to keep their cases secret.

Navigating these waters as a whistleblower can be tricky and would-be whistleblowers would be well advised to speak to experienced lawyers who can protect their interests. To learn more about our Whistleblower and Qui Tam practice, click here.