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SUPREME COURT OF THE UNITED STATES
_________________
No. 15–513
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STATE FARM FIRE AND CASUALTY COMPANY,
PETITIONER v. UNITED STATES, ex rel.CORI RIGSBY,
et al.
on writ of certiorari to the united states
court of appeals for the fifth circuit
[December 6, 2016]
Justice Kennedy delivered the opinion of the
Court.
This case addresses the question of the proper
remedy when there is a violation of the False Claims Act (FCA)
requirement that certain complaints must be sealed for a limited
time period. See 31 U. S. C. §3730(b)(2). There are two
questions presented before this Court. First, do any and all
violations of the seal requirement mandate dismissal of a private
party’s complaint with prejudice? Second, if dismissal is not
mandatory, did the District Court here abuse its discretion by
declining to dismiss respondents’ complaint?
I
A
The FCA imposes civil liability on an
individual who, inter alia, “knowingly presents
. . . a false or fraudulent claim for payment or
approval” to the Federal Government. §3729(a)(1)(A). Almost unique
to the FCA are its qui tam enforcement provisions,
which allow a private party known as a “relator” to bring an FCA
action on behalf of the Government. §3730(b)(1); Vermont Agency
of Natural Resources v. United States ex rel. Stevens,
529 U. S. 765 , n. 1 (2000) (listing three other
qui tam statutes). The Attorney General retains the
authority to intervene in a relator’s ongoing action or to bring an
FCA suit in the first instance. §§3730(a)–(b).
This system is designed to benefit both the
relator and the Government. A relator who initiates a meritorious
qui tam suit receives a percentage of the ultimate
dam-ages award, plus attorney’s fees and costs. §3730(d). In turn,
“ ‘encourag[ing] more private enforcement suits’ ” serves
“ ‘to strengthen the Government’s hand in fighting false
claims.’ ” Graham County Soil and Water Conservation
Dist. v. United States ex rel. Wilson, 559 U. S.
280, 298 (2010) .
The FCA places a number of restrictions on suits
by relators. For example, under the provision known as the
“first-to-file bar,” a relator may not “ ‘bring a related
action based on the facts underlying [a] pending action.’ ”
Kellogg Brown & Root Services, Inc. v. United States
ex rel. Carter, 575 U. S. ___, ___ (2015) (slip op.,
at 11) (quoting §3730(b)(5); emphasis deleted). Other FCA
provisions require compliance with statutory requirements as
express conditions on the relators’ ability to bring suit. The
paragraph known as the “public disclosure bar,” for instance,
provided at the time this suit was filed that “ ‘[n]o court
shall have jurisdiction over an action under this section based
upon the public disclosure of allegations or transactions
. . . unless the action is brought by the Attorney
General or . . . an original source of the
information.’ ” Graham County Soil and Water Conservation
Dist. v. United States ex rel. Wilson,
supra, at 283, n. 1, 285–286 (quoting 31
U. S. C. §3730(e)(4)(A) (2006 ed.); footnote
omitted).
The FCA also establishes specific procedures for
the relator to follow when filing the complaint. Among other
things, the relator must serve on the Government “[a] copy of the
complaint and written disclosure of substantially all material
evidence and information the [relator] possesses.” §3730(b)(2).
Most relevant here, the FCA provides: “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.”
Ibid.
B
Petitioner State Farm is an insurance company.
In the years before Hurricane Katrina, petitioner issued two types
of homeowner-insurance policies that are relevant in this case: (1)
Federal Government-backed flood insurance policies and (2)
petitioner’s own general homeowner insurance policies. The
practical effect for homeowners who were affected by Hurricane
Katrina and who purchased both policies was that petitioner would
be responsible for paying for wind damage, while the Government
would pay for flood damage. As the Court of Appeals noted, this
arrangement created a potential conflict of interest: Petitioner
had “an incentive to classify hurricane damage as flood-related to
limit its economic exposure.” 794 F. 3d 457, 462 (CA5
2015).
