Graham County Soil & Water Conservation Dist. v. U.S. ex rel. Wilson

From ScotusWiki

Argued November 30, 2009. Decided March 30, 2010.

Authorship: Jacqueline de Armas of Stanford Law School (with SCOTUSblog's Lyle Denniston contributing to the post-opinion analysis)

Docket: 08-304

Issue: Whether federal courts have jurisdiction over False Claims Act suits based on revelations in administrative reports or audits issued by state or local governments, as opposed to the federal government.

1 Briefs and Documents
2 Post-Opinion Articles
- 2.1 Analysis
- 2.2 Recap
3 Oral Argument Recap
4 Argument Preview
5 Links and Further Information
- 5.1 Media Links
- 5.2 From the Blogosphere

Briefs and Documents

Decision

REVERSED AND REMANDED in a 7-2 decision with an opinion written by Justice Stevens, joined by Chief Justice Roberts and Justices Kennedy, Thomas, Ginsburg, and Alito. Justice Scalia joined in part and filed an opinion concurring in part. Justice Sotomayor filed a dissenting opinion, joined by Justice Breyer.

Oral Argument

Transcript (November 30, 2009)

Merits Briefs

Amicus briefs

Certiorari-Stage Documents

Opinion below (4th Circuit)
Petition for certiorari
Brief in opposition
Petitioner’s reply
Brief amicus curiae of National League of Cities (in support of petitioner)
Brief amici curiae of Pharmaceutical Research and Manufacturers of America, et al. (in support of petitioner)
Brief amici curiae of Chamber of Commerce of the United States of America, et al. (in support of petitioner)
Brief amici curiae of Washington Legal Foundation, et al. (in support of petitioner)
Brief amici curiae of Pennsylvania, et al. (in support of petitioner)
Brief amicus curiae of the United States

Post-Opinion Articles

Analysis

Lyle Denniston originally wrote the following for SCOTUSblog:

The Supreme Court’s ruling Tuesday, blocking potentially thousands of federal lawsuits by whistle-blowers seeking to recover U.S. government funds that were misspent, apparently will not be in force for very long. Even as the Court was moving towards its decision in Graham County Soil and Water Conservation District v. U.S. ex rel. Wilson (08-304), Congress was changing the federal law in a way that apparently will overturn that decision, at least for future cases. The Court took note of that change in a footnote, and thus appeared to have limited its ruling to so-called “false claims” cases that had been pursued previously.

Even so, it appears that there may be a lingering dispute over whether the change in the law applies retroactively. The Court’s opinion did not resolve that issue.

The controversy revolves around a law that is nearly a century-and-a-half old, the federal False Claims Act (sometimes called the “Lincoln Law” because it originated in the Lincoln Administration in 1863). Among other provisions, the Act generally allows private citizens to file lawsuits, on behalf of the federal government, when there is evidence that someone has wrongly made a claim for money from the federal government. The suing citizen gets a part of any money that is recovered. The government can bring its own lawsuits, but the whole idea of the False Claims Act is that private citizens’ help in recovering misspent funds is a valuable part of the scheme.

What was at stake both in the Graham County case, and in the amendment signed into law a week ago by President Obama as part of the multi-faceted health care reform bill, is a limitation on private lawsuits under the False Claims Act. Congress, apparently concerned that there would be what are called “parasitic” lawsuits, or claims for money by someone who had no role in ferreting out the misconduct but was simply trying to use someone else’s disclosure, has barred such lawsuits if they were based on earlier “public disclosures.”

In Tuesday’s ruling, the Supreme Court ruled for the first time that a private citizen (technically, a “relator”) cannot bring a lawsuit to recover misspent funds if that individual learned about the situation in an official report or audit by a state or local government agency. Congress, in adopting changes in the law in 1986, Justice John Paul Stevens wrote for the majority in the 7-2 decision, blocked lawsuits that were based on “administrative” disclosures, whether those came from a federal source or an official state or local source. Justice Sonia Sotomayor, in a dissent joined by Justice Stephen G. Breyer, said that would rule out lawsuits that grew out of “thousands of state and local government administrative reports produced each year.”

In the new health reform law, Congress changed the language of the Act that was before the Court in Graham County. It clarifies that a private lawsuit under the Act is blocked only if the prior public disclosure came in a “federal” proceeding in which the federal government is a party, or in a report, audit or investigation that was itself “federal.” By omission, then, the new law seems to clear the way for whistle-blower lawsuits under the Act based on public disclosures in state and local government probes or reports.

Justice Stevens, in his opinion, mentioned the new law in a footnote. That note said that the new provision “makes no mention of retroactivity.” Such a clause would have been necessary, the footnote added, in order for it to apply to “pending cases.” The Court, however, did not rule directly on whether, in fact, the law could be understood to apply to pending cases that originated before the law was amended, or to state or local public disclosures that preceded the amendment.

The state of North Carolina notified the Court, in a letter dated the day President Obama signed the new law, of the amendment. The letter commented that the state did not believe that the change “impacts the outcome of the action before the Court” — that is, the Graham County case — because the amendment “does not purport to make the amendment…retroactive.”

