Tuesday, December 17, 2013

Refusing to Extend the Seal: Court Refuses Requests to Extend Seal of Qui Tams for Informal Discovery or Settlement Negotiations

Section 3730(2), Title 31, of the False Claims Act ("FCA") provides that when a qui tam relator files an FCA complaint under seal, the case may remain under seal for "at least 60 days" while the government investigates and decides on whether or not to intervene. It is the rare case that remains under seal only 60 days, however, and in some cases, the government keeps the qui tam under seal for years, even over the objection of the relator. For example, one case in the Middle District of Florida, the Wasserman case, was filed under seal in 2004, but the government did not unseal it until 2010.

Ben Vernia at False Claims Counsel blog recently wrote about one federal district court judge in South Carolina who has given notice that the court will no longer agree to these automatic extensions of the seal for qui tams. In a recent "standing order," U.S. District Court Judge Joseph Anderson, Jr. observed that in "recent years, this court has extended the seal period, at the request of the government, on eight occasions in two actions," only to be informed by the government after all that time that it was not going to intervene in those cases.

Judge Anderson noted that the 4th Circuit observed that there are four reasons why Congress adopted the sixty-day seal period: "(1) to permit the United States to determine whether it already was investigating the fraud allegations (either criminally or civilly); (2) to permit the United States to investigate the allegations to decide whether to intervene; (3) to prevent an alleged fraudster from being tipped off about an investigation; and, (4) to protect the reputation of a defendant in that the defendant is named in a fraud action brought in the name of the United States, but the United States has not yet decided whether to intervene." Am. Civil Liberties Union v. Holder, 673 F.3d 245, 250 (4th Cir. 2011). Judge Anderson, however, noted that "none of the foregoing reasons for extending the seal period involve discovery of documents from the putative defendant or settlement negotiations." In turn, the Court observed further that the FCA's legislative history provides that "with the vast majority of cases, 60 days is an adequate amount of time to allow Government coordination, review and decision."

In light of these considerations, Judge Anderson stated that in deciding whether "good cause" exists to continue the seal after 60 days, "henceforth, the court will no longer consider informal discovery and/or settlement negotiations as sufficient grounds for extending the seal period."

If widely adopted, Judge Anderson's position would radically change FCA practice both for relators and qui tam defendants.

A. Brian Albritton
December 16, 2013

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