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TAFEF Files Supreme Court Amicus in State Farm Case

The TAF Education Fund has filed an amicus curiae brief with the U.S. Supreme Court in the case of State Farm Fire and Casualty Company v. United States el rel. Cori Rigsby, et al.

The case comes to the Supreme Court from the Fifth Circuit, which affirmed a lower court judgment in support of the whistleblower and the government in a case where a seal was, allegedly, broken.


TAFEF’s brief notes that the seal in a False Claims Act case does not prevent a relator, or her lawyers, from discussing the facts of a defendant’s fraud, or even saying that they have been interviewed by the U.S. Department of Justice. The seal in a False Claims Act case only protects the existence of a pending qui tam case filed under the False Claims Act.  It serves no corporate interest.


In support of a case-by-case evaluation of seal violations in FCA cases, the TAF Education Fund cites United States ex rel. Lujan v. Hughes Aircraft Co., 67 F.3d 242 (9th Cir. 1995), in which the Fifth Circuit said that any allegation of a qui tam seal breach must be evaluated by imposing a balancing test. That balancing test asks three simple questions:  1) Did the breach actually harm the investigative interests of the government? 2) Was the seal breach serious? 3) Did the seal breach occur in bad faith?


In this instance, the Fifth Circuit said the seal breach did not harm the investigative interests of the government – a point affirmed by the U.S. Department of Justice itself.


In its amicus curiae brief, TAFEF argues that minor seal violations need not result in the dismissal of a qui tam relator’s case. The purpose of the seal, after all, is to allow the Government an adequate opportunity to evaluate a case and decide if wants to intervene. The seal is not there to serve the defendant’s interests. The only logical authority on the degree of harm done to the government’s case by a seal violation is the government — not a False Claim Act defendant’s legal counsel.


TAFEF goes on to note that the sealing of qui tam cases is not a simple “on and off” switch. In most cases where the government intervenes, there is a “partial unsealing” of the case. These partial unsealings are an extra-statutory device created by the U.S. Department of Justice for purposes of advising defendants of fraud allegations against them, negotiation with these same defendants, fact-finding, and to address the management of related cases.

TAFEF  notes that a breach of a seal on day 30, before the government has really begun to investigate, is very different from a violation on day 300, or 600, or 900, when the defendant is aware of the investigation and has already been producing documents in response to a Civil Investigative Demand.


TAFEF’s amicus also notes that the False Claims Act itself does not say a word about what should happen when a seal is breached. Penalties and consequences are wisely left up to the courts because the issue is mostly contempt of court, and it is not jurisdictional.


Finally, the TAFEF brief notes that it is not just the whistleblower or his or her lawyer that can breach a seal, which is why a balancing test in such matters is so important.


What happens when a party other than the relator breaches the seal? Papers mistakenly get filed on the public record, or left on a table in a prosecutor’s or clerk’s office. An investigator interviewing a witness accidently tells the witness that there is a lawsuit pending. Defendants provided with copies of a complaint following a partial unsealing may put too much information in an SEC filing or say something at an industry conference. A lawyer may make a mistake.


Such things happen. But State Farm and its amici do not even acknowledge these possibilities, so focused are they on punishing and discouraging relators in any way possible: Absent an answer to these possibilities, Petitioner’s proposed rule, positing as it does that only relators breach the seal, is mere gamesmanship.


TAFEF’s amicus was written by Rick Morgan of Morgan Verkamp, and Jacklyn DeMarr, TAFEF’s in-house lawyer. This is not the first time that Morgan Verkamp and Jacklyn have teamed up this year; Jennifer Verkamp was the primary author of TAFEF’s amicus brief in Escobar, which was decided 8-0 in favor of the whistleblowers.

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