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State Farm v. U.S. ex rel Rigsby

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Supreme Court of the United States
State Farm v. U.S. ex rel. Rigsby
Reference: 15-513
Issue: False Claims Act
Term: 2016
Important Dates
Argued: November 1, 2016
Decided: December 6, 2016
Outcome
Fifth Circuit Court of Appeals affirmed
Vote
8-0 to affirm
Majority
Chief Justice John G. Roberts • Anthony Kennedy • Clarence Thomas • Ruth Bader Ginsburg • Stephen Breyer • Samuel Alito • Sonia Sotomayor • Elena Kagan
Concurring
None
Dissenting
None


State Farm Fire and Casualty Co. v. U.S. ex rel. Rigsby is a case argued during the October 2016 term of the U.S. Supreme Court. Argument in the case was held on November 1, 2016. The case came on a writ of certiorari to the United States Court of Appeals for the 5th Circuit. On December 6, 2016, in an opinion by Justice Anthony Kennedy, the court unanimously affirmed the judgment of the Fifth Circuit.

HIGHLIGHTS
  • The case: State Farm is challenging the Fifth Circuit's denial of a motion to dismiss this case. State Farm claims that allegations made against them under the False Claims Act had to be kept under seal and that this "seal requirement" was not met. Accordingly, State Farm believes the case against them should be dismissed because of the seal requirement violation.
  • The issue: What standard must courts use when deciding whether to dismiss a claim made by a private party on behalf of the U.S. when that party violates the seal requirement of the False Claims Act?
  • The outcome: The judgment of the Fifth Circuit Court of Appeals was affirmed.


    • In brief: 31 U.S.C. § 3730(b), a provision of the False Claims Act, allows a private party known as a relator to bring a civil action, a qui tam suit, in federal court on behalf of the U.S. government against any party who has submitted false or fraudulent claims to the U.S. government, which is a violation of 31 U.S.C. § 3729. A procedural requirement alleging such violations mandates that the complaint be filed privately and kept sealed for at least 60 days unless the government chooses to intervene and proceed on its own, rather than through the relator. State Farm contends that this requirement for documents being kept under seal was violated and that, as a result, the case against them should be dismissed for this violation. The Fifth Circuit Court of Appeals rejected this argument. Oral argument before the U.S. Supreme Court was held on November 1, 2016. On December 6, 2016, in an opinion by Justice Anthony Kennedy, the court unanimously affirmed the judgment of the Fifth Circuit.

    You can review the Fifth Circuit's opinion here.[1]

    Click on the tabs below to learn more about this Supreme Court case.

    Case


    Background

    This case is about whether and when a complaint under the False Claims Act must be dismissed for a procedural violation.

    In April 2006, sisters Cori Rigsby and Kerri Rigsby brought a civil action against State Farm Fire and Casualty Company (State Farm) on behalf of the U.S. government alleging violations of 31 U.S.C. § 3729, a provision of the False Claims Act. A separate provision of the False Claims Act, 31 U.S.C. § 3730(b), permits private parties to bring civil actions on behalf of the U.S. government for alleged § 3729 violations. Such lawsuits are known as qui tam suits and the parties bringing the suits are known as qui tam relators, or simply as relators. The term qui tam translates literally as "we think" and represents a shortened form of the phrase, qui tam pro domino rege quam pro si ipso in hac parte sequitur, which translates as "he who brings an action for the king as well as for himself."[2] Relators authorized to bring qui tam lawsuits under § 3730(b) are eligible to receive between 15% and 30% of the monies recovered by the government.[1][2]

    In their complaint, the Rigsbys alleged that State Farm "submitted false claims to the United States government for payment on flood policies arising out of damage caused by Hurricane Katrina." The U.S. government, through the National Flood Insurance Program (NFIP), provides flood insurance policies "at or below actuarial rates in areas where it is uneconomical for private insurance companies to provide flood insurance." Since 1983, private property and casualty insurance companies like State Farm have been able to issue flood insurance policies in their own name, but with the government's financial backing, through a Federal Emergency Management Agency (FEMA) program called "Write Your Own" (WYO). These policies provide coverage for flood damage, but not for other types of hurricane-related damage such as wind damage. Insurance coverage for property damage caused by wind must be paid out by the insurer, not the government, per the stipulations of any individual policy.[1]

