December 06, 2016

Supreme Court Decides State Farm Fire & Casualty Co. v. United States ex rel. Rigsby

On December 6, 2016, the United States Supreme Court decided State Farm Fire & Casualty Co. v. United States ex rel. Rigsby, No. 15-513, holding that the False Claims Act (FCA) does not mandate dismissal of the case when a relator violates the statutory seal on the complaint, but that a district court has discretion to determine what sanction is appropriate. 

The FCA allows private parties to file suit on behalf of the government against persons who make false claims for payment to the government. The statute requires that such a complaint “shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendants until the court so orders.”

Cori and Kerri Rigsby are insurance adjusters who assessed claims made on State Farm policies following Hurricane Katrina. They filed an FCA suit alleging that State Farm had falsely categorized certain Katrina-related damage as caused by floods rather than wind so that damages would be paid for by the government rather than State Farm. The Rigsbys’ lawyer violated the statutory seal by disclosing the existence of their complaint to national news outlets, and later withdrew from the case. The district court and Fifth Circuit held that FCA did not require dismissal of the case based on the disclosure.

The Supreme Court affirmed. The Court noted that filing under seal is “a mandatory rule” but that the FCA “says nothing … about the remedy for a violation of that rule.” The Court explained that “the seal requirement was intended in main to protect the Government’s interests” by ensuring that FCA suits will not “alert defendants to a pending federal criminal investigation.” The Court concluded that “it would make little sense to adopt a rigid interpretation of the seal provision that prejudices the Government by depriving it of needed assistance from private parties.” The Court held that “the question whether dismissal is appropriate should be left to the sound discretion of the district court,” and that “tools like monetary penalties or attorney discipline remain available to punish and deter seal violations even when dismissal is not appropriate.”

Justice Kennedy delivered the decision for a unanimous Court.

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