Respondents Cori and Kerri Rigsby are former
claims adjusters for one of petitioner’s contractors, E. A. Renfroe
& Co. Together with other adjusters, they were responsible for
visiting the damaged homes of petitioner’s customers to determine
the extent to which a homeowner was entitled to an insurance
payout. According to respondents, petitioner instructed them and
other adjusters to misclassify wind damage as flood damage in order
to shift petitioner’s insurance liability to the Government. See
id., at 463–464 (summarizing trial evidence).
In April 2006, respondents filed their
qui tam complaint under seal. At the Government’s
request, the District Court extended the length of the seal a
number of times. In January 2007, the court lifted the seal in
part, allowing disclosure of the qui tam action to
another District Court hearing a suit by E. A. Renfroe against
respondents for purported misappropriation of documents related to
petitioner’s alleged fraud. See E. A. Renfroe & Co. v.
Moran, No. 2:06–cv–1752 (ND Ala.). In August 2007, the
District Court lifted the seal in full. In January 2008, the
Government declined to intervene.
In January 2011, petitioner moved to dismiss
respondents’ suit on the grounds that they had violated the seal
requirement. The parties do not dispute the essential background.
In the months before the seal was lifted in part, respondents’
then-attorney, one Dickie Scruggs, e-mailed a sealed evidentiary
filing that disclosed the complaint’s existence to journalists at
ABC, the Associated Press, and the New York Times. All three
outlets issued stories discussing the fraud allegations, but none
revealed the existence of the FCA complaint. Respondents themselves
met with Mississippi Congressman Gene Taylor, who later spoke out
in public against petitioner’s purported fraud, although he did not
mention the existence of the FCA suit at that time. After the seal
was lifted in part, Scruggs disclosed the existence of the suit to
various others, including a public relations firm and CBS News.
At the time of the motion to dismiss in 2011,
respondents were represented neither by Scruggs nor by any of the
attorneys who had worked with him. In March 2008, Scruggs withdrew
from respondents’ case after he was indicted for attempting to
bribe a state-court judge. Two months later, the District Court
removed the remaining Scruggs-affiliated attorneys from the case,
based on their alleged involvement in improper payments made from
Scruggs to respondents. The District Court did not punish
respondents themselves for the payments because they were not made
“aware of the ethical implications” and, as laypersons, “are not
bound by the rules of professional conduct that apply to”
attorneys. App. 21.
In deciding petitioner’s motion the District
Court considered only the seal violations that occurred before the
seal was lifted in part, reasoning the partial lifting in effect
had mooted the seal. Applying the test for dismissal set out in
United States ex rel. Lujan v. Hughes Aircraft
Co., 67 F. 3d 242, 245–247 (CA9 1995), the District Court
balanced three factors: (1) the actual harm to the Government, (2)
the severity of the violations, and (3) the evidence of bad faith.
The court decided against dismissal. Petitioner did not request
some lesser sanction. The case went to trial, resulting in a
victory for respondents on what the Court of Appeals referred to as
a “bellwether” claim regarding a single damaged home. 794
F. 3d, at 462.
The Court of Appeals for the Fifth Circuit
affirmed the denial of petitioner’s motion to dismiss. The court
recognized that the case presented two related issues of the first
impression under its case law: (1) whether a seal violation
requires mandatory dismissal of a relator’s complaint and, if not,
(2) what standard governs a district court’s decision to dismiss.
