Sixth Circuit adopts per-se rule dismissing qui tam suits violating seal filing requirements

by admin | October 12th, 2010

In an October 4 decision in U.S. ex rel. Summers v. LHC Group, Inc., the Sixth Circuit affirmed the Middle District of Tennessee’s dismissal with prejudice of a qui tam suit brought by a former physical therapist. Her attorney had filed the suit, and after the clerk contacted him to ask whether it should be filed under seal, he exchanged communications with the clerk’s office to determine how to fulfill that requirement. In the meantime, the case was publicly posted to PACER, the court’s docket system. The attorney’s motion to file the suit under seal was later denied for failing to set forth a basis for doing so, and the defendant moved to dismiss the complaint. The district court granted the motion, and the relator appealed.

The Sixth Circuit noted that the Ninth Circuit had, in U.S. ex rel. Lujan v. Hughes Aircraft Co., 67 F.3d. 242 (9th Cir. 1995), applied a three-part balancing test to such cases, but it concluded that such a test comprised “judicial overreach.” Congress had clearly fashioned the seal requirement, the Court reasoned, after it “clearly identified the factors it found relevant and considered the tension between them”. Congress understood that under certain circumstances an abbreviated seal period would be possible, and provided the terms under which that could happen.

The court likewise rejected the relator’s argument that the mere possibility of harm to the government by the failure to file under seal could not justify dismissal of the action, concluding that the “mere harm” is, in fact, the point of the seal requirement. In addition, the court found that a contrary rule would permit relators to tactically choose to violate the seal provisions, for example, to bring media pressure to bear on a defendant.

In a concurring opinion, Judge Keith noted that the decision creates a split in the circuits on the question.

Comment: The Court’s decision gives short shrift to the government’s interest in the seal requirement. In this case, the government filed a statement of interest which noted that there was a possibility of harm (due to the foreclosure of certain investigative methods once the defendant got word of the breach), but otherwise argued that the Ninth Circuit’s balancing test should be applied. The 1986 False Claims Act amendments, in response to “parasitic suit” fears, tended to draw bright lines which now – over a quarter-century later – appear unworkable.

The seal requirement is particularly so because of the wildly inconsistent methods in the various district courts for filing claims under seal. Some courts provide clear and publicly available rules; in other courts specific procedures are required but not publicized, creating a minefield for novice FCA counsel. Although the Middle District of Tennessee’s clerk clearly did the right thing in this case by contacting the relator’s attorney, it makes little sense to adopt a bright-line rule where the procedural requirements are often a mystery.

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