    At trial, the Rigsbys claimed that State Farm, through various means, shifted its responsibility to pay for wind-related hurricane damage by classifying the damage as flood-related hurricane damage, which would be paid out by the government-subsidized NFIP policy. The Rigsbys were limited to a single claim, in part because the district court "sought to 'strike a balance between the Relators' interests in identifying ... other allegedly false claims and the defendants' interest in preventing a far ranging and expensive discovery process.'" The district court held, however, that if the Rigsbys prevailed at trial on the single claim then additional discovery on other claims would be considered. The Rigsbys were successful on the merits and were awarded the maximum possible award, but were denied additional discovery for other claims after the verdict. Both the Rigsbys and State Farm appealed to the Fifth Circuit Court of Appeals. The Rigsbys appealed for additional discovery, while State Farm challenged the district court decision on procedural, jurisdictional, and evidentiary grounds.[1]

    In an opinion for the court, Chief Judge Carl Stewart of the Fifth Circuit held that the district court was wrong to dismiss the Rigsby's motion for additional discovery because "in denying the Rigsbys any additional discovery after a verdict in their favor, the district court abused its discretion in a manner that affected their substantial rights." This portion of the district court decision was remanded to the district court. The Fifth Circuit ruled against State Farm in holding that the district court properly had subject matter jurisdiction over the case (the jurisdictional challenge) and that, based on the evidence, the jury's verdicts were reasonably reached (the evidentiary challenge).

    In regards to the procedural challenge, State Farm claimed that the Rigsbys violated the False Claims Act's seal requirement and, as a result, the case against State Farm should have been dismissed. The seal requirement of the False Claims Act is codified as 31 U.S.C. § 3730(b)(2) and reads,[3]

    “

    A copy of the complaint and written disclosure of substantially all material evidence and information the person possesses shall be served on the Government pursuant to Rule 4(d)(4) of the Federal Rules of Civil Procedure. The complaint shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders. The Government may elect to intervene and proceed with the action within 60 days after it receives both the complaint and the material evidence and information. [4]

    		”

    Evidence filed in camera, literally "in a chamber", is filed with a court in private, outside of public and media view. The seal requirement prevents public disclosure of documents. What § 3730(b) requires then is for complaints and supporting evidence of a False Claims Act violation to be filed privately and kept secret for at least 60 days. In addressing State Farm's claim of a seal violation, the Fifth Circuit acknowledged that "Although this is an issue of first impression in this court, three circuits have addressed the consequences of an FCA seal violation and come to divergent conclusions." Ultimately, the Fifth Circuit adopted the standard used by the Ninth Circuit Court of Appeals, which was derived from that court's 1995 opinion in U.S. ex rel Lujan v. Hughes Aircraft Co. in which a district court was instructed to evaluate three factors in assessing whether a dismissal for a seal violation was merited: "1) the harm to the government from the violation; 2) the nature of the violations; and 3) whether the violations were made willfully or in bad faith." After conceding that the Rigsbys did violate the seal requirement, the court held that "even presuming bad faith, the Lujan factors favor the Rigsbys. Although they violated the seal requirement, the Rigsbys' breaches do not merit dismissal."[1] State Farm appealed to the Supreme Court of the United States.

    Petitioner's challenge

    State Farm is challenging the standard by which the Fifth Circuit Court of Appeals determined that a seal violation under the False Claims Act did not merit dismissal of the judgment against State Farm.[5]

    Certiorari granted

    On October 20, 2015, petitioner State Farm Fire and Casualty Co., initiated proceedings in the Supreme Court of the United States in filing a petition for a writ of certiorari to the United States Court of Appeals for the 5th Circuit. The U.S. Supreme Court granted State Farm's certiorari request on May 31, 2016, limiting argument to question 1 of the petition. Oral argument before the Supreme Court was held on November 1, 2016.

    Arguments


    Question presented

    Question presented:

    "What standard governs the decision whether to dismiss a relator's claim for violation of the FCA's seal requirement, 31 U.S.C. § 3730(b)(2)?"[5]


    Audio

    • Audio of oral argument:[6]



    Transcript

    • Transcript of oral argument:[7]

    Outcome

    Decision

    In a unanimous decision, the Supreme Court affirmed the decision of the United States Court of Appeals for the Ninth Circuit. Justice Anthony Kennedy delivered the opinion of the court.[8]

    Opinion

    In his opinion for the court, Justice Kennedy noted that, while the False Claims Act did not provide explicitly for a remedy should the seal requirement be violated, "The FCA’s structure is itself an indication that violating the seal requirement does not mandate dismissal. This Court adheres to the general principle that Congress’ use of 'explicit language' in one provision 'cautions against inferring' the same limitation in another provision ... And the FCA has a number of provisions that do require, in express terms, the dismissal of a relator’s action."[8]

    Justice Kennedy highlighted the government's position in support of the view that a seal violation did not necessitate dismissal of a relator's suit. In his words,[8]

    “

    Because the seal requirement was intended in main to protect the Government’s interests, 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 Federal Government agrees with this interpretation. It informs the Court that petitioner’s test 'would undermine the very governmental interests that the seal provision is meant to protect.' [4]

    		”

    Justice Kennedy concluded by rejecting the petitioners' argument that the district court abused its discretion in failing to dismiss the petitioners' motion to dismiss the lawsuit.[8]

    Concurring opinions

    There were no concurring opinions filed.

    Dissenting opinions

    There were no dissenting opinions filed.

    The opinion

    Filings

    The court granted State Farm's certiorari request on May 31, 2016, limiting argument to question 1 of the petition.

    Merits filings

    Parties' filings

    • State Farm Fire and Casualty Company, the petitioner, filed a merits brief on July 29, 2016.
    • The United States of America, ex rel. Cori Rigsby and Kerri Rigsby, the respondents, filed a merits brief on September 12, 2016.
    • State Farm filed a reply brief on the merits on October 12, 2016.

    Amicus curiae filings

    The following groups filed amicus curiae briefs in support of the petitioner, State Farm Fire and Casualty Co.

    • Brief of the American Tort Reform Association
    • Brief of the Coalition for Government Procurement
    • Brief of DRI-The Voice of the Defense Bar
    • Brief of the National Association of Criminal Defense Lawyers


    The following groups filed amicus curiae briefs in support of the respondent, U.S. ex rel Rigsby

    • Brief of the Taxpayers Against Fraud Education Fund
    • Brief of the National Whistleblower Center
    • Brief of the United States of America

    Certiorari filings

    Parties' filings

    • State Farm Fire and Casualty Company, the petitioner, filed a petition for certiorari on October 20, 2015.
    • The United States of America, ex rel. Cori Rigbsy and Kerri Rigsby, the respondents, filed a brief in opposition to certiorari on November 20, 2015.

    Amicus curiae

    The following groups filed amicus curiae briefs in support of granting certiorari

    • Brief of the American Tort Reform Association
    • Brief of The Academy Advisors
    • Brief of the National Association of Criminal Defense Lawyers

    The following group filed an amicus curiae brief in support of denying certiorari

    • Brief of the United States of America

    See also

    Footnotes

    1. ↑ 1.0 1.1 1.2 1.3 1.4 U.S. Court of Appeals for the Fifth Circuit, United States of America ex rel Cori Rigsby and Kerri Rigsby v. State Farm Fire & Casualty Company, decided July 13, 2015
    2. ↑ 2.0 2.1 Morgan Verkamp LLC, "What does 'qui tam' stand for?" accessed September 21, 2016
    3. ↑ Findlaw, "31 U.S.C. § 3730 : US Code - Section 3730: Civil actions for false claims," accessed September 21, 2016
    4. ↑ 4.0 4.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    5. ↑ 5.0 5.1 Supreme Court of the United States, State Farm Fire and Casualty Co. v. U.S. ex rel Rigsby, May 31, 2016
    6. ↑ Supreme Court of the United States, State Farm Fire & Casualty Co. v. United States, ex rel. Rigsby, argued November 1, 2016
    7. ↑ Supreme Court of the United States, State Farm v. U.S. ex. rel. Rigsby, argued November 1, 2016
    8. ↑ 8.0 8.1 8.2 8.3 Supreme Court of the United States, State Farm Fire & Casualty Co. v. United States ex rel. Rigsby, decided December 6, 2016
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