Supreme Court Hands Corporate Whistleblowers a Setback

The U.S. Supreme Court has handed corporate whistleblowers a setback with a 5-3 ruling that they cannot bring lawsuits on the basis of information they get from a Freedom of Information Act request.

The court reversed a federal appeals court ruling that was in favor of a former Schindler Elevator Corp. employee, Daniel Kirk, who sued the company under the federal False Claims Act.

Kirk alleged that Schindler submitted hundreds of false claims about veterans it employed to the Department of Labor for payment under its federal contracts and that the company did not comply with proper reporting requirements.

Kirk based his charges on information his wife obtained through FOIA requests.

The False Claims Act includes a public disclosure bar that forecloses private parties from bringing suits to recover falsely or fraudulently obtained federal payments where those suits are “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.”

The District Court concluded that the False Claim Act’s public disclosure bar deprived it of jurisdiction in the case because Kirk’s allegations were based on information disclosed in a government report or investigation, namely the government’s responses to his wife’s FOIA requests. But the Second Circuit vacated and remanded, holding, in effect, that an agency’s response to a FOIA request was neither a “report” nor an “investigation” as set forth by the public disclosure bar.

Now the Supreme Court has ruled along with the District Court, finding that information obtained from FOIA requests qualifies as a “report” under the False Claim Act’s public disclosure restriction.

Kirk, himself a Vietnam veteran, did not specify the amount of damages he sought on behalf of the United States, but he asserted that the value of Schindler’s covered contracts exceeded $100 million. A whistleblower can receive between 25 percent and 30 percent of the proceeds of an action.

Justice Clarence Thomas delivered the majority opinion, joined by Chief Justice John G. Roberts and Justices Antonin Scalia, Anthony M. Kennedy and Samuel Alito. Justice Ruth Ginsburg filed a dissent, in which Justices Stephen Breyer and Sonia Sotomayor joined.

In her dissent, Ginsburg wrote that Kirk sought corroboration for his suspicions in the FIOA information. The decision, she wrote, “weakens the force of the FCA as a weapon against fraud” by government contractors.

Justice Elena Kagan did not participate in the case.