The attorney for the would-be whistle-blower in the Graham County case, Mark T. Hurt of Abingdon, VA, wrote to the Court on March 26 to note the passage of the new law, and said “the legislation raises complex issues as to its retroactive effect.” That letter went on to suggest that the Court call for “short supplemental briefs from the parties on what impact this new amendment has on the pending case,” and that the Court should also seek advice from the federal government on the new law’s impact. Solicitor General Elena Kagan, in a letter to the Court also dated Friday, said the government did not plan to file any views on that issues unless the Court sought them.

Those letters appeared to have reached the Court on the day the Court was holding its private Conference last week — probably the Conference at which the Court made up its mind to release its Graham County ruling this week. Thus, there was no call for further briefs on the retroactivity issue. Presumably, that will be an issue when the case is returned to the Fourth Circuit Court; Justice Stevens’ opinion noted that there would be further proceedings there.

Recap

Jacqueline de Armas originally wrote the following for SCOTUSblog:

On March 31st, in an opinion by Justice Stevens, the Court held by a vote of seven to two that the term “administrative” in the False Claims Act’s public disclosure bar was not limited to information contained in federal reports, audits, and investigations, but instead, extends also to reports, audits, and investigations by state and local authorities. Justice Scalia concurred in the judgment and agreed with most of the majority opinion, but he parted ways with the majority opinion to the extent that it suggested that consideration of legislative history might be appropriate to determine legislative purpose. Justice Sotomayer dissented, joined by Justice Breyer. While – as Lyle discussed Tuesday – the thrust of this opinion may be short-lived due to Congressional action, the decision contains helpful analysis.

The Court took particular issue with the lower court’s application of the principle of noscitur a sociis, dubbing the approach of the court of appeals the “Sandwich Theory” because its conclusion that the term “administrative” referred to strictly federal sources was based on the term’s position between two federal sources. In its own application of noscitur a sociis, the Court looked to two factors – the number of listed words and the “harmon[y]” among those words – to determine meaning. Here, it found, there were too few words in the list, and those words were not sufficiently harmonious, to conclude that the word “administrative” referred only to federal sources. Indeed, Justice Stevens notably observed, “[a] list of three items, each quite distinct from the other no matter how construed is too short to be particularly illuminating.” (Addressing this question in her dissent Justice Sotomayor countered, “[w]e have not previously constrained the canon in this way, and I would not do so here.”)

Looking at the broader text of the public disclosure bar, the Court emphasized that the term “administrative” had elsewhere been used to refer to state and county hearings. The Court thus rejected the notion that the FCA was exclusively federal.

Turning to legislative intent, the Court discussed Congress’s intent to balance “parasitic” qui tam actions with those of genuine whistleblowers. Here, the Court found that the “history of the public disclosure bar raises more questions than it answers,” and it rejected the respondent’s assertion that Congress intended administrative to be strictly federal, that Congress intended the public disclosure bar to be narrow, and that the Attorney General would have a difficult time learning of fraud found in state and county sources.

Ultimately, the Court rested its judgment on whether the allegations have been “publicly disclosed,” rather than on the accessibility of information to the Attorney General. In dissenting, Justice Sotomayor deemed the Court’s interpretation overly restrictive, arguing that Congress intended a more liberal result. Indeed, although the Court recognized that “Congress may well have endorsed those views in its recent amendment,” it emphasized that the version of Section 3730 (e)(4)(A) at issue in this case was not limited to federal sources.

Oral Argument Recap

Justice Breyer set the tone for oral arguments on Monday’s argument in Graham County Soil & Water Conservation District v. United States ex rel., Karen T. Wilson,. Justice Breyer plainly admitted that he was “up in the air,” explaining that the arguments “are more balanced than any I can remember.” Indeed, it was unclear where the Court stood, and the Justices pressed all three lawyers with enthusiasm in considering whether Congress intended the Federal Claims Act’s public disclosure bar of the Federal Claims Act to include state and city “administrative” audits and reports or whether it means only federal audits and reports.

At the outset, the Justices were concerned with the practicalities of their ruling. Justice Scalia and Ginsberg immediately asked what effect the Act would have on the States’ ability to immunize themselves from harm, and they expressed concern that the availability of qui tam actions would be reduced. Later, the Court turned to the text, with Justice Ginsberg highlighting the redundancy that the petitioner’s argument would produce in the text. Throughout his argument, Christopher Browning – arguing for Graham County – emphasized the possibility that the potential flood of actions from opportunistic qui tam relators would rob the government of revenues and unjustly enrich opportunistic relators.

Arguing on behalf of respondent Karen Wilson, Mark T. Hurt began by parsing the public disclosure bar into three categories and highlighting the exclusively federal nature of his second category – encompassing “administrative” reports and audits. Justice Ginsberg posed the hypothetical whether, if the first category encompasses state and federal materials, the second category should then be read as federal. Mr. Hurt responded that the categories are distinct in grammar and function. Throughout, Mr. Hurt sought to counter Mr. Browning’s forecast of a flood of actions by stressing “an enormous number of reports and audits that the Federal Government is likely never to see.”