The court noted that the Courts of Appeals for the Second and Ninth
Circuits had held that the FCA does not require automatic dismissal
for a seal violation, while the Court of Appeals for the Sixth
Circuit had held that dismissal is mandatory. See United States
ex rel. Pilon v. Martin Marietta Corp., 60
F. 3d 995, 998 (CA2 1995); United States ex rel.
Lujan v. Hughes Aircraft Co., supra, at 245; United
States ex rel. Summers v. LHC Group Inc., 623
F. 3d 287, 296 (CA6 2010); see also United States
ex rel. Smith v. Clark/Smoot/Russell, 796
F. 3d 424, 430 (CA4 2015) (following Pilon).
After a careful analysis, the Court of Appeals
for the Fifth Circuit held automatic dismissal is not required by
the FCA. 794 F. 3d, at 470–471. It then considered the same
factors the District Court had weighed and came to a similar
conclusion. Id., at 471–472. First, the Court of Appeals
held the Government was in all likelihood not harmed by the
disclosures because none of them led to the publication of the
pendency of the suit before the seal was lifted in part. Second,
the Court of Appeals determined the violations were not severe in
their repercussions because respondents had complied with the seal
requirement when they first filed their suit. Third, the Court of
Appeals assumed, without deciding, that the bad behavior of
respondents’ then-attorney could be imputed to respondents; but it
held that, even presuming the attribution of bad faith, the other
factors favored respondents.
This Court granted certiorari, 578 U. S.
___ (2016), and now affirms.
II
A
Petitioner’s primary contention is that a
violation of the seal provision necessarily requires a relator’s
complaint to be dismissed. The FCA does not enact so harsh a
rule.
Section 3730(b)(2)’s text provides that a
complaint “shall” be kept under seal. True, this language creates a
mandatory rule the relator must follow. See Rockwell Int’l
Corp. v. United States, 549 U. S. 457, 464 (2007)
(“As required under the Act, [the relator] filed his complaint
under seal . . . ”); see also Kingdomware
Technologies, Inc. v. United States, 579 U. S. ___,
___ (2016) (slip op., at 9) (“[T]he word ‘shall’ usually connotes a
requirement”). The statute says nothing, however, about the remedy
for a violation of that rule. In the absence of congressional
guidance regarding a remedy, “[a]lthough the duty is mandatory, the
sanction for breach is not loss of all later powers to act.”
United States v. Montalvo-Murillo, 495 U. S.
711, 718 (1990) .
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. Marx v. General
Revenue Corp., 568 U. S. ___, ___ (2013) (slip op., at
12). And the FCA has a number of provisions that do require, in
express terms, the dismissal of a re-lator’s action. Supra,
at 2 (citing §3730(b)(5)); see also §§3730(e)(1)–(2) (“[n]o court
shall have jurisdiction” over certain FCA claims by relators
against a member of the military or of the judicial, legislative,
or executive branches). It is proper to infer that, had Congress
intended to require dismissal for a violation of the seal
requirement, it would have said so.
The Court’s conclusion is consistent with the
general purpose of §3730(b)(2). The seal provision was enacted in
the 1980’s as part of a set of reforms that were meant to
“encourage more private enforcement suits.” S. Rep. No.
99–345, pp. 23–24 (1986). At the time, “perhaps the most
serious problem plaguing effective enforcement” of the FCA was “a
lack of resources on the part of Federal enforcement agencies.”
Id., at 7. The Senate Committee Report indicates that the
seal provision was meant to allay the Government’s concern that a
relator filing a civil complaint would alert defendants to a
pending federal criminal investigation. Id., at 24. 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.” Brief for
United States as Amicus Curiae 10.
B
Petitioner’s arguments to the contrary are
unavailing. First, petitioner urges that because the seal provision
appears in the subsection of the FCA creating the relator’s private
right of action, Congress intended to condition the right to bring
suit on compliance with the seal requirement. It is true that, as
discussed further below, the Court sometimes has concluded that
Congress conditioned the authority to file a private right of
action on compliance with a statutory mandate. E.g.,
Hallstrom v. Tillamook County, 493 U. S. 20 –26
(1989). There is no textual indication, however, that Congress did
so here.
Section 3730(b)(2) does not tie the seal
requirement to the right to bring the qui tam suit in
conditional terms. As noted above, the statute just provides: “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 text at issue in Hallstrom, by
contrast, was quite different than the statutory language that
controls here. The Hallstrom statute, part of the Resource
Conservation and Recovery Act of 1976, provided: “ ‘No action
may be commenced . . . prior to sixty days after the
plaintiff has given notice of the violation’ ” to the
Government. 493 U. S., at 25.
