Thursday, March 29, 2007

SCOTUS limits incentives for qui tam relators to bring suit

In Rockwell v. United States, SCOTUS zapped the incentive of qui tam relators to disclose fraud against the federal government under the Federal False Claims Act. The court, in a 6-2 decision, held that retired engineer James S. Stone cannot share in a $4.2 million award he and the U.S. government had won in a suit against Rockwell International. Stone accused the company of making false statements about environmental, health and safety activities at its Rocky Flats nuclear weapons facility outside Denver. Stone filed his complaint under seal and later the government later joined his suit

The main issue in the case was whether Stone was an "original source," which is defined as “an individual who [1] has direct and independent knowledge of the information on which the allegations are based and [2] has voluntarily provided the information to the Government before filing an action under this section which is based on the information.” The court held that Stone was not an original source because he did not have knowledge of the actual facts supporting the theory ultimately proven at trial. The majority said Stone didn't meet the original source requirement because the focus of the case shifted during the litigation and the jury's findings against the company weren't based on information he provided. (Stone alleged that environmental damage would be caused by the deterioration of a storage system due to poor engineering when in fact it was a poorly designed mixture used to preserve the waste).

Justices John Paul Stevens and Ruth Bader Ginsburg dissented. According to the dissenting justices, the original source inquiry "focuses on the facts in the public domain at the time the action is commenced. If the process of discovery leads to amended theories of recovery, amendments to the original complaint would not affect jurisdiction that was proper at the time of the original filing."

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