Court Opinion

ID: 9482780
Source: CourtListenerOpinion
Date Created: 2023-08-05 09:00:15.468019+00
Date Added: 2024-06-11T17:49:11.961234
License: Public Domain

WALKER, Circuit Judge,
dissenting:
The majority finds a public disclosure in the fact that FBI agents interviewing potential witnesses advised “innocent employees” of John Doe Corporation of the fraud. I have two difficulties with this conclusion. First, the factual record does not support the claim that the FBI interviewed “innocent employees” and for that reason this case at least should be remanded for further factual development. Second, even assuming that the FBI did interview “strangers to the fraud”, I do not agree that advising individual employees of the targeted organization would necessarily constitute a public disclosure under the statute. I do not think that bringing the fraud to the attention of innocent employees, who have no incentive to make further disclosures to the detriment of their employer, serves the purpose of the qui tam statute of preventing the government from sitting on its hands. Finally, I believe that by finding a public disclosure here, the majority is effectively countenancing a return to the “government investigation” standard, which Congress rejected in the 1986 amendments to the False Claims Act. Accordingly, I dissent.

1. Were “innocent" employees interviewed?

The majority repeatedly characterizes the people interviewed by the government, upon whom the majority rests its conclusion of public disclosure, as “strangers to the fraud” and “innocent employees.” I am not sure how the majority justifies this critical determination. Certainly it is possible that some of the people targeted by the government in fact were unaware of the *325fraudulent course of the corporation’s business. However, the majority’s arrival at this conclusion seems to be based on guesswork and supposition.
The record does not support what the majority suggests is “clear.” The only evidence pertaining to the state of mind of those interviewed by the government are two affidavits submitted by an FBI agent. In one affidavit, the agent stated that “[w]e asked the persons we spoke to about their knowledge of these allegations. Some of the people we spoke to provided further information in support of these allegations and some refused to speak with us altogether.” In the other, the agent reported that “[s]ome of the employees who were questioned acknowledged that fraud against the United States had been taking place.” In neither affidavit did the agent state, or even suggest, that any of the interviewed employees were without knowledge of the pervasive frauds alleged to be occurring at John Doe Corp. It is only by judicial alchemy that the majority can convert this factual record into its conclusion that some of those interviewed were “innocent employees” who knew nothing of the ongoing fraud. At the very least, then, this case should be remanded for further fact finding to determine whether any of the employees interviewed were in fact ignorant of the fraud.

2. Would disclosure by the FBI to innocent employees of the company constitute a “public disclosure”?

I agree with the majority that it is not necessary that members of the public have “a legal right to pry the allegations of fraud from the mouths of innocent employees” in order for there to be a public disclosure. However, the majority also states that “once allegations of fraud are revealed to members of the public with no prior knowledge thereof”, a public disclosure has occurred. Presumably, “members of the public” could be one or two people with no incentive to further reveal what they have learned. This I cannot accept. As the Third Circuit recognized in U.S. ex rel. Stinson v. Prudential Ins, 944 F.2d 1149, 1161 (3rd Cir.1991), the statute demands “a practical, commonsense interpretation of ‘public disclosure,’ one that distinguishes between information hidden in files or disclosed in private and information ... which is presumptively ... available for ... general use.” (emphasis added). The majority departs from Stinson by treating matters “disclosed in private” as if they were presumptively available for general use.
Such an expansive reading of “public disclosure” thwarts Congressional intent in amending the qui tarn provision. The purpose of the 1986 expansion of the False Claims Act was to encourage the discovery of fraud and prevent the government from “sitting” on fraud of which it had knowledge. See United States v. CAC-Ramsay, Inc., 744 F.Supp. 1158, 1160 (S.D.Fla.1990). Thus, in assessing whether or not there has been a public disclosure, courts should be focusing on whether there has been sufficient dissemination such that it is reasonably likely that the fraud will come to light.
This standard might be met where, as in Stinson, the information is deposited in a place generally accessible by the public. No such deposit has occurred in this case. Alternatively, there might be a public disclosure where the fraud is privately disclosed to people with an incentive to bring the fraud to public attention. However, I think it unlikely that this standard would be met in the present case, even if we assume that the FBI did interview “innocent” employees.
After all, even innocent employees have compelling reasons not to alert the general public to frauds committed by their employer. The whistleblowers’ lot is not a happy one. The innocent employee who comes forward with allegations of fraud by her employer knows that her job may be in jeopardy. Thus, contrary to my colleagues, I think there is a clear distinction between information communicated to employees and to customers. See Majority Opinion at 323. Customers are in a far less precarious position vis-a-vis the defrauding corporation, and thus are far more likely to bring the fraud to light.
*326Indeed, this very case demonstrates that the sort of disclosure at issue here will rarely bring fraud to light and that it will do precious little to prevent the government from “sitting on its hands.” In the two years since the government interviewed the “innocent employees,” there is no indication that anyone other than government investigators and employees of the corporation (and the relator) acquired any knowledge either of the identity of John Doe Corporation or of the extent of the fraud. Moreover, during the two years since what the majority considers to be “public disclosure” of the fraud, the government has yet to initiate either a criminal or civil action against John Doe Corporation.
Finally, the rule adopted by the majority, that every disclosure to an ignorant potential witness constitutes a public disclosure, effectively shifts the standard from “public disclosure” back to “government investigation.” After all, in virtually every investigation the government will interview some potential witnesses who later may turn out to have had no prior awareness of the misconduct. This cannot be what Congress envisioned by “public disclosure.” Congress decisively rejected the “government investigation” standard in the 1986 amendments to the False Claims Act. We should not disturb the balance Congress struck in 1986 between the desire to avoid parasitic claims and the need to bring fraud to light by resurrecting that standard in a different guise.
In sum, I believe the majority is mistaken on two counts. First, the factual record does not support the majority’s conclusion that the government interviewed “innocent employees” who were “strangers to the fraud.” Second, the legal standard for public disclosure adopted by the majority is contrary to Congressional purpose in expanding the False Claims Act.
I respectfully dissent.