State Farm Fire and Casualty Co. v. U.S. ex rel. Rigsby

PETITIONER: State Farm Fire and Casualty Co.
RESPONDENT: United States ex rel. Cori Rigsby, et al.
LOCATION: U.S. Court of Appeals for the Fifth Circuit

DOCKET NO.: 15-513
DECIDED BY:
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: US ()
GRANTED: May 31, 2016
ARGUED: Nov 01, 2016

ADVOCATES:
John F. Bash - for United States, as amicus curiae
Kathleen M. Sullivan - for petitioner
Tejinder Singh - for respondents

Facts of the case

Many homeowners in the Gulf Coast area had two separate insurance policies: One that covered flood but not wind damage, and another that covered wind but not flood damage. These policies were frequently administered by the same private insurance company, but the company would be responsible for paying wind damage claims, while government funds would pay for flood damage claims; therefore, there was an incentive for the companies to classify damage as caused by flood rather than wind. State Farm Fire and Casualty Co. (State Farm) was one of these companies that administered such policies in the Gulf Coast area. Cori Rigsby was a State Farm claims adjuster who believed that State Farm was wrongfully seeking to maximize its policyholders’ flood damage claims and minimize wind damage claims after Hurricane Katrina. Rigsby sued State Farm under the False Claims Act (FCA). The district court determined that State Farm had submitted false claims in violation of the FCA. On appeal, State Farm argued Rigsby had violated the FCA’s seal requirement, which stated that the complaint cannot be disclosed until the court orders the complaint served on the defendant, and that violation of the FCA seal requirement warrants immediate dismissal. The U.S. Court of Appeals for the Fifth Circuit held that, although Rigsby violated the seal requirement by disclosing the existence of the suit, the violation of the seal requirement does not warrant immediate dismissal.

Question

What standard governs the decision of whether a claim under the False Claims Act should be dismissed because the complaining party violated the seal requirement?

Media for State Farm Fire and Casualty Co. v. U.S. ex rel. Rigsby

Audio Transcription for Oral Argument - November 01, 2016 in State Farm Fire and Casualty Co. v. U.S. ex rel. Rigsby

John G. Roberts, Jr.:

We'll hear argument first this morning in Case No. 15-513, State Farm Fire and Casualty Company v. United States, ex rel. Rigsby. Ms. Sullivan.

Kathleen M. Sullivan:

Mr. Chief Justice, and may it please the Court: The False Claims Act asks very little of a private qui tam relator who would step into the government's shoes, file under seal, serve only on the government, and maintain the seal until it is lifted. Respondents here violated that requirement. They leaked the content and existence of their suit to the Associated Press, ABC, and the New York Times.

And yet, under this rule adopted by the court of appeals, they suffered no consequence whatever for that violation.

This Court should reverse or vacate and hold that such bad-faith, willful, and severe violations warrant dismissal under either -- any appropriate test.

Anthony M. Kennedy:

Did you seek any sanction of -- for the seal violations other than dismissal?

Kathleen M. Sullivan:

We did not, Your Honor.

We sought dismissal repeatedly.

Anthony M. Kennedy:

Why not?

Kathleen M. Sullivan:

Your Honor, we think dismissal was the appropriate sanction and that any alternative sanction would be toothless here for -- for -- just to begin --

Ruth Bader Ginsburg:

From -- from -- perhaps from the defendant's point of view, but I thought the whole purpose of sealing the materials was not to tip off the defendant.

And if that's so, then the defendant would benefit from being tipped off, and the government -- who I think you agree is the primary concern of Congress to be protected -- the government then would be left with the choice of either drop -- dropping the suit or expending its own resources on it. So the one that was really penalized, in addition to the qui tam plaintiffs, is the government.

Kathleen M. Sullivan:

Your Honor, we think that Congress intended a statutory bargain that does not give the government absolute discretion to decide whether the seal has been violated. And let me explain first what the statutory bargain is.

The statutory bargain set forth in 3730(b)(2) is, the relator gets the litigating authority of the government.

It gets to see -- share in any award the government might obtain, but on condition -- on a mandatory condition that it abide by the simple requirements I mentioned, of keeping the -- the complaint under seal.

Ruth Bader Ginsburg:

And if it's a condition for the government's benefit, the government can waive it.

Kathleen M. Sullivan:

Your Honor, we don't agree with that.

We don't -- we think that Congress could have said that the seal should be maintained at the Attorney General's discretion.

It did not say that; it said the seal's --

Anthony M. Kennedy:

Well, just under Justice Ginsburg's question, why -- why don't the defendants have a stronger interest in having the seal requirement followed than the government does?

Kathleen M. Sullivan:

Respectfully, I disagree, Your Honor.

Anthony M. Kennedy:

That's the point of the question right now.

Kathleen M. Sullivan:

Yes, but let me go back to the question.

The government does have an interest in having the seal maintained.

The seal is, under the '86 amendments, it -- it's required, in order that the government may investigate the claims, decide whether it -- to intervene, and also pursue any criminal investigations that might have already commenced or be commenced in light of the complaint. But that doesn't just protect the government's discretion; it protects the operation of the statute.

And the way it does that is it gives the government a period of time in which it may decide to do any of three things: Intervene and conduct the qui tam case, decline to intervene, or, as in happen -- as happens in very many cases, settle the case with the defendants before the seal is lifted.

And as the Second Circuit said in Pilon, which we think gives the best version of a discretionary test, the incentives for settlement which benefits the taxpayers and the treasury will often disappear if a potentially meritorious complaint is filed and a defendant is willing to reach a -- a -- a speedy and valuable settlement with the government in order to avoid unsealing.

John G. Roberts, Jr.:

So you're arguing -- you're arguing the government's interests, but it -- it rings a little hollow when we see that the government is on the other side.

Kathleen M. Sullivan:

Yes, Mr. Chief Justice.

I'm in a difficult position, arguing that we serve the government's interests better than the government suggests.

But let me say why I think it's very important not to see this as something that is the government's seal to be maintained at the government's discretion. When Congress sets a mandatory precondition to suit, this Court has always held that the requirement merits dismissal -- Hallstrom is the case most clearly on point -- because --

Sarah from Law Aspect

Hi there, would you like to get such a paper? How about receiving a customized one? Check it out https://goo.gl/9aavBA