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Supreme Court to Hear FCA Seal Violation Issue

June 2, 2016

Author: Robert Rhoad, Brian Tully McLaughlin, David W. O'Brien, Stephen M. Byers, and Jason M. Crawford.

For the third consecutive year, the Supreme Court will hear a case involving the False Claims Act (FCA). On May 31, the Court granted review in State Farm Fire and Cas. Co. v. U.S. ex rel. Rigsby to address the applicable standard for dismissal in FCA cases when whistleblowers (referred to as relators under the statute) violate the FCA’s statutory sealing provision by publicly revealing the allegations in their complaint while it is under seal and being investigated by the government. The case presents the Court with an opportunity to resolve a split in which circuits have applied three tests: (1) a bright-line rule that mandates dismissal; (2) a rule that considers whether the violation frustrates the congressional goals served by the seal requirement; and (3) a balancing test that focuses on whether the violation actually harms the government. Crowell & Moring will monitor developments in this case closely and provide updates when the case is fully briefed and argued.

The Court decided that it would not hear the second question presented in State Farm’s petition for certiorari -- whether a corporation may be deemed to have “knowingly” presented a false claim, or used or made a false record, in violation of the FCA based on the purported collective knowledge of employees other than the employee who made the decision to present the claim or record found to be false. In Rigsby, the Fifth Circuit applied the collective knowledge doctrine in order to hold State Farm liable under the FCA even though the State Farm employee submitting the claim to the government did not know that the claim was false. The importance of this issue was underscored by the fact that several trade associations filed amicus briefs in support of a grant. (Crowell & Moring submitted an amicus brief on behalf of the Academy Advisors, a policy coalition associated with the Health Management Academy). Healthcare providers, government contractors, and all institutions that receive federal dollars can only hope that the Court will continue its pattern of hearing FCA cases and will address the collective knowledge doctrine in the near future.

Stephen M. Byers
Partner – Washington, D.C.
Phone: +1.202.624.2878

Jason M. Crawford
Partner – Washington, D.C.
Phone: +1.202.624.2768

Brian Tully McLaughlin
Partner – Washington, D.C.
Phone: +1.202.624.2628

David W. O'Brien
Retired Partner – Washington, D.C.
Phone: +1.703.307.1977