Opinion analysis: Justices reject automatic dismissal for seal violations in False Claims Act cases
on Dec 6, 2016 at 5:43 pm
Tuesday morning brought us the court’s first decision from its November argument session, in State Farm Fire & Casualty Co. v. United States ex rel. Rigsby. The opinion has a familiar texture – resolving a circuit conflict by rejecting a categorical rule calling for mandatory dismissal in favor of a rule that leaves matters in the sound discretion of the district court. I admit that my opening hook was pretty vague. But if I’d started off by telling you the case was about the False Claims Act, most of you would have moved on to the next entry without even clicking to “continue reading.” I thought maybe some of you would read a little further if I softened you up before telling you the case interprets a 19th-century statute directed at fraud in government contracts.
But now that I’ve done that, I can explain that the case involves the “seal” requirement of the False Claims Act. When a “relator” (think bounty hunter) files a False Claims Act complaint alleging that a contractor has committed fraud, the complaint remains under seal while the government gets a chance to decide if it wants to take over the litigation. (The relator gets a bigger share of verdicts in cases on which the government passes, and a smaller share of verdicts in cases that the government takes over.)
In this case, the relator’s attorney publicized the complaint while the case was still under seal. All agree that this was an intentional violation of the seal requirement. The question is what the courts should do about the violation. The district court decided not to dismiss the complaint, noting that the violation did not prejudice the government and that the offending attorney already had been removed from the case (after his indictment for attempted bribery in an unrelated matter). The U.S. Court of Appeals for the 5th Circuit affirmed, rejecting a holding of the U.S. Court of Appeals for the 6th Circuit that dismissal is a mandatory sanction for any violation of the seal requirement.
All the justices joined the opinion of Justice Anthony Kennedy affirming the decision of the court of appeals. Much like the opinion in Samsung v. Apple handed down a few minutes later, the opinion in this case is short and sweet, abjuring any extended discussion of the statute’s goals or purposes and treating the result as flowing directly from the statutory language. For the court, the most important point is that the statute, although it makes the seal requirement mandatory, says nothing at all about the proper response to a violation. In contrast, several other sections of the False Claims Act explicitly require dismissal in various circumstances. The court’s opinion concludes that the absence of a mandatory-dismissal provision in the statute’s discussion of the seal requirement necessarily means that dismissal is not a mandatory remedy for seal violations.
The opinion ends with a cursory rejection of State Farm’s argument that the trial court erred in exercising its discretion not to dismiss this particular case. The court notes State Farm’s contention that the district court “did not consider the proper factors when declining to dismiss respondents’ complaint.” But the court does not even specify the factors to which State Farm points. Rather, the opinion combines a conclusion that the lower courts did not err with a willful refusal to explain what was appropriate in the district court’s reasoning. The opinion first states firmly that “[t]his Court holds the District Court did not abuse its discretion by denying petitioner’s motion.” It then goes on to note that the justices well might have affirmed a decision coming out the other way: “In light of the questionable conduct of [the relator’s] prior attorney, it well may not have been reversible error had the District Court granted the motion.” For obvious reasons, “that possibility … need not be considered here.”
In an apparent effort to make it absolutely clear that justices intend to provide as little guidance as possible about how district courts are supposed to exercise their discretion, the opinion goes on to state that:
In general, the question whether dismissal is appropriate should be left to the sound discretion of the district court. While the factors articulated in [an oft-cited 9th Circuit opinion on which the lower courts relied] appear to be appropriate, it is unnecessary to explore these and other relevant considerations. These standards can be discussed in the course of later cases.
Here as in the Samsung opinion, the dominant feature of the court’s quick, unanimous resolution of the case is an overt avoidance of any specific articulation of standards for use by the lower courts. Indeed, compared to the even less forthcoming opinion in Samsung (summarized in my post earlier today), the most interesting question this case raises for me is why the opinion includes a section assessing the exercise of discretion at all. The answer may lie in the question on which the court granted review, which asks “what standard governs” the propriety of dismissal for a violation of the seal requirement. It is pretty hard, once the court grants review to decide “what standard governs,” both to refuse to say anything about the standard and to refuse to say whether the decision below was correct. So by committing the question to the district court’s discretion and affirming the exercise of that discretion here, the opinion charts a path to a decision that provides the least possible opportunity for substantive disagreement among the justices.
The early returns from this fall suggest to me a modest court, content to sit back and intervene as incrementally as possible, leaving the ongoing development of the law as much as possible to the lower courts. Only time (and the confirmation of a ninth justice) will tell whether this is a temporary response to the shorthanded bench or the seeds of a more permanent development in the Roberts court.
[Disclosure: Goldstein & Russell, P.C., whose attorneys contribute to this blog in various capacities, is among the counsel to the respondents in this case. The author of this post, however, is not affiliated with the firm.]