The Fifth Circuit held that federal government employees can bring whistleblower suits under the False Claims Act (FCA), even when it is their job to investigate fraud.
The whistleblowers in the case, Little v. Shell Exploration & Production Co., alleged that Shell defrauded the federal government of millions of dollars in royalties by taking improper deductions for expenses to gather and store oil. The whistleblowers, or “relators” in FCA parlance, were a Senior Auditor and Supervisory Auditor for the U.S. Department of Interior’s Minerals Management Service (MMS), which administers Shell’s drilling leases. The relators discovered elements of the alleged fraud in the course of auditing Shell and reported it to MMS supervisors. As far as the relators knew, neither MMS nor any other federal agency acted on their information, and they filed suit. The U.S. Justice Department declined to join the suit, but did not move to dismiss it despite its position that government employees who uncover fraud in the scope of their official duties are prohibited from acting as relators under the FCA.
The district court granted summary judgment for Shell, holding that the FCA precluded government officials from being relators. The district court also said the relators ran afoul of the FCA’s public disclosure bar. The Fifth Circuit reversed.
First, the Fifth Circuit focused on the FCA’s language that a “person” may bring a whistleblower suit. Shell, joined by the government, argued that the heading in the relevant portion of the FCA is “Actions by private person” and that, at the least, federal employees who learn of fraud through their official duties should be barred from bringing FCA claims. Shell and the federal government further argued out that the FCA allows relators to file suit “for the person and for the United States,” and since federal employees embody the United States, it would not make sense for them to bring suit on behalf of the United States. The Fifth Circuit, however, rejected these arguments, holding that the plain meaning of the term “persons” encompassed government employees, and that neither the FCA’s text as a whole nor its legislative history precluded such an interpretation. The Tenth and Eleventh circuits have similarly held (and the Sixth and Ninth have implicitly held), while the First Circuit has ruled that at least some federal employees cannot be relators. The Fifth Circuit also rejected the government’s and Shell’s argument that federal ethical regulations and the criminal conflict-of-interest statute preclude federal employees from acting as relators.
Second, the court considered Shell’s argument that the relators’ complaint was partially based upon material already in the public domain—three prior FCA lawsuits and several administrative decisions. The FCA precludes suits based on publicly disclosed information unless a relator is an “original source” of the information. In order to qualify as an “original source,” a relator has to, among other things, have “voluntarily disclosed” the information to the government. The court held that government employees cannot meet this requirement because their jobs compel them to disclose information to the government. Thus, relators suit can only go forward if it is not based on publicly disclosed material. On this score, the Fifth Circuit remanded the case to the district court for further consideration of this issue.