Petitioner cites two additional cases to support
its argument, but those decisions concerned statutes that used even
clearer conditional words, like “if” and “unless.” See United
States ex rel. Texas Portland Cement Co. v. McCord, 233
U. S. 157, 161 (1914) (statute allowed creditors of Government
contractors to bring suit “ ‘if no suit should be brought by
the United States within six months from the completion and final
settlement of said contract’ ”); McNeil v. United
States, 508 U. S. 106 , n. 1 (1993) (statute provided
that “ ‘[a]n action shall not be instituted upon a claim
against the United States for money damages . . . unless
the claimant shall have first presented the claim to the
appropriate Federal agency’ ”).
Again, the FCA’s structure shows that Congress
knew how to draft the kind of statutory language that petitioner
seeks to read into §3730(b)(2). The applicable version of
the public disclosure bar, for example, requires a district court
to dismiss an action when the underlying information has already
been made available to the public, “ ‘unless’ ” the
plaintiff is the Attorney General or an original source. Graham
County Soil and Water Conservation Dist. v. United States ex
rel. Wilson, 559 U. S., at 286.
Second, petitioner contends that because this
Court has described the FCA’s qui tam provisions as
“effecting a partial assignment of the Government’s damages claim,”
Vermont Agency of Natural Resources v. United States ex
rel. Stevens, 529 U. S., at 773, adherence to all of the
FCA’s mandatory requirements—no matter how small—is a condition of
the assignment. This argument fails for the same reason as the one
discussed above: Petitioner can show no textual indication in the
statute suggesting that the relator’s ability to bring suit depends
on adherence to the seal requirement.
Third, petitioner points to a few stray
sentences in the Senate Committee Report that it claims support the
mandatory dismissal rule. As explained above, however, the Report’s
recitation of the general purpose of the statute is best understood
to support respondents. Supra, at 7. And, furthermore,
because the meaning of the FCA’s text and structure is “plain and
unambiguous, we need not accept petitioner[’s] invitation to
consider the legislative history.” Whitfield v. United
States, 543 U. S. 209, 215 (2005) .
III
Petitioner’s secondary argument is that the
District Court did not consider the proper factors when declining
to dismiss respondents’ complaint or, at a minimum, that it was
plain error not to consider respondents’ conduct after the seal was
lifted in part. This Court holds the District Court did not abuse
its discretion by denying petitioner’s motion, much less commit
plain error. In light of the questionable conduct of respondents’
prior attorney, it well may not have been reversible error had the
District Court granted the motion; that possibility, however, need
not be considered here.
In general, the question whether dismissal is
appropriate should be left to the sound discretion of the district
court. While the factors articulated in United States
ex rel. Lujan v. Hughes Aircraft Co. appear to be
appropriate, it is unnecessary to explore these and other relevant
considerations. These standards can be discussed in the course of
later cases.
IV
Petitioner and its amici place great
emphasis on the reputational harm FCA defendants may suffer when
the seal requirement is violated. But even if every seal violation
does not mandate dismissal, that sanction remains a possible form
of relief. District courts have inherent power, moreover, to impose
sanctions short of dismissal for violations of court orders. See
Chambers v. NASCO, Inc., 501 U. S. 32 –46
(1991). Remedial tools like monetary penalties or attorney
discipline remain available to punish and deter seal violations
even when dismissal is not appropriate.
Of note in this case, petitioner did not request
any sanction other than dismissal. Tr. of Oral Arg. 3–4, 17. Had
petitioner sought some lesser sanctions, the District Court might
have taken a different course. Yet petitioner failed to do so. On
this record, the question whether a lesser sanction is warranted is
not preserved.
The judgment of the Court of Appeals for the
Fifth Circuit is
Affirmed.
