Supreme Court Holds Government’s Response to FOIA Request a “Report” Triggering FCA’s Public Disclosure Bar: Relators May Not Use FOIA as Basis for Qui Tam Claims, as appeared in AHLA’s Healthcare Liability & Litigation Health Briefs

A federal agency's response to a request for documents under the Freedom of Information Act (FOIA) constitutes a "report" triggering the False Claims Act's (FCA's) public disclosure bar, the U.S. Supreme Court held on May 16, 2011, in Schindler Elevator Corp. v. United States ex rel. Kirk (No. 10-188). The decision disarms would-be relators and their attorneys of a powerful weapon in investigating and developing claims of fraud against healthcare providers and other government contractors.

Daniel Kirk, a Vietnam-era Army veteran, had been an employee of Schindler Elevator Corporation from 1978 until 2003, when he resigned. Since 1999, Schindler had entered into hundreds of contracts with the federal government subject to the reporting requirements of the Vietnam Era Veterans' Readjustment Assistance Act of 1972 (VEVRAA)—among other things, VEVRAA requires contractors such as Schindler to certify to the Secretary of the U.S. Department of Labor (DOL) how many of its employees are "qualified covered veterans" under the statute. Kirk came to suspect that Schindler was including false information in its VEVRAA reports, and following his resignation he filed a qui tam suit against Schindler under FCA.

In support of his allegations, Kirk relied upon information and documents that had been provided to his wife by DOL in response to several FOIA requests. Based upon this information, Kirk argued that Schindler's certifications of VEVRAA compliance were false, rendering its claims for payment under its numerous government contracts "false claims" under FCA.

Schindler moved to dismiss the complaint, arguing among other things that Kirk's reliance on FOIA responses triggered FCA's public disclosure bar, which deprives the court of jurisdiction over FCA complaints "based upon the public disclosure of allegations or transactions . . . in a congressional, administrative, or government accounting office report, hearing, audit, or investigation." The district court dismissed Kirk's claims, holding that DOL's responses to FOIA requests "entailed an 'investigation' and produced a 'report' as those words are commonly used and defined." On appeal, the Second Circuit reversed, concluding that "report" as used in FCA's public disclosure bar "connotes the compilation or analysis of information with the aim of synthesizing that information in order to serve some end of the government, as in a 'hearing' or 'audit.' It does not naturally extend to cover the mechanistic production of documents in response to an FOIA request made by a member of the public."

The Supreme Court, in an opinion authored by Justice Thomas, reversed. FCA does not specifically define the term "report," and so the Court began with the premise that "report" is ordinarily defined to mean "'something that gives information' or a 'notification,' or 'an official or formal statement of facts or proceedings.'" That broad meaning, the Court said, "is consistent with the generally broad scope of FCA's public disclosure bar." And a FOIA response falls within that broad ordinary meaning, the Court held, because it "plainly is 'something that gives information,' a 'notification,' and an 'official or formal statement of facts'":

Any records the agency produces along with its written FOIA response are part of that response, "just as if they had been reproduced as an appendix to the printed report." Nothing in the public disclosure bar suggests that a document and its attachments must be disaggregated and evaluated individually. If an allegation or transaction is disclosed in a record attached to an FOIA response, it is disclosed "in" that FOIA response and, therefore, disclosed "in" a report for the purposes of the public disclosure bar. DOL's three written FOIA responses to Mrs. Kirk, along with their attached records, are thus reports within the meaning of the public disclosure bar. Each response was an 'official or formal statement' that 'gave information' and 'notified' Mrs. Kirk of the agency's resolution of her FOIA request.

The Court rejected Kirk's argument that he had used FOIA responses only to bolster his own suspicions, noting that "anyone could have filed the same FOIA requests and then filed the same suit. Similarly, anyone could identify 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 under the FCA." Such suits should be barred, the Court said, as they represent "a classic example of the 'opportunistic' litigation that the public disclosure bar was designed to discourage." The Court likewise rejected as "pure speculation" the suggestion that potential defendants would make periodic FOIA requests for incriminating documents so as to insulate themselves from future FCA liability.

In dissent, Justice Ginsburg lamented that the majority's view "weakens the force of the FCA as a weapon against fraud on the part of government contractors. Why should a whistleblower attentive to the heightened pleading standards of Federal Rule of Civil Procedure 9(b) 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? After today's decision, which severely limits whistleblowers' ability to substantiate their allegations before commencing suit, that question is worthy of Congress' attention."

The Schindler decision's scope is not without limits. The majority specifically noted that the Patient Protection and Affordable Care Act had amended the public disclosure bar, but that its decision in Schindler did not address the statute as amended but rather "as it existed when the suit was filed." Further, the Court cautioned that because it concluded that FOIA responses constituted "reports" within the bar, it need not address whether they also constituted "investigations."

Nonetheless, the Schindler decision denies would-be relators a powerful tool. No longer can FOIA be used as a means to gather evidence against healthcare providers and other government contractors. Only those with independent information may avail themselves of FCA's qui tam provisions.

Reprinted with permission from the AHLA.