By Taylor Ey

Today, the Fourth Circuit issued its decision in a published opinion in the civil case of United States ex rel. Wilson v. Graham Cnty. Soil & Water Conservation Dist.  Appellant, Ms. Karen Wilson, brought this claim on behalf of the United States under the False Claims Act’s qui tam provision, alleging that the appellee, Graham County Soil and Water Conservation District, fraudulently took money from the government.  The Fourth Circuit reversed the district court’s decision, holding that the district court did have subject matter jurisdiction to decide this action brought under the False Claims Act.

History of the case

In February 1995, a storm hit parts of western North Carolina, causing significant flooding and erosion in the area.  North Carolina’s Graham and Cherokee counties applied for relief under the Emergency Watershed Protection Program (“EWP Program”).  The EWP Program provides financial assistance to eligible states “to relieve imminent hazards . . . created by a natural disaster that causes a sudden impairment of a watershed.”  7 C.F.R. § 624.2.

Both counties entered into a “Cooperative Agreement,” as required by 7 C.F.R. § 624.8(c), and each agreed to perform or contract out the necessary work.  The Soil and Water Conservation District (“SWCD”) of each county was responsible for ensuring compliance with the EWP Program.  Each county hired independent contractors to complete the required cleanup and remediation.

During this time, Ms. Karen Wilson, the appellant in this case, was a secretary at the Graham County SWCD.  She suspected fraud in the implementation of the program both by her colleagues at the SWCD and by the government officials responsible for overseeing the EWP Program.  The Graham County SWCD was also being audited by county auditors at that time.

In April 1996, the auditors issued a formalized report (“the Audit Report”), stating that the independent contractor was likely hired “in violation of the County’s code of conduct,” and that the SWCD did not keep proper documentation of the EWP contracts.  According to the cover letter of the Audit Report, the auditors supplied four copies of the Audit Report: two copies for the Graham County records, one for the Graham County SWCD, and one for the United States Department of Agriculture (“USDA,” the department overseeing the EWP Program).

Ms. Wilson continued to suspect foul play.  She reported her concerns to the USDA.  In August 1997, USDA’s Special Agent Golec completed a Report of Investigation.  The report was distributed to state and federal law enforcement agencies, but the report was “not to be distributed outside [those agencies] . . . without prior clearance from the Office of Inspector General, USDA.”

In 2001, Ms. Wilson filed suit under the False Claims Act’s qui tam provision, alleging that the federal government received fraudulent invoices under the EWP Program in Graham and Cherokee counties.  In 2006, Ms. Wilson filed her third amended complaint, the pleading at issue in this case, naming several other defendants.

Should the District Court Have Dismissed Ms. Wilson’s Claim for Lack of Subject Matter Jurisdiction?

The issue before the Fourth Circuit was whether the qui tam provision of the False Claims Act barred Ms. Wilson from bringing this suit in federal court.

The qui tam provision allows private citizens to bring suit on behalf of the United States “to recover from those persons who make false or fraudulent claims for payment to the United States.”  Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 283 (2010).  The public disclosure bar, 31 U.S.C. § 3730(e)(4)(A) (2006), requires claims be dismissed if the claims are brought under public disclosure, unless the claimant qualifies as an original source.

The case turns on the proper interpretation of “public disclosure” under the qui tam provision.

The District Court’s Findings of Fact and Decision

The district court considered three questions: (1) whether any relevant audits, reports, hearings, or investigations had been publicly disclosed, (2) whether Ms. Wilson based her claims on any such public disclosures, and (3) if so, whether Ms. Wilson nonetheless was an original source of her claims.  The court concluded that (1) the Audit Report and the Report of Investigation from the USDA Special Agent had been publicly disclosed, (2) that Ms. Wilson based her claims on those reports, and (3) that Ms. Wilson was not an original source.  Thus, the district court dismissed Ms. Wilson’s claim for lack of subject matter jurisdiction.

The District Court’s Legal Conclusions Are Reviewed De Novo

The Fourth Circuit could uphold the district court’s dismissal of Ms. Wilson’s claim only if it found that (1) all relevant reports were publicly disclosed, (2) Ms. Wilson based her claims on those reports, and (3) Ms. Wilson was not the original source.  However, the Fourth Circuit held that the district court applied the incorrect legal standard to the factual findings under (1), thus the district court reached the improper result that the reports were publicly disclosed.

What is the Meaning of “Public Disclosure?”

The False Claims Act removes actions under the qui tam provision if the reports were “publicly disclosed” before the action was filed.

The Fourth Circuit looked to the plain meaning of “public disclosure,” citing to Webster’s Dictionary to define “disclosure” as “to open up to general knowledge,” “to expose to view,” and “to make known.”

Thus, the Fourth Circuit reasoned that it was Congress’s intent to remove jurisdiction if reports were made known to the public at large.  Because neither the Audit Report nor the USDA Special Agent Report were made known to the public, and the cover letters clearly indicated that the reports were only to be distributed to a select list, the record did not support the conclusion that the reports were publicly disclosed.

Although the Seventh Circuit has adopted the view shared by the district court, that the reports were publicly disclosed because they were distributed to public officials representing the community, this view is not adopted by any other circuit.  The Fourth Circuit expressly rejected this interpretation.

The Fourth Circuit Reversed the District Court

The Fourth Circuit held that the district court had jurisdiction to hear Ms. Wilson’s case because no public disclosure deprived the district court of jurisdiction.  The holding was limited to the matter of jurisdiction only.

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