State Farm Fire & Cas. Co. v. United States Ex Rel. Rigsby
137 S. Ct. 436
| SCOTUS | 2016Background
- Relators Cori and Kerri Rigsby (former adjusters) filed a qui tam False Claims Act (FCA) complaint under seal in April 2006 alleging State Farm directed adjusters to misclassify wind damage as flood to shift liability to the federal flood program.
- The district court repeatedly extended the seal at the Government’s request, later partially lifted the seal to permit disclosure to another district-court proceeding, and fully lifted it in August 2007; the Government declined to intervene.
- Before the partial lift, relators’ then-attorney disclosed the complaint’s existence to journalists and others (some disclosures continued after the partial lift); relators later replaced that counsel and were not represented by him when the dismissal motion was filed.
- State Farm moved to dismiss the FCA suit for violation of the seal provision (31 U.S.C. §3730(b)(2)); district court applied the Hughes Aircraft (Lujan) balancing test (harm to Government, severity, bad faith) and denied dismissal; Fifth Circuit affirmed.
- Supreme Court granted certiorari to decide (1) whether any seal violation requires mandatory dismissal with prejudice, and (2) whether the district court abused its discretion in denying dismissal.
Issues
| Issue | Rigsby (Relators) Argument | State Farm Argument | Held |
|---|---|---|---|
| Whether any violation of §3730(b)(2)’s seal requirement mandates dismissal of the relator’s complaint | Seal compliance is mandatory but breach should not automatically strip relators of their claim; remedy is discretionary | Any seal violation requires automatic dismissal of the qui tam complaint | A seal violation does not mandate dismissal; remedy is discretionary for the district court |
| Standard for deciding dismissal and whether district court abused its discretion denying dismissal | District court may use discretionary balancing (e.g., Hughes Aircraft factors: actual harm to Government, severity, bad faith) | District court should have applied stricter review and considered post-partial-lift conduct | The district court did not abuse its discretion in denying dismissal; Hughes Aircraft factors are appropriate though not exhaustively prescribed |
| Whether lesser sanctions should have been considered / preserved for appeal | District court has broad remedial tools (monetary sanctions, attorney discipline); State Farm waived by only seeking dismissal | State Farm needed dismissal as sole remedy | Lesser sanctions remain available but State Farm did not preserve the issue by requesting them; question not preserved on this record |
Key Cases Cited
- United States v. Detroit Timber & Lumber Co., 200 U.S. 321 (syllabus preparation authority cited) (syllabus precedent on headnotes)
- United States v. Montalvo-Murillo, 495 U.S. 711 (1990) (mandatory duty does not automatically dictate forfeiture of later powers to act)
- Rockwell Int'l Corp. v. United States, 549 U.S. 457 (2007) (interpreting statutory use of “shall” as creating requirements)
- Hallstrom v. Tillamook County, 493 U.S. 20 (1989) (conditioning commencement of suit on statutory prerequisites)
- Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765 (2000) (qui tam provisions effect a partial assignment of Government’s claim)
- Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280 (2010) (public-disclosure bar and qui tam statutory structure)
- Chambers v. NASCO