Seal Trumps Speech in False Claims Act Case

The U.S. Court of Appeals for the Fourth Circuit recently ruled against three public interest groups that sought to limit the government's ability to gag whistleblowers who file complaints under the False Claims Act (FCA). The ruling upheld a lower court decision to dismiss the suit.

The American Civil Liberties Union (ACLU) filed suit against the government on behalf of the Government Accountability Project (GAP) and OMB Watch. In ACLU v. Holder, the plaintiffs contended that the extended use of the FCA seal had violated the First Amendment as well as separation of powers. The plaintiffs sought to limit the government's ability to restrict the speech of whistleblowers related to their complaints.

The FCA is a tremendous tool that encourages whistleblowers to step forward with information on waste, fraud, and abuse in government programs. Under the FCA, whistleblowers may receive a percentage of the money saved by the government if their complaints are successful.

The law allows the government to seal cases for 60 days from the time complaints are filed to allow the Department of Justice to investigate and decide whether or not to proceed. However, in practice, these seals can last much longer, dragging out from months into years, during which time whistleblowers often feel they cannot discuss the problem or pursue other means of addressing the issue despite the uncertainty of government action.

The intended purpose of the seal is to protect whistleblowers from retaliation by providing them with anonymity until the complaint moves forward, and in many cases, that is still how the seal functions. But in some cases, whistleblowers are less concerned with anonymity and are eager to discuss the problems they have uncovered with members of Congress and the media. In those cases, the seal can act as a gag on a complainant.

The Fourth Circuit ruled 2-1 to dismiss the suit and maintain the government's authority to apply the FCA seal as it had been prior to the suit. The majority opinion found that the seal provision was narrowly tailored in three ways:

  • First, that the seal is only supposed to last for 60 days
  • Second, that a court gets to review the seal if the government chooses to extend it beyond the initial 60-day period
  • Third, that the seal only limits whistleblowers from discussing the FCA complaint but not the underlying fraud

The third point, that "[n]othing in the FCA prevents the qui tam relator from disclosing the existence of the fraud" is close to the point that the plaintiffs sought to clarify with the lawsuit. However, the ruling also noted, "The FCA's seal provisions, however, only preclude a qui tam relator who wants to use the FCA to recover money from discussing the FCA complaint for a brief period of time." The concern is that whistleblowers using the FCA in hopes of recovering funds will find it difficult to discuss the underlying fraud without running the risk of discussing some aspect of the complaint. Rather than run the risk of invalidating their complaint, whistleblowers will discuss nothing about the underlying issues while the seal is in place.

The dissenting opinion by Judge Roger Gregory, however, found that transparency served an important purpose in holding the government accountable in its implementation of the FCA. Gregory wrote:

The freedom to speak about FCA complaints bolsters the public role of relators and pressures the government to rigorously enforce the FCA—or to expeditiously decline to intervene. It also reduces the risk that the government will under-enforce the FCA for political reasons, such as against campaign donors. Indeed, there is reason to believe that speech about FCA under-enforcement remains important.

Gregory goes on to note that in reality, the government has interpreted the scope of the seal more broadly then limiting whistleblowers from discussing the specific complaint and agreed that the seal could limit the speech of those wishing to discuss the underlying issues. Gregory stated, "I am hard-pressed to see how any relator could still speak about fraud without violating the seal provisions or being chilled," and concluded that the government could threaten criminal charges against anyone who disclosed the basic facts of the fraud in an FCA complaint.

The plaintiffs have 45 days to decide if they will appeal the circuit court's ruling.

back to Blog