Washington District Court denies motion to dismiss for failure to file amended qui tam under seal

by Ben Vernia | December 2nd, 2010

In a November 18 opinion in U.S. ex rel. Stewart v. Altech Servs., Inc., Eastern District of Washington Judge Lonny R. Suko denied the motion of individual defendants whom a relator added in an amended complaint publicly filed after the government had declined to intervene in the case. The individual defendants argued that the failure to file the amended complaint under seal violated the False Claims Act’s seal provision, and amounted to a new lawsuit which did not conform to the Act.

The whistleblower argued that he had disclosed the underlying facts in the original complaint, filed under seal, and that the United States had investigated those facts over a lengthy period of time before declining to intervene.

The Court sided with the relator, concluding that the seal provision, 31 U.S.C. 3730(b)(2) is not jurisdictional, and that a violation of that clause does not require dismissal of a suit per se. The court continued:

No provision of the False Claims Act explicitly authorizes dismissal as a sanction for disclosures in violation of the seal requirement. Further, the Court finds defendants’ arguments lack merit because by its terms, § 3730(b)(2) applies only to the complaint and not to any amended complaint. See Wisz ex rel. U.S. v. C/HCA Development, Inc., 31 F.Supp.2d 1068, 1068-69 (N.D.Ill. 1998). In U.S. ex rel. Milam v. Regents of Univ. of Cal., 912 F.Supp. 868, 889-90 (D.Md. 1995), the relator’s amended complaint added defendants but was not filed under seal or in camera. The Milam court rejected the defendant’s argument that plaintiff failed to comply with § 3730(b)(2) and held that “[the relator] followed the requirements of § 3730(b)(2) when filing the initial complaint. Neither the statute nor any relevant case law imposed upon [the relator] the duty to file any amendments to that complaint in camera and under seal.” Id. at 890.

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