State Farm Fire & Cas. Co. v. United States Ex Rel. Rigsby

196 L. Ed. 2d 340, 137 S. Ct. 436, 26 Fla. L. Weekly Fed. S 397, 580 U.S. 26, 2016 WL 7078622, 2016 U.S. LEXIS 7420, 85 U.S.L.W. 4011, 46 Envtl. L. Rep. (Envtl. Law Inst.) 20185
Supreme Court of the United States·Decided December 6, 2016·No. 15–513.·Published·Cited by 103 cases

Opinion

Justice KENNEDY delivered the opinion of the Court.

This case addresses the question of the proper remedy when there is a violation of the False Claims Act (FCA) requirement that certain complaints must be sealed for a limited time period. See 31 U.S.C. § 3730 (b)(2). There are two questions presented before this Court. First, do any and all violations of the seal requirement mandate dismissal of a private party's complaint with prejudice? Second, if dismissal is not mandatory, did the District *440 Court here abuse its discretion by declining to dismiss respondents' complaint?

I

A

The FCA imposes civil liability on an individual who, inter alia, "knowingly presents ... a false or fraudulent claim for payment or approval" to the Federal Government. § 3729(a)(1)(A). Almost unique to the FCA are its qui tam enforcement provisions, which allow a private party known as a "relator" to bring an FCA action on behalf of the Government. § 3730(b)(1) ; Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765 , 768, n. 1, 120 S.Ct. 1858 , 146 L.Ed.2d 836 (2000) (listing three other qui tam statutes). The Attorney General retains the authority to intervene in a relator's ongoing action or to bring an FCA suit in the first instance. §§ 3730(a) -(b).

This system is designed to benefit both the relator and the Government. A relator who initiates a meritorious qui tam suit receives a percentage of the ultimate damages award, plus attorney's fees and costs. § 3730(d). In turn, " 'encourag[ing] more private enforcement suits' " serves " 'to strengthen the Government's hand in fighting false claims.' " Graham County Soil and Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280 , 298, 130 S.Ct. 1396 , 176 L.Ed.2d 225 (2010).

The FCA places a number of restrictions on suits by relators. For example, under the provision known as the "first-to-file bar," a relator may not " 'bring a related action based on the facts underlying [a] pending action.' " Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, 575 U.S. ----, ----, 135 S.Ct. 1970 , 1978, 191 L.Ed.2d 899 (2015) (quoting § 3730(b)(5) ; emphasis deleted). Other FCA provisions require compliance with statutory requirements as express conditions on the relators' ability to bring suit. The paragraph known as the "public disclosure bar," for instance, provided at the time this suit was filed that " '[n]o court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions ... unless the action is brought by the Attorney General or ... an original source of the information.' " Graham County Soil and Water Conservation Dist. v. United States ex rel. Wilson, supra, at 283, n. 1, 285-286, 130 S.Ct. 1396 (quoting 31 U.S.C. § 3730 (e)(4)(A) (2006 ed.) ; footnote omitted).

The FCA also establishes specific procedures for the relator to follow when filing the complaint. Among other things, the relator must serve on the Government "[a] copy of the complaint and written disclosure of substantially all material evidence and information the [relator] possesses." § 3730(b)(2). Most relevant here, the FCA provides: "The complaint shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders." Ibid.

B

Petitioner State Farm is an insurance company. In the years before Hurricane Katrina, petitioner issued two types of homeowner-insurance policies that are relevant in this case: (1) Federal Government-backed flood insurance policies and (2) petitioner's own general homeowner insurance policies. The practical effect for homeowners who were affected by Hurricane Katrina and who purchased both policies was that petitioner would be responsible for paying for wind damage, while the Government would pay for flood damage. As the Court of Appeals noted, this arrangement *441 created a potential conflict of interest: Petitioner had "an incentive to classify hurricane damage as flood-related to limit its economic exposure." 794 F.3d 457 , 462 (C.A.5 2015).

Respondents Cori and Kerri Rigsby are former claims adjusters for one of petitioner's contractors, E.A. Renfroe & Co. Together with other adjusters, they were responsible for visiting the damaged homes of petitioner's customers to determine the extent to which a homeowner was entitled to an insurance payout. According to respondents, petitioner instructed them and other adjusters to misclassify wind damage as flood damage in order to shift petitioner's insurance liability to the Government. See id., at 463-464 (summarizing trial evidence).

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State Farm Fire & Cas. Co. v. United States Ex Rel. Rigsby, 196 L. Ed. 2d 340, 137 S. Ct. 436, 26 Fla. L. Weekly Fed. S 397, 580 U.S. 26, 2016 WL 7078622, 2016 U.S. LEXIS 7420, 85 U.S.L.W. 4011, 46 Envtl. L. Rep. (Envtl. Law Inst.) 20185 (U.S. 2016).

196 L. Ed. 2d 340 (State Farm Fire & Cas. Co. v. United States Ex Rel. Rigsby) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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