Notable Recent Decisions Under the False Claims Act--Part 2

February 18, 2013

knoxville_courthouse1.jpgThis is the second installment of our four part series about notable recent decisions under the False Claims Act. This week's featured decision is United States ex rel. Glenda Martin v. Life Care Centers of America, Inc., 2012 WL 6084626 (E.D. Tenn., Nov. 15, 2012).

This case deals with the extent to which matters under the FCA should remain under seal, both during the pendency of the Government's pre-intervention investigation and thereafter. The specific issues presented were: whether the court should grant the Government's request to maintain several documents under seal after the Government intervened in an action; and whether a local newspaper should be entitled to intervene to oppose the requested seal. The District Court allowed the newspaper to intervene and denied the Government's request to maintain certain documents under seal. While the case involves narrow issues, the District Court's excoriation of the Government for what it believed to be its abuse of the sealing provisions of the FCA is priceless.

This case was filed in October 2008. The Government sought several extensions of the seal. On January 13, 2011, the Court granted the Government's request for an indefinite extension of time in which the Government could make its intervention determination, and it ordered that the case be administratively closed. In support of that request, the Government had filed a status report indicating that it was involved in a "nationwide investigation" of the defendant, that it "continues to devote significant time and resources to this investigation," that its investigation had already involved over 150 witnesses nationwide, that it intended to serve additional subpoenas, that it had made a "lengthy and detailed presentation" to the defendant, and that the defendant had requested time to consider the information presented.

In March 2012, the Government transferred a second qui tam case raising the same issues to the Eastern District of Tennessee and sought to consolidate the two cases. At a status conference held on consolidation request, the Government objected to a reporter's presence and asked that the courtroom be sealed. The Court then asked the parties to brief whether all pleadings in the case should remain sealed and whether the Court should close the courtroom for all future proceedings in the case.

Before briefing on these two issues was completed, the Government moved to intervene in part in the case, requesting that the docket remain under seal, excepting only the Complaint and the notice of intention to intervene. The Government sought the continuation of the seal over the rest of the docket "to protect the identity of cooperating witnesses until such time as the [G]overnment may be compelled to disclose their identities under applicable rules of discovery."

The District Court consolidated the cases and allowed the media company to intervene. It then assessed the seal. The Court first noted that the purpose of the seal was to determine whether the Government would intervene and to "prevent alleged wrongdoers from being tipped off that they are under investigation." The Court "conclude[d] that the Government has stretched the FCA's under-seal requirement to its breaking point." Indeed, the Court took the government to task, noting that "the length of time this case has remained under seal borders on the absurd....It appears to the Court that the Government's pre-intervention strategies approach the abusive, and, in any event fall well beyond the contemplation of the FCA."

First, "the government has apparently used the under-seal period as a means of conducting unchecked discovery in an effort to build a more complete case against the Defendant." The FCA does not sanction such "one sided discovery."
Second, "[t]he actions the Government took in the course of its investigation are also indicative of significant overreach." For example, in approaching the defendant and making a "lengthy and detailed presentation" about its investigation, the Government completely undermined the purpose of the seal, to keep from tipping off potential wrongdoers. The Government's actions, moreover, clearly indicate that it already decided that it would intervene in the case.

The District Court then put the Government on notice that "in all future qui tam proceedings under the False Claims Act, the Court will expect the Government to provide notice regarding its intervention within the statutorily mandated 60-day period." Requests for further extension "will be met with significant scrutiny - allegations regarding a lack of resources or manufactured complexity simply will not suffice."

The Court finally denied without prejudice the Government's request to maintain the seal over certain documents, essentially daring the Government to file additional information to justify such relief, but instructing that if it does, it must "define precisely which documents it believes should remain sealed; state clearly any bases on which the information should remain sealed (e.g., Fed.R.Civ.P. 26) and identify why the Government's interest in having the material sealed outweighs the strong presumption in favor of public access to this Court's records."

Not surprisingly, the day after this opinion was issued, the Government filed a notice indicating that it would not seek to extend the seal over any of the documents.