COURT UPHOLDS CONSTITUTIONALITY OF “UNDER SEAL” PROVISION OF FALSE CLAIMS ACT

On March 28, 2011, the Fourth Circuit Court of Appeals issued a decision that has positive consequences for  future qui tam relators.  The case, American Civil Liberties Union, et al., v. Eric Holder, et al., involved a constitutional challenge to the sealing provisions of the False Claims Act.  The Act mandates that all qui tam lawsuits be filed under seal and kept under seal for at least 60 days, so that the government can evaluate the allegations of fraud and decide whether to intervene.  The Court upheld these provisions because it determined that the United State’s interest in protecting the integrity of a qui tam fraud investigation was compelling, and that the sealing provisions necessarily protected that interest and were narrowly tailored toward that end.

The lawsuit was filed by a cluster of advocacy groups, including the American Civil Liberties Union, the Government Accountability Project, and OMB Watch.  These groups alleged that the sealing provisions unlawfully block the public from judicial proceedings, restrict the first amendment rights of qui tam relators by preventing relators from speaking about the case, and violate the constitution’s separation of powers doctrine by infringing upon the judiciary’s ability to decide its own cases.

A key aspect of the Court’s conclusion that the provisions do not infringe upon the First Amendment was that the seal period is of limited duration—and that the public does, in fact, eventually have access to most qui tam cases.  Qui tam complaints generally become unsealed at the end of the 60-day period, whether the government ultimately intervenes, or not.  And if the government wants to keep the case sealed for longer than 60 days, or conduct additional investigation before making its decision, it is required to demonstrate “good cause,” the same standard to which any other litigant is held in seeking to seal court records in civil cases.

The Court also emphasized that the sealing provisions were not an absolute bar to a relator’s freedom to speak about the fraud.  The provisions only narrowly restrict the relator from discussing the lawsuit, but leave him or her free to discuss the actual fraud itself.

The Court’s decision is good news for qui tam relators.  The “under seal” investigatory period is beneficial to qui tam relators who blow the whistle from inside of an organization, and remain employed while the investigation takes place.  The sealing provisions allow the government to proceed without the defendant becoming aware of the investigation and interfering with it.  In addition, the seal provides some degree of anonymity to qui tam whistleblowers, at least during the period of the government’s investigation.

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