Supreme Court to consider False Claims Act Seal Violations

The Supreme Court will undertake review of another False Claims Act case after accepting the petition of State Farm to reconsider the 5th Circuit Court of Appeals decision in U.S. ex rel. Rigsby v. State Farm Fire and Casualty Co.

The case turns on the appropriate consequences of a violation of the False Claims Act’s seal requirement in 31 U.S.C. § 3730(b)(2). The FCA requires the complaint to be filed in camera and remain under seal. The purpose of the seal requirement is to give the U.S. Government time to investigate the allegations before the defendant becomes aware that it is under investigation and has knowledge of a lawsuit filed against it. The court concluded that relators seal violation did not warrant dismissal of the case.

The facts of the Rigsby case relate to the payment of insurance following Hurricane Katrina. Some homeowners with damaged homes were covered by two policies. One of these policies covered flood damage while excluding wind damage, and the other policy covered wind damage while excluding flood damage. The lawsuit alleges that State Farm classified damage to properties with both policies as flood damage instead of wind damage in order to pay out from government funds providing for flood insurance rather than its own funds which backed the policy providing wind damage insurance. The government’s flood program is the National Flood Insurance Program (“NFIP”), administered by the Federal Emergency Management Agency (“FEMA”).

State Farm has appealed because of disclosures made to reporters while the lawsuit was still under seal. The 5th Circuit agreed with the lower court determination that the disclosures did not warrant dismissal of the lawsuit. In doing so, the Fifth Circuit disagreed with the 2010 6th Circuit decision in U.S. ex rel. Summers v. LHC Group, Inc., which concluded that any violation of the seal requirement requires dismissal.

The False Claims Act and whistleblower lawsuits have led to a few different appeals to the Supreme Court over the past few years. Most recently, the Supreme Court is considering the question of the validity of the implied certification doctrine as a violation of the FCA in U.S. ex rel. Escobar v. Universal Health Services, Inc. Last year, the Supreme Court considered the first to file rule and the appropriate length of the statute of limitations in U.S. ex rel. Escobar v. Kellogg Brown & Root Services, Inc.

For information about the outcome of this case, please contact our False Claims Act attorneys.

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