Supreme Court To Decide When Violations of Seal Warrant Dismissal

On May 31, 2016, the Supreme Court granted certiorari in State Farm Fire and Casualty Co. v. United States ex rel. Cori Rigsby and Kerri Rigsby, making it the third False Claims Act (FCA) case the Supreme Court has taken up in the last two terms. The issue to be decided by the Court is “[w]hat standard governs the decision whether to dismiss a relator’s claim for violation of the FCA’s seal requirement, 31 U.S.C. § 3730(b)(2)?”

In the proceedings below, State Farm argued that the qui tam relators alerted the media to their FCA allegations roughly a year before the District Court ordered that the seal be lifted, in contravention of 31 U.S.C. § 3730(b)(2)’s requirement that the complaint be filed and remain under seal for at least 60 days, and during the pendency of any extensions granted to the Government. There is currently a circuit split on whether violation of the False Claims Act’s seal provision warrants dismissal of the complaint. The Fifth and Ninth Circuits have said that violation of the seal provision does not warrant dismissal if the federal government was not harmed by the publication. The Sixth Circuit has held that violation of the seal provision precludes Plaintiffs from asserting qui tam status and thereby requires automatic dismissal. Finally, the Second and Fourth Circuits have held that dismissal is warranted where the violation incurably frustrates the congressional goals underlying the seal provision. In addition to the congressional goal of allowing the Government time to investigate and consider the relator’s claims privately, the Fourth Circuit held that protecting a defendant’s reputation is also relevant when considering the consequences of failing to follow the seal requirements.

While this case does not directly address the question whether a relator’s failure to comply with other procedural requirements under § 3730(b)(2), such as failure to serve a “copy of the complaint and written disclosure of substantially all material evidence” on the Government, might also warrant dismissal, the Supreme Court’s opinion in State Farm may prove instructive on those points as well.

We expect this case to be briefed next term in the fall and to have a decision rendered by June 2017.