FOIA Cannot Be Used In False Claims Lawsuit

(CN) - The Supreme Court has held that a Freedom of Information Act request cannot be used to trigger a False Claims Act lawsuit, voting 5-3 in favor of the Schindler Elevator Corp., which had sought to have the a case against it dismissed.

Daniel Kirk, a former employee, sued on behalf of the government, claiming Schindler had submitted hundreds of false claims for payment under its federal contracts by willfully inflating the number of Vietnam veterans it employed.

Kirk, a Vietnam Vet himself, said based on his own experience and observation, Schindler failed to meet the annual information-reporting requirements of the Vietnam Era Veteran's Readjustment Assistance Act.

To support his allegations, Kirk pointed to information his wife received from the U.S. Labor Department in response to three requests for records she filed under the Freedom of Information Act. The documents purport to show that some years Schindler provided no information at all, while in others, provided patently false accounts of how many Vietnam vets it employed.

A District Court threw out the case, concluding that the False Claims Act's public disclosure bar deprived it of jurisdiction over allegations that were based on information disclosed in a government "report" or "investigation."

The FCA's public disclosure bar generally forecloses private parties from bringing qui tam suits to recover falsely or fraudulently obtained federal payments where those suits are "based upon the public disclosure of allegations or transactions in a criminal, civil or administrative hearing, in a congressional, administrative or Government Accounting Office report, hearing, audit or investigation, or from the news media."

The Second Circuit vacated and remanded the ruling, holding that an agency's response to a FOIA request is neither a "report" nor an "investigation."

But writing for the majority, Justice Clarence Thomas said that the three FOIA responses and accompanying records Kirk's wife received were reports within the meaning of the public disclosure bar.

But in staking out that position, Thomas revealed that he was obviously disturbed by the nature of the case itself, which describing it as "a classic example of the 'opportunistic' litigation that the public disclosure is designed to discourage.

Anyone could identifying a few regulatory filing and certification requirements, submit FOIA requests until he discovers a federal contractor who is out of compliance, and potentially reap a windfall in a qui tam action."

Thomas dismissed Kirk's contention that extending the public disclosure bar to written FOIA responses would necessarily lead to "unusual consequences," and found that the one-time Schindler employee failed to provide any principled way to define "report" to exclude FOIA responses without excluding other documents.

"Whether Kirk's suit is 'based upon... allegations or transactions' disclosed in those reports is a question for the Court of Appeals to resolve on remand," he said.

Chief Justice John Roberts and Justices Antonin Scalia, Anthony Kennedy and Samuel Alito joined the Thomas opinion.

Justice Ruth Bader Ginsburg dissented and was joined by Justices Stephen Breyer and Sonia Sotomayor.

In her dissent, Ginsburg said the Second Circuit had gotten the case right, agreeing with its opinion that the term "report" most readily bears a narrower meaning than simply "something that gives information."

Ginsburg argued that by ranking what she described as the Labor Department's mechanical, administrative response to the FOIA as akin to a Government Accounting Office report, "weakened the FCA as a weapon against fraud on the part of government contractors."

"Why should a whistleblower attentive to the heightened pleading standards of the Federal Rule of Civil Procedure be barred from court if he seeks corroboration for his allegations, as Kirk did, through a FOIA request," she wrote. "After today's decision, which severely limited whistleblowers' ability to substantiate their allegations before commencing suit, that question is worthy of Congress' attention."

Justice Elena Kagan did not participate because she worked on the case while serving as solicitor general.

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