The Supreme Court recently heard oral argument in a case testing the scope of the False Claims Act’s public disclosure bar. The False Claims Act (“FCA”) is the government’s primary weapon against waste, fraud, and abuse in government contracting. Penalties for FCA violations are harsh: actual damages are trebled, and each false claim (such as an individual invoice) triggers a penalty of up to $11,000. Under the FCA’s qui tam provisions, whistleblowers (formally called relators) can bring lawsuits on behalf of the government. Whistleblowers receive a significant bounty for acting as private prosecutors: they are entitled to between 15 and 30 percent of the government’s proceeds from the litigation. This is a substantial sum, as the trebling and penalty provisions catapult many modest matters into multimillion dollar actions.
Congress recognized that this lucrative bounty could attract parasites. Without any controls, whistleblowers could file qui tam lawsuits based on nothing more than public information or media reports. To prevent such parasitic lawsuits, Congress required that whistleblowers base their complaints on personal knowledge. This policy is enacted through the FCA’s public disclosure bar.
The public disclosure bar is a jurisdictional limit. It states that courts lack jurisdiction over a qui tam suit if the complaint is based on “allegations or transactions … in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media.” 31 U.S.C. § 3730(e)(4)(A) (2009). The whistleblower may proceed, however, if it was the original source of the information. Otherwise, the whistleblower is barred from prosecuting the action.
(The public disclosure bar was amended by the Patient Protection and Affordable Care Act. The version at issue before the Supreme Court, and thus the text quoted above, is from the pre-amended statute. The effect of the amendment is discussed below.)
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