The latest potential SCOTUS case involves the Act’s “public disclose” bar. Typically, a False Claims Act case must be dismissed if “substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed” or in a federal hearing, report, audit, or investigation, in the news media. However, there is some dispute regarding how narrowly the phrase “substantially the same” should be defined.
On October 3, 2016, the Supreme Court invited the U.S. Solicitor General to offer the U.S. Government’s views on United States ex rel. Advocates for Basic Legal Equality v. U.S. Bank., 816 F.3d 428 (6th Cir. 2016). In Advocates for Basic Legal Equality, the Sixth Circuit Court of Appeals dismissed a False Claims Act case against U.S. Bank on the basis that a prior public disclosure barred the action. The issue is whether the prior disclosure involved the “substantially same allegations” as those in the case.
Advocates for Basic Legal Equality involves the FHA mortgage insurance program, which U.S. Bank has participated in. Under the program, each time U.S. Bank requested an insurance payment from the government (after a borrower defaults on a loan), the bank was required to certify to the federal government that it followed the program’s requirements, including loan mitigation practices. The relator in Advocates for Basic Legal Equality accused U.S. Bank of falsely certifying that it engaged in the required loan mitigation practices with the borrowers before foreclosure and before it submitted insurance claims to the government.
However, U.S. Bank argued successfully that the allegations that formed the basis of the claims against it had already been “publicly disclosed” in: (1) a 2011 consent order between U.S. Bank and the government regarding alleged foreclosure wrongdoing; and (2) a 2011 foreclosure review report, which “noted that various banks, including U.S. Bank, had failed to take a variety of loss mitigation measures.”
The relator argued, unsuccessfully, that “neither the consent order nor the foreclosure practices review dealt with loss mitigation related to the types of loans here.” The Sixth Circuit affirmed the dismissal of the complaint, holding that “additional details are insufficient to avoid our broad construction of the public disclosure bar, which precludes individuals who base any part of their allegations on publicly disclosed information from bringing a later qui tam action.”
The Supreme Court has not set a deadline for the Solicitor General to weigh in. If the high court decides to take the case, it will likely result in a clearer definition of the phrase “substantially same allegations” under the False Claims Act.
