Term: 2016
Docket: 15-513
State Farm Fire & Casualty Co. v. United States, Ex Rel Rigsby
- Pro
15-513 STATE FARM FIRE AND CASUALTY COMPANY V. UNITED STATES, EX REL. RIGSBY DECISION BELOW: 794 F.3d 457 QUESTION PRESENTED: I. Section 3730(b) of the civil False Claims Act ("FCA'') permits a private person (a qui tam relator) to bring a civil action in the name of the United States Government for violation of section 3729 of the Act. Section 3730(b)(2) requires that a relator's complaint "shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders." 31 U.S.C. § 3730(b)(2). A three-way circuit split exists as to the standard for determining whether to dismiss a relator's claim for violation of the FCA's seal requirement. Depending on the circuit, such a violation (i) mandates dismissal of the relator's claim, as the Sixth Circuit has held; (ii) mandates dismissal if the violation incurably frustrates the congressional goals served by the seal requirement, as the Second and Fourth Circuits have held; or (iii) warrants dismissal only if the seal violation caused actual harm to the Government pursuant to the balancing test applied by the Fifth Circuit in this case and the Ninth Circuit. The first question presented is: What 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)? II. The FCA imposes liability only for knowing violations of the Act, which the FCA defines as requiring that the defendant "with respect to information" have "actual knowledge of the information" or act in "deliberate ignorance" or "reckless disregard" of "the truth or falsity of the information." See 31 U.S.C. § 3729(b)(I)(A)(i)-(iii). The interpretation of the FCA's scienter requirement is the subject of conflicting decisions by the D.C. and Fourth Circuits and by the Fifth Circuit in this case. The second question presented is: Whether and under what standard a corporation or other organization may be deemed to have "knowingly" presented a false claim, or used or made a false record, in violation of section 3729 (a) of the FCA based on the purported collective knowledge or imputed ill intent of employees other than the employee who made the decision to present the claim or record found to be false, where (i) the employee submitting the claim or record independently made the decision to present the claim or record in good faith after reviewing the available information and (ii) there was no causal nexus between the submission of the false claim or record and the purported collective knowledge or imputed ill intent of those other employees? LOWER COURT CASE NUMBER: 14-60160 GRANTED LIMITED TO QUESTION 1 PRESENTED BY THE PETITION. CERT. GRANTED 5/31/2016
In the case of State Farm Fire & Casualty Co. v. United States, ex rel Rigsby (2016), the Supreme Court ruled that a violation of the False Claims Act's seal requirement does not mandate dismissal of a claimant’s lawsuit. The case arose after Hurricane Katrina when two former insurance adjusters alleged that State Farm had falsely classified wind damage as flood damage to shift liability to government-backed insurers and thereby defraud them. This was done under qui tam provisions which allow private parties to sue on behalf of the U.S., but require lawsuits be kept secret or "under seal" for 60 days while being reviewed by federal officials - something violated in this instance due to an email leak by one attorney involved in representing Rigsby sisters who were whistleblowers against State Farm Insurance Company. However, despite this breach, SCOTUS held it did not necessitate automatic dismissal; instead courts have discretion over whether such violations warrant dismissal based on factors like actual harm caused.
The dissenting opinion in the case of State Farm Fire & Casualty Co. v. United States, ex rel Rigsby, argued that the majority's decision to not enforce automatic dismissal for violations of the False Claims Act’s (FCA) seal requirement was a misinterpretation of Congress' intent and an overreach by judicial discretion. The dissenters believed that when a party violates this seal provision, it should result in mandatory dismissal as stated under FCA law rather than leaving it up to court discretion on whether or not to dismiss based on severity or harm caused by violation. They contended that such discretionary approach undermines Congressional purpose behind implementing strict confidentiality rules during investigations into fraud against government programs and could potentially deter whistleblowers from coming forward due to lack of trust in maintaining their anonymity.