Almost immediately after Assistant to the Solicitor General Douglas Hallward-Driemeier began his argument on behalf of the United States, Justice Ginsberg again returned to her hypothetical. Mr. Hallward-Driemeier emphasized the legislative history of the Act, arguing that the Act was not contemplated as encompassing the States, and he tried to highlight the federal nature of the second category.

During Mr. Browning’s rebuttal, Chief Justice Roberts again categorized this case as a toss-up: he asked whether, “to follow up . .. [on] a question that Justice Breyer asked . . . do you have any tie-breaker on your side?” Mr. Browning ended with the idea that over-zealous lawyers and relators will be disruptive to states and local governments. During Mr. Browning’s rebuttal Chief Justice Roberts again categorized this case as a toss-up asking, “to follow up . .. [on] a question that Justice Breyer asked . . . do you have any tie-breaker on your side?” Mr. Browning ended with the idea that over-zealous lawyers and relators will be disruptive to states and local governments working “in the trenches.”

Argument Preview

The False Claims Act creates civil penalties for leveling “fraudulent or false” monetary claims against the government, and it allows “relators” – private persons on behalf of the government – to bring qui tam actions to recover statutory damages and civil penalties (which are shared with the government) for such false claims.

Under the Act, courts lack jurisdiction over qui tam actions in which the information substantiating the claim has already been publicly disclosed. The Act further defines public disclosures as “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.” In No. 08-304, Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson, the Court will consider whether the public disclosure bar applies to a qui tam action based on information provided in state or county audits, reports or investigations, or whether the bar applies instead only to federal audits, reports or investigations.

In 1995, two North Carolina counties – Graham and Cherokee – received federal disaster relief to clean up damage caused by a storm. That same year, Karen Wilson, a secretary for Graham County and the respondent in this case, complained about fraud by a ring consisting of federal government inspectors, a Graham County Conservation District employee, and the contractor hired to perform the cleanup. In 1996, a private accounting firm hired by the county to perform an audit raised similar fraud concerns, as did a report prepared by the North Carolina Department of Environment, Health, and Natural Resources.

In 2001, Wilson filed a qui tam action under the False Claims Act. The district court held that it lacked jurisdiction over Wilson’s FCA claims because both the county audit and state report triggered the Act’s public disclosure bar. On appeal, the Fourth Circuit held – like the Third Circuit before it, but in conflict with three other circuits – that state and local audits, reports, and investigations were outside the scope of the public disclosure bar. In the court’s view, the “context and consideration of the structure of the statute” indicated that the public disclosure bar applied only to federal administrative reports, audits, or investigations.

Petitioners Graham County et al. filed a petition for certiorari in which they emphasized, among other things, the circuit split and the large number of claims brought under the Act. The Court called for the views of the Solicitor General, who filed a brief urging the Court to grant certiorari. Certiorari was granted on June 22, 2009.

In their merits brief, petitioners argue – as they did in their petition for certiorari – that the statutory language is plain and that the statute’s use of the term “administrative” is not the same as the phrase “federal administrative.” Moreover, they contend that the Fourth Circuit improperly relied on the doctrine of noscitur a sociis – a word is known by the company that it keeps – because only two of the words and phrases in the statute are uniquely federal; by contrast, the statute also applies to “news media,” which is clearly not federal. The Fourth Circuit’s interpretation, they also argue, undermines the purpose of the public disclosure bar by encouraging qui tam actions based on publicly disclosed information. Finally, they seek to refute public policy arguments made to support the Fourth Circuit’s interpretation, including the prospect that a contrary holding would encourage states to distort reports that highlight wrongdoing. This final argument is supported by an amicus brief on behalf of thirty states, who argue that including state and county reports and audits within the scope of the public disclosure bar will protect state interests. Petitioners counter that this is not true: indeed, because states are the original source of state reports and audits, they could bring qui tam actions themselves.

In her brief on the merits, Wilson – supported by an amicus brief by the Solicitor General – argues that because the word “administrative” is sandwiched between two clearly federal qualifiers – “congressional” and “Government Accounting Office” – in the public disclosure bar, “administrative” is properly read as also being limited to federal administrative proceedings. She divides the public disclosure bar provision into three different kinds of public disclosures: (1) those made during a “criminal, civil, or administrative hearing”; (2) those made during a “congressional, administrative, or [GAO] report, hearing, audit, or investigation”; and (3) those made in “the news media.” Because these categories are distinct, Wilson contends, the reference to disclosures by the news media does not undermine the purely federal nature of the second category. Wilson also argues that the Fourth Circuit’s interpretation of the public disclosure bar is consistent with the history of the Federal Claims Act, the 1986 Amendments to which were intended to “encourage more qui tam suits” by relaxing the jurisdictional bar. Thus, including state and local audits, reports, and investigations within the public disclosure bar would expand the jurisdictional bar, contrary to congressional intent. Finally, Wilson counters that concerns that the Fourth Circuit’s interpretation will encourage “parasitic relators” are overstated and contrary to the Act’s purpose of encouraging of qui tam actions.

Links and Further Information

Media Links

From the Blogosphere

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