Argument preview: Can information from a FOIA disclosure support an individual’s False Claims Act suit?

By Eric M. Fraser
on Feb 27, 2011 at 5:00 pm

Eric M. Fraser is the Executive Director for Research for the Committee on Capital Markets Regulation. The views expressed herein do not necessarily represent the views of the Committee.

DISCLOSURE: Mr. Fraser is the author of an article on the question presented by this case; he spoke briefly with counsel to the respondent regarding the article but has not obtained any confidential information or represented any party or amicus in the proceeding.

The False Claims Act, which prohibits fraud against the federal government, contains a qui tam provision that allows a private party who discovers fraud to sue the alleged fraudster on behalf of the government. If the suit is successful, then that private party – who is known as a relator – may share in any recovery. The qui tam provision, however, contains a “public disclosure bar” that prohibits a relator from bringing a suit that is based upon information that has already been publicly disclosed in certain enumerated sources, including a government report or investigation. The issue in this case is whether a federal agency’s response to a request under the Freedom of Information Act (FOIA) is a government report or investigation that triggers that bar. If a response to a FOIA request necessarily triggers the public disclosure bar, then a relator may not bring a claim based on the FOIA response.

Background

Daniel Kirk, the respondent in this case, filed a suit against his former employer, petitioner Schindler Elevator Corp. In that suit, which he brought as a relator under the False Claims Act, he alleged that Schindler had obtained government contracts while falsely claiming that it had complied with certain obligations required by a statute designed to promote job opportunities for veterans. Schindler was allegedly required, as a government contractor, to file “VETS-100” reports documenting certain aspects of veterans in its workforce. Although Kirk based some of his allegations upon his own personal knowledge, he also relied in part upon information he received as a result of his wife filing FOIA requests with the Department of Labor seeking copies of Schindler’s VETS-100 reports over several years. Although it produced copies of Schindler’s reports for some of the years at issue, the DOL indicated that it had not located any reports for some of the other years at issue. Kirk alleged that Schindler had violated the False Claims Act by entering into government contracts and requesting payments despite its failure to file some of the required VETS-100 reports, and because in other years it had filed inaccurate reports.

The district court dismissed the case.  Among other things, it held that that FOIA disclosures trigger the public disclosure bar. On appeal, the Second Circuit reversed.  It held that FOIA disclosures do not necessarily trigger the public disclosure bar; whether a particular disclosure triggers the bar depends upon whether the particular document disclosed is one of the specific sources enumerated by the False Claims Act, such as a government report or investigation.

Merits Briefs

In its brief on the merits, Schindler argues that basing a qui tam case upon information obtained from a FOIA disclosure is precisely the type of opportunistic, parasitic case the public disclosure bar is meant to prevent. The qui tam provision, it contends, is meant to reward individuals who produce firsthand knowledge of fraud. In this case, however, Kirk based at least part of his case on information he obtained from the government through his wife’s FOIA requests. Schindler explains that a FOIA request triggers an investigation and report. Under the plain meaning of those words, an agency conducts an “investigation” when it searches and analyzes its records for files that are responsive to the FOIA request and determines whether the files qualify for an exception to FOIA or must be redacted. The agency’s response to the request takes the form of a “report” containing documents or some form of explanation written by the agency. Under this logic, all FOIA disclosures categorically trigger the public disclosure bar. According to Schindler, a contrary reading disregards congressional intent to reward relators with firsthand knowledge and instead supports only professional relators who file claims based upon information the government already has.

Kirk, on the other hand, argues that some, but not all, documents disclosed through FOIA fit into one of the enumerated sources such as government reports or investigations; exhuming a document through the FOIA process does not turn it into a government report or investigation. He rejects the idea that all FOIA disclosures categorically trigger the public disclosure bar; instead, he contends, a court should look to the particular documents that an agency disclosed and determine whether those documents constitute government reports or investigations. For example, Kirk explains that it is hard to categorize the VETS-100 reports as administrative reports because Schindler – rather than a government agency – created them. Similarly, many records are disclosed through the FOIA process without an extensive search or narrative response. Kirk also argues that the broad definitions of “report” and “investigation” that Schindler advances do not fit into the context of the enumerated sources in the False Claims Act, which also lists sources such as audits and hearings. The word “report” means more than merely giving information, and the word “investigation” means more than merely searching for documents. According to Kirk, looking at the document itself rather than the disclosure method is consistent with the legislative history and congressional intent because the statute does not require the relator to have independent knowledge but rather allows anyone to bring a suit that is not based upon information in an enumerated source. The statute also provides a special exception for a relator who was the original source for the publicly disclosed information.

The United States filed an amicus brief supporting Kirk and will participate in oral arguments.  Like Kirk, it rejects a categorical trigger, arguing that a response to a FOIA request does not, standing alone, trigger the public disclosure bar.

Analysis

This issue is the subject of a circuit split and at least two academic articles. Both sides rely on dictionary definitions of the terms, the structure of the public disclosure bar, and descriptions of the FOIA disclosure process. They both also rely upon the history of the False Claims Act, which has been amended several times since President Lincoln signed it into law in 1863.

When defending a categorical approach, Schindler may face questions about particular types of disclosures that are hard to categorize as a government report or investigation. For example, if an agency performs a mechanical keyword search and discloses copies of forms prepared and submitted to the agency by a private party, may a relator base his claim upon that FOIA disclosure? Kirk, on the other hand, may face questions about whether a FOIA request that demands a particularly detailed search and requires the agency to perform extensive analysis may create a report or investigation even though the underlying components do not fit those terms. Both sides may face questions concerning how the terms “report” and “investigation” fit into the list of enumerated sources, as well as how particular interpretations of those terms will affect the ability of relators to uncover fraud. Schindler will likely argue that relators without independent knowledge of fraud add no value; Kirk will likely argue that relators with or without personal knowledge can use FOIA requests to uncover evidence of fraud, which is helpful in combating abuse by government contractors.