Over a decade after Hurricane Katrina, the truth was finally exposed on the fraudulent activity carried out by the State Farm Fire and Casualty Company. The company attempted to escape the $758,000 punishment by accusing whistleblowers of violating the False Claims Act’s seal provision, as detailed here in the US Code.
On September 19th 2016, the National Whistleblower Center (NWC) filed an amicus brief in the case of State Farm Fire and Casualty Company v. U.S. ex rel. Rigsby. The question in this case was whether the most severe sanctions available to a court for policing purposes should be applied, regardless of the intent of the party committing the infraction, the consequences affecting other groups, and other interests. In its brief, the NWC warns against such an inflexible rule on the grounds that it would go against Congress’s intent. Moreover, mandatory dismissal would discourage whistleblowers from coming forward.
The brief argues that authorizing mandatory dismissal would hurt taxpayers who are the intended beneficiaries of the FCA and draws attention to Congress’ past decisions not to include mandatory dismissal when given the opportunity. It also highlights how other statutes that are also subject to confidential court proceedings do not require mandatory dismissal. It points out that if the Court had ruled in favour of mandatory dismissal, the FCA could no longer function as the flexible tool Congress intended it to be and whistleblowers would suffer as a consequence.
In a victory for whistleblowers, the 5th Circuit Court ruled against mandatory dismissal and instead favored a flexible balancing test that prioritizes the interests of both the government and whistleblowers. Whistleblower Network News notes that the court’s decision hinged on the basic flexibility that district courts have always had to remedy violations of protective orders and sealing orders. It also points out how the government benefits “by making sure that potential targets of criminal and civil investigations are not tipped off.” The Supreme Court ruled to affirm the judgement of the 5th Circuit and dismissed the FCA claims of the State Farm Fire and Casualty Company. The Supreme Court decision can be found here.
Noted whistleblower law expert and former NWC Executive Director Stephen M. Kohn stated, “This is another attempt by the Chamber of Commerce to undermine the False Claims Act and protect corrupt government contractors who rip off the taxpayers from accountability. It is time to stop shooting the messenger.”
