Seal Requirement

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The United States District Court for the Northern District of Alabama recently ordered that a relator’s qui tam lawsuit must be unsealed upon the case’s voluntary dismissal, denying the relator’s request to maintain the action under seal post-dismissal. This ruling in U.S. ex rel. Meythaler v. Encompass Health Corporation serves as an important reminder that public access to court records is vitally important and that whistleblowers’ allegations and identities will almost certainly be made public, even where the case is dismissed without litigation.

FCA Complaint Filed Under Seal

The relator, a physician formerly employed by the defendant, filed suit under the False Claims Act (FCA) against an inpatient rehabilitation facility operator and the CEOs of two of its Alabama facilities. The complaint alleged numerous schemes, including allegations that the defendants sought reimbursement for treatment of patients who were not eligible for rehabilitation benefits, delayed discharges and other orders to increase reimbursement, and made improper referrals to a home health agency. Per the FCA’s procedural requirements, 31 U.S.C. § 3730(b)(2), the relator filed his complaint under seal, giving the government a statutory period of at least 60 days to investigate the allegations and determine whether to intervene in the case.

The government declined to intervene in the action last fall. The relator then filed a notice of voluntary dismissal with prejudice, to which the government later consented. The relator also filed a motion asking the court to maintain the action under seal even after the case was dismissed to prevent the defendants from learning that the relator had filed a qui tam action against them. The government took no position on the relator’s motion.Continue Reading Relator Cannot Maintain Dismissed Qui Tam Action Under Seal, District Court Rules

The U.S. District Court for the Eastern District of Pennsylvania recently refused to extend the period during which a False Claims Act (FCA) action remains under seal while the government investigates and decides whether to intervene. In U.S. ex rel. Brasher v. Pentec Health, Inc., which involved claims of illegal kickbacks constituting FCA violations, the court denied the government’s eleventh extension request and subsequent request for reconsideration even after both the relator and the defendant joined that request. The case had been under seal for more than five years.

Settlement Discussions Were Not Good Cause to Extend the Seal Period

The court held that the matter would not remain sealed to allow the government and defendant time to reach a settlement. It noted that “the purpose of the sealing provision is not to allow the Government to prosecute a civil action entirely under seal and then to present a settlement as a fait accompli to the Court and the general public.”Continue Reading “Significant Abuses of the Statutory Scheme:” District Court Criticizes Practice of Regular Extensions of the FCA Seal Period

The Supreme Court held that a relator’s breach of the seal in a qui tam case does not require mandatory dismissal of the complaint, but the Court declined to articulate what factors are appropriate to consider in determining whether dismissal is appropriate.  The Court wrote only that appropriateness of dismissal in a given case should be left to the sound discretion of the district court. The district court in this case had not abused its discretion in declining to dismiss the case, and the appropriate test could be taken up in future cases.
Continue Reading Supreme Court Rejects Mandatory Dismissal for an FCA Seal Breach

Last week, the U.S. Supreme Court granted the petition for writ of certiorari in State Farm Fire and Casualty Co. v. United States ex rel. Rigsby and will consider what standard should determine when a relator’s complaint should be dismissed for violating the FCA’s seal requirement.  In Rigsby, former claims adjusters who worked with State Farm after Hurricane Katrina filed suit against the company under § 3730(b), alleging that State Farm misclassified wind damage as flood damage to shift the costs of paying those claims to the federal government.  After a jury found that State Farm falsely claimed that damages to a home in Mississippi were caused by flooding, the district court ordered State Farm to pay $758,000 in damages and awarded the relators $227,000.  State Farm appealed the verdict, citing the district court’s failure to dismiss the lawsuit despite the district court’s finding that the relators’ attorneys breached the FCA’s seal requirement by disclosing the existence of the case to the media.
Continue Reading U.S. Supreme Court to Resolve Circuit Split on FCA Seal Breaches

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From the Bass, Berry & Sims Blog Network

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