A PUBLICATION OF SHOOK, HARDY & BACON L.L.P. MARCH 28, 2007
Attorneys in SHB’s
Government Enforcement &
Compliance Practice have
U.S. SUPREME COURT ISSUES IMPORTANT RULING ON THE the breadth of experience to
“ORIGINAL SOURCE” REQUIREMENT meet the demands of a wide
range of criminal and civil
regulatory, investigative and
The U.S. Supreme Court has issued a much anticipated decision defining, among prosecutorial matters.
other things, when a relator can qualify as an “original source” and thus overcome what
We have successfully repre-
is known as the public disclosure bar to a False Claims Act (FCA) lawsuit. Rockwell sented clients at all stages of
Int’l Corp. v. U.S., No. 05-1272 (U.S. Mar. 27, 2007). The public disclosure bar limits the criminal process, includ-
ing agency investigations,
who may bring a false claim action when the underlying information is already within the legislative inquiries, grand-
public domain. In that circumstance, only the U.S. attorney general and those who qual- jury investigations,
ify as an “original source” may do so. indictments, complex jury
trials, appeals, and collateral
proceedings. Our attorneys
The most significant rulings in Rockwell include: (1) the “original source” require- have particular expertise in
ment is a pre-requisite to subject matter jurisdiction; (2) to qualify as an “original source” defending antitrust, health
care and complex fraud pros-
under the FCA, a relator must have direct and independent knowledge of the informa- ecutions.
tion on which his or her allegations are based; (3) the term “allegations” includes, at a
minimum, the allegations in the original complaint and any amended complaint; and (4) We regularly handle non-
criminal white collar matters
a relator’s failure to qualify as an original source will result in a dismissal of his including qui tam (“whistle-
complaint, but will not deprive the government of its action. blower”) lawsuits, civil RICO
actions, debarment, peer-
review proceedings, and
DECISION SUMMARY professional discipline. Our
attorneys have structured
The Court held that, to qualify as an “original source,” a whistleblower must have anti-money-laundering and
direct and independent knowledge of the information on which the allegations are other regulatory compliance
based. The Court re-affirmed that the original source requirement is jurisdictional and, programs for clients and
frequently lecture on these
thus may be raised at any time in the proceedings and may not be waived by any party. matters.
The Court also discussed the impact of its holding on government intervention. Where
the government intervenes, the determination that a relator is not an original source The Practice is staffed with
former state and federal
does not result in dismissal. Instead, the attorney general essentially becomes a substi- prosecutors as well as former
tute plaintiff, who brings the action as required under section §3734(e)(4)(a). Where the enforcement-agency attor-
neys who have served at all
government has declined to intervene, however, failure to qualify as an original source levels of state and federal
will result in dismissal for lack of subject matter jurisdiction. As a practical matter, the government.
holding will likely discourage relators from bringing cases that may be subject to the
public disclosure bar.
Qui Tam Litigation Alert MARCH 28, 2007 - PAGE 2
Shook, Hardy & Bacon has
THE FACTS a proven track record of
As the Court noted, the facts were long and complex, taking “nearly two complex litigation. Our
capacity to draw on the
decades to seep, so to speak, into this Court.” Essentially, relator James Stone was depth of experience of our
an engineer at Rockwell’s Rocky Flats plant; he reviewed plans to convert toxic pond civil trial lawyers gives us
sludge into pondcrete, a solid mixture of sludge and concrete, for transport and stor- an unparalleled advantage
in the defense of high-
age. Based on his review, Stone predicted that the process would result in an stakes Government
unstable mixture that would later deteriorate and release toxic wastes because of a Enforcement &
problem with the proposed piping system. Rockwell manufactured the pondcrete
notwithstanding his opinion.
A year after the relator left Rockwell’s employ, Stone contacted the FBI
and alleged environmental crimes during the period of his employment. The following
year, the pondcrete blocks began to leak, and the media reported these problems.
Approximately one year later, Stone filed his qui tam complaint, and, while the
government initially declined to intervene, it later reversed course, and its motion to
intervene was granted. A jury found for the relator and the government on claims
arising from site problems other than those relator had alleged.
Rockwell moved post-trial to dismiss the successful claims on the
ground that relator was not an original source of the claims that proceeded to trial.
The Court, in a 6-2 opinion authored by Justice Antonin Scalia, held that the relator For more information,
was not an original source of the allegations tried and dismissed him from the action.
It preserved the verdict as to the government, however, because, the attorney David Douglass
general became the plaintiff when relator was dismissed, which satisfied statutory SHB Washington, D.C.
THE RULING’S SIGNIFICANCE Paul Harris
SHB Washington, D.C.
The holding, although in many ways narrow, may nevertheless serve as (202) 783-8400
a significant limitation on the reach of the False Claims Act. First, the greatest impact
of the Court’s decision will be on those cases in which the government declines to Michael Koon
intervene. In that circumstance, failure to qualify as an “original source” will be fatal SHB Kansas City
to relator’s claims and will result in dismissal of the case for lack of subject matter (816) 474-6550
jurisdiction. Further, because lack of subject matter jurisdiction may be raised at any
time, whether a relator satisfied the test can be raised after extensive discovery on Carol Poindexter
relator’s claims. Thus, the decision will force relators to clearly and precisely articu- SHB Kansas City
late their allegations, which, in conjunction with the stringent requirements of Federal (816) 474-6550
Rule of Civil Procedure 9(b), will make pleading qui tam suits more difficult. It should
also be noted that, although the public disclosure in Rockwell was media disclosure, www.shb.com
that need not be the case. Thus, extensive discovery into what was known publicly
concerning the allegations at issue by, among others, former employees, competitors
and regulators, may prove fruitful to defeat a relator’s claims.
Qui Tam Litigation Alert MARCH 28, 2007 - PAGE 3
Second, when a public disclosure has been made, relators and their
counsel will be forced to carefully assess the likelihood that the relator is an “original
source” of allegations that will likely be part of the case. The holding makes it less
likely that where a public disclosure has been made, a relator will be able to
successfully file a qui tam action and parlay that into a recovery. Because the ABOUT SHB
government often depends on relators and their counsel to act as a drawing force in Shook, Hardy & Bacon is
an investigation, the disincentive to filing a qui tam lawsuit in matters that are already widely recognized as a
public may reduce the number of qui tam suits the government files and actively premier litigation firm in the
United States and abroad.
investigates. For more than a century,
the firm has defended
Additionally, the Court’s expansive definition of “allegations” may cause clients in some of the most
substantial national and
a wedge between the government and relators when the government attempts to international product liability
narrow the case through an amended complaint. Under the Court’s reasoning, the and mass tort litigations.
relator must be the original source of the allegations that ultimately succeed at trial.
Shook attorneys have
Thus, the inquiry is into the allegations the relator makes, as distinguished from unparalleled experience
information he may later acquire or otherwise becomes part of the case. This inter- in organizing defense
pretation, among other matters, prevents what the Court called “claim-smuggling,” in defense themes and trying
which a relator would file a narrow complaint hoping to then ride on additional claims high-profile cases. The firm
that might subsequently become part of the case, the scenario that the Court is enormously proud of its
track record for achieving
believed described the relator’s position in Rockwell. favorable results for clients
under the most contentious
Finally, it is worth commenting that the Court was guided, in part, by a circumstances in both
federal and state courts.
decision Justice Samuel Alito authored as a judge on the Third Circuit Court of
Appeals. The ascension of Chief Justice John Roberts, who authored Totten v. The firm's clients include
Bombardier, 286 F.3d 542 (D.C. Cir. 2002), and Justice Alito, could foretell a trend in many large and multi-
national companies in the
the law. Their presence could serve as a counterweight to recent, expansive tobacco, pharmaceutical,
commentary on FCA jurisprudence and indicate that the Court will more narrowly medical device, automotive,
chemical, food and
interpret the statute in the future. beverage, oil and gas,
tural, and retail industries.
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