8th Circuit affirms public disclosure dismissal of whistleblower's case alleged to have been a quid pro quo

by Ben Vernia | September 9th, 2013

On August 28, the Eighth Circuit Court of Appeals, in US ex rel Newell v City of St Paul affirmed the district court’s dismissal under the public disclosure bar. The suit was brought by a housing contractor against the City of St Paul, Minnesota, for falsely certifying compliance to HUD that the city was in compliance with its obligations under Section 3 (which requires grant recipients to direct contracting work to low-income individuals). The district court found that the whistleblower’s allegations were publicly disclosed when he read from an internal city memo describing its noncompliance with the law, and when he obtained documents through a FOIA request, which corroborated that noncompliance.

The Court of Appeals agreed, first noting that the relator “virtually concedes” the public disclosures, and rejecting his argument that his case was not based upon them on the grounds that he was conflating the “based upon” prong of the bar with its “original source” exception. But the relator was not an original source, the court concluded, because his knowledge of the city’s wrongdoing was not direct and independent. His knowledge, the court reasoned, was derived almost entirely from current and former city employees, and it dismissed his assertion that he witnessed the city’s noncompliance at a meeting in 2000: that event, the court found, did not establish even a single instance of Section 3 noncompliance, much less the chronic noncompliance he alleged in his complaint.

The court likewise rejected the relator’s argument that the district court abused its discretion in denying him relief from final judgment under Fed. R. Civ. P. 60(b). In events which were the subject of a House hearing, the Department of Justice declined to intervene in the relator’s case after initially suggested that it would take it on. At the same time, DOJ’s Civil Rights Division was pressuring St. Paul to drop a case before the Supreme Court challenging an 8th Circuit decision involving disparate impact claims under the Fair Housing Act. Republican lawmakers alleged that then-Civil Rights Division Assistant Attorney General Thomas Perez (who had been nominated for Labor Secretary, a position he now holds), brokered a secret agreement under which the city would drop its Supreme Court case in exchange for DOJ declining to intervene in the whistleblower’s case. At the district court and on appeal, the relator argued that this secret agreement constituted an alternate remedy, in which he was entitled to share.

The Eighth Circuit rejected his argument, reasoning that none of his allegations related to the reasons for the district court’s dismissal of his qui tam case, that the government’s settlement of “unrelated claims against unrelated parties in unrelated lawsuits” does not comprise an alternate remedy, and that the relator’s claims were subject to dismissal under the public disclosure bar even if the government had obtained an alternate remedy.

Disclosure: I wrote a letter to the House committee investigating the alleged “quid pro quo” described above. In that letter, I argued against the Republican staff report’s suggestion that DOJ should have evaluated the risk that the relator would lose his case on public disclosure grounds. I stated that it was my experience that DOJ did not perform such an evaluation, and should not be expected to do so, given its limited resources.

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