FOIA weakened as whistleblower weapon

Tuesday, May 17, 2011

WASHINGTON — The Freedom of Information Act has lost some of its potency as a tool for corporate whistleblowers.

The Supreme Court yesterday ruled in the case of Schindler Elevator Corp. v. United States ex. rel. Kirk that documents obtained under FOIA cannot form the basis of whistleblower suits under the False Claims Act. The decision was not an interpretation of the FOIA itself, but rather of the false-claims law, which allows citizens to file suits on behalf of the government, challenging fraud and abuse by government contractors. The Civil War-era law allows citizens to win a substantial percentage of what is recovered through the litigation.

The law discourages opportunistic or scavenger lawsuits, however, by requiring that claims not be based on information that has already been publicly disclosed in a government report or by the news media. In other words, the law prevents individuals from profiting from reports of fraud already revealed by others.

The question before the Court in the case decided yesterday was whether the release of documents under FOIA amounts to a “report” that would make a suit based on those documents invalid. The opinion written by Justice Clarence Thomas said yes.

Daniel Kirk, who worked at Schindler Elevator, filed a suit claiming that the company falsified reports it made to the federal government concerning the number of veterans it employed in government contract work. In support of his claim, he cited documents his wife had obtained under the FOIA. The company sought dismissal of the suit because of the False Claims Act provision barring suits based on public reports made by the government.

The 2nd U.S. Circuit Court of Appeals sided with Kirk, as did the U.S. government, but the Supreme Court reversed, favoring Schindler Elevator. Thomas wrote that even though Kirk had suspicions about the false statements based on his own time at the company, the ordinary meaning of “report” includes FOIA requests.

“Anyone could have filed the same FOIA requests and then filed the same suit,” wrote Thomas, adding that Kirk’s suit was the sort of case that was “a classic example of the opportunistic litigation” barred by the law.

The high court sent the case back to the 2nd Circuit to determine the extent to which Kirk’s lawsuit was actually based on the FOIA disclosures. So the case could stay alive in spite of yesterday’s ruling.

New York lawyer Steven Reiss, who argued the case for Schindler Elevator, said the ruling was “very important for what won’t happen” as a result. If the Court had upheld the 2nd Circuit, Reiss said “we would have seen a flood of cases” brought by “trolling plaintiffs” using FOIA to find documents that could be used in this kind of lawsuit.

Justice Ruth Bader Ginsburg dissented, joined by Justices Stephen Breyer and Sonia Sotomayor. Ginsburg disagreed that Kirk’s lawsuit was opportunistic and said the majority opinion “weakens the force of the [False Claims Act] as a weapon against fraud on the part of government contractors.” She said whistleblowers should not be penalized for seeking corroboration of their claims through FOIA, and urged Congress to consider changing the law to counteract today’s ruling. Justice Elena Kagan did not participate in the case.

Adina Rosenbaum of Public Citizen, which filed a brief in support of Kirk, told Reuters that the ruling “puts up an additional barrier to people who uncover fraud against the government. It sometimes takes the knowledge of a person like Mr. Kirk to find the value in documents that the government possesses.”

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