PLAINTIFF QUALIFIES FOR QUI TAM CASE, DESPITE USE OF FOIA MATERIAL

June 14, 2004

Steven P. Garmisa
Hoey & Farina Attorney
garmisa@hoeyfarina.com
1-888-425-1212

A plaintiff may not sue under the False Claims Act based on publicly disclosed information unless he was an original source of the relevant knowledge. But what if he used the Freedom of Information Act to obtain the material that supports a qui tam complaint?

Most cases have ruled that information obtained through FOIA is publicly disclosed within the meaning of the False Claims Act.

Rejecting the majority rule in a lawsuit pending in the Northern District of Illinois, however, U.S. District Judge Robert W. Gettleman denied a motion to dismiss a False Claims Act case. U.S. ex rel. Yannacopolous, 2004 WL 911746 (N.D. Ill., April 27).

Dimitri Yannacopolous filed a complaint alleging that General Dynamics and Lockheed Martin Corp. violated the False Claims Act by defrauding the United States out of hundreds of millions of dollars during the sale of fighter aircraft to Greece.

Some of the information that Yannacopolous relied on was obtained through the Freedom of Information Act.

Moving to dismiss, the defendants argued that Yannacopolous was barred from filing a qui tam case because he relied on information obtained through FOIA.

Sections 3730(e)(4)(A) and (B) of the False Claims Act provide:

"(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.

"(B) For purposes of this paragraph, 'original source' means an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the government before filing an action under this section which is based on the information."

Here are some highlights of Gettleman's opinion on the FOIA issue (with various omissions not noted in the quoted text):

"Defendants argue that information relator obtained ... pursuant to FOIA requests ... constitutes public disclosure of the 'allegations or transactions' in the instant case.

"The majority of circuit courts confronted with this issue have held that information divulged in a FOIA request becomes a public disclosure upon receipt of that information by the requesting party.

"To fit under section 3730(e)(4)(A)'s list, the FOIA information is considered an 'administrative report.'

"A minority view holds that FOIA information is not a 'public disclosure' because it is excluded from section 3730(e)(4)(A)'s list. This court regards this view as consistent with the legislative intent in enacting the 1986 amendments to the FCA. 145 Cong. Rec. 1546-01 (1999) (statement of Rep. Howard Berman and Sen. Charles Grassley, the principal House and Senate sponsors of the 1986 amendments, that they do not view FOIA requests as public disclosures)."

With a footnote, Gettleman observed that, "In objecting to an increasingly inclusive view of section 3730(e)(4)(A), Rep. Berman also stated, '[W]e want forcefully to disagree with cases holding that qui tam suits are barred if the relator obtains some, or even all, of the information necessary to prove fraud from publicly available documents, such as those obtained through a Freedom of Information Act (FOIA) request.... We believe that a relator who uses their education, training, experience or talent to uncover a fraudulent scheme from publicly available documents, should be allowed to file a qui tam action.... This is especially true where a relator must piece together facts exposing a fraud from separate documents.' "

Returning to the principal text, Gettleman continued:

"In an unpublished opinion, citation to which is disfavored, the [4th U.S. Circuit Court of Appeals] held that FOIA information does not amount to a 'public disclosure' because it is not expressed in section 3730(e)(4)(A). The 4th Circuit's 2001 opinion is the most recent circuit court opinion on the matter. U.S. ex rel. Bondy v. Consumer Health Found., 2001 U.S. App. LEXIS 24238 (4th Cir. 2001).

"The 7th Circuit has not directly decided the issue of whether information produced pursuant to FOIA requests are 'public disclosures,' although it did affirm a District Court that held that FOIA requests are 'public disclosures.' Lamers, 998 F.Supp. at 979, affirmed on other grounds 168 F.3d 1013 (7th Cir. 1999). In affirming Lamers, however, the 7th Circuit never mentioned the FOIA, stating, 'In the case before us, all the facts on which Mr. Lamers based his fraud claim were publicly disclosed when the media covered the FTA's 1995 administrative decision.'

"The 7th Circuit affirmed Lamers because of 'news media' public disclosures, not on FOIA grounds. Consequently, the issue has yet to be decided in the 7th Circuit.

"The FOIA issue falls between competing policy tensions in the FCA. On one hand, the FCA encourages 'whistle-blowing,' whether by an insider or outsider. Since it is difficult for the government to investigate completely all potentially fraudulent claims, allowing an individual to investigate such claims promotes recovery of government funds.

"On the other hand, the FCA is concerned with strike suits, especially those where an individual rehashes existing claims or investigations already in possession of the government.

"Congress enacted the 1986 amendments to better balance the two tensions in light of a 7th Circuit opinion that barred Wisconsin from acting as a qui tam plaintiff in a Medicare fraud case because Wisconsin previously disclosed the information to the U.S. government as required under the pre-1986 FCA. U.S. ex rel. Wisconsin v. Dean, 729 F.2d 1100, 1103-04, 1106-07 (7th Cir. 1984).

"After the U.S. government declined to intervene, the public disclosure bar prevented Wisconsin from litigating the case merely because the information was in federal possession, despite the fact that the federal government possessed the information only because Wisconsin supplied it.

"The 1986 amendments responded to Dean by amending the public disclosure bar to apply not to material in possession of the government, but to material actually disclosed to the public by the government. The overall purpose of the 1986 amendments was to focus the public disclosure bar toward information that the public knew, not toward information that the government knew.

"The glaring flaw in the dominant view (FOIA material is publicly disclosed as soon as the requesting party receives it) is that the public is not informed of the contents of the FOIA material by transmission to a private party. Only the requesting party knows about it.

"By deeming the material a 'public disclosure' upon receipt by the requesting party, the incentive for a person to investigate fraud against the government would be destroyed, because any FOIA request would inevitably become a public disclosure under the FCA.

"Practically, this approach is no different from the pre-1986 approach (all information in possession of the government is a 'public disclosure') because members of the public still cannot actually use that FOIA information in an FCA claim. Receipt would bar use of the information, thus destroying the incentive to investigate. Thus, if receipt of FOIA material would bar a relator's claim, then every corporation would be well-advised to request as much FOIA material as possible. If the corporation was later named a defendant in a FCA action, then anything in the FOIA request would be a public disclosure merely because the defendant asked for it in a FOIA request. Certainly, the FCA was not intended to insulate corporations in this manner.

"In light of the purpose of the 1986 amendments that public investigation and public knowledge are integral to the FCA, this court holds that an FCA action based on FOIA material is not barred unless the material has actually been disclosed to the public. Mere disclosure to the requesting party is not disclosure to the public.

"Moreover, because the 1986 amendments to section 3730(e)(4)(A) did not textually include FOIA information among the list of disclosures considered public, FOIA information is not encompassed by the public disclosure bar. For information to be a 'public disclosure' it must be enumerated in section 3730(e)(4). Consequently, for this additional reason, relator's FOIA material is not barred by the 'public disclosure' exclusion of section 3730(e)(4)(A)."

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