Supreme Court hears argument in Graham County case, discovers that the public disclosure bar is a mess

by Ben Vernia | November 30th, 2009

Justice Scalia is almost always talkative during oral argument, but he frequently speaks for a minority (or a slim majority) of justices. Today, however, he seems to have captured the prevailing mood well when he described the public disclosure bar of the False Claims Act as a “terrible test,” and asked the attorney for the relator, Mark Hurt, what ruling the Court could provide in the case that would most encourage the US to amend what he characterized as a “random” public disclosure bar.

The provision at issue, 31 USC 3730(e)(4)(A), reads:

(4)(A) No court shall have jurisdiction over an action under this section 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, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.

As is typical before the Supreme Court, no one escapes the hard questions, but the Court quickly becomes stuck in the quagmire of the public disclosure bar. NC’s SG, Christopher Browning, barely gets out his theme – that there will be a deluge of parasitic qui tam suits and damage to federal/state cooperation if state administrative reports don’t trigger the public disclosure bar – before a question from Justice Scalia prompts Browning to say that a deposition in a civil case could trigger the public disclosure bar. Scalia’s response is – incredulity. What?! A deposition is a “hearing?! He concludes: “That’s an argument that doesn’t go very far with me.”

It’s as if the state of public disclosure bar caselaw comes as a complete (and unpleasant) surprise to the justices, even though they dealt with it just two years ago in Rockwell Int’l. Corp. v. US. The state tries to make some points by relying on caselaw that state criminal and civil hearings can trigger the bar, so why not administrative ones. This basically just evokes speculation from justices that maybe there’s no basis for that caselaw.

The justices’ speculation, in turn, evokes gasps from the False Claims Act bar attending the argument. For those of us attending, the argument was much more interesting than we had any reason to expect. The Court seems willing to question – hard – the sense of nearly a quarter-century of caselaw interpreting the public disclosure bar. It’s not exactly a “emperor has no clothes” moment, but close.

Everyone goes round and round the mulberry bush of the False Claims Act’s actual text: the inclusion of “administrative” as a type of case in the first phrase vs. the sandwiching of it between “congressional” and “Government Accounting Office” in the second phrase; the weird redundancies in the text; and the juxtaposition of governmental functions with “news media,” which, in a rare consensus, is typically privately-run.

Neither the relator’s attorney, Hurt, nor the Asst. to the SG arguing for the US, Douglas Hallward-Dreimeier, fare much better. Hurt tries to set up a three-category structure for the bar: adjudicative (i.e., “civil” and “criminal”) matters, non-adjudicative (administrative, congressional) ones, and the news media. Since his client used only state-based “non-adjudicative” information in her qui tam, she’s nor barred. The justices are having none of this three-category model, however, asking what reason there is for extending the adjudicative category to states, but not the non-adjudicative one; Hurt is forced to concede that he doesn’t really agree that adjudicative should be extended, either (he’s just been completely bound by lower court caselaw that, today at least, is looking somewhat less binding). As they pepper him with questions about how to interpret the Act, Scalia comments that the statute’s text “just shows that Congress wasn’t thinking clearly.” One gets the idea that the False Claims Act’s public disclosure bar is, for Scalia, Exhibit A of Congressional ineptitude. (He might be right.)

Justice Breyer struggles to find a way through the mess, asking why they shouldn’t defer to the position of the US (who, today at least, sees “administrative” as federal-only), since it’s that party that stands to lose by parasitic lawsuits. (Something similar to this nearly found its way into the False Claims Act amendments: a provision which would have given standing only to the US to allege a violation of the public disclosure bar.)

In the end, the Court seems united in being fed up with an unworkable statute – a “terrible test,” in Scalia’s words. The interesting question is whether they will duck the issue, attempt to fix it themselves (e.g., interpret it consistently in the US’s interest, as Breyer suggests) or break it so thoroughly that the Administration and Congress have to amend it (as Scalia proposes).

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