Kagan’s Brief on Whistleblowing/False Claims Act

The False Claims Act (sometimes called the “Lincoln Law,” as it was passed during President Lincoln’s administration) allows private citizens to file lawsuits, on behalf of the federal government, when there’s evidence that a person has wrongly made a claim for money from the federal government. The citizen who files the suit is entitled to part of any money that’s recovered. The government can bring its own lawsuits, but part of the rationale of the False Claims Act is that private citizens’ assistance in helping recover misspent federal funds should be encouraged and rewarded.

In Graham County Soil & Water Conservation District v. U.S. ex rel Wilson, the question was whether, under the False Claims Act, a private citizen can file a lawsuit to recover misspent funds if that individual learned about the situation in an official report or audit by a state or local government agency. According to the Act, a private citizen who had no role in discovering the misconduct but was simply trying to use someone else’s disclosure couldn’t file suit under the Act if the citizen’s claim was based on earlier “public disclosures.”

When Elena Kagan filed her brief as Solicitor General with the U.S. Supreme Court, she argued that a county’s own internal audit and a state agency’s reports didn’t constitute “public disclosures” of wrongdoing in a False Claims Act case. Therefore, the citizen who had filed suit in Graham County, relying on county and state documents wasn’t barred from filing the suit. According to Kagan: ”State and local administrative reports, audits, and investigations are not among the classes of documents that Congress identified as triggering the FCA’s public disclosure bar.”

The Supreme Court, in a 7-2 decision, rejected Kagan’s argument. The Court ruled that a private citizen can’t bring a lawsuit to recover misspent funds if tha individual learned about the situation in an official report or sudit by a state of local government agency. The effect of the Supreme Court’s opinion was to rule out lawsuits that grow out of government administrative reports which are produced in the tens of thousands each year and can be the source of the discovery of misspent funds.

In the new health reform legislation, Congress changed the language of the False Claims Act to clarify that a private lawsuit under the Act is blocked only if the prior public disclosure came in a “federal” proceeding in which the federal government is a party, or in a report, audit or investigation that was “federal.” Thus, the new law would seem to now allow the kind of suit that the Supreme Court dismissed in Graham County. It also would seem to mean that, under the new law, Kagan’s argument would be now be accepted.

Whistleblowing lawsuits are booming in many areas of the country. Quite often, they are filed by employees, sometimes under the False Claims Act. There are other multiple state and federal laws that gives whistleblowers protection. Kagan’s brief would indicate that the laws should be given a liberal reading in favor of the whistleblower. Without trying to read too much into this, her argument in the Graham County case indicates a pro-employee point of view in these kinds of cases.

For other posts on Kagan, click here, here, here, here, here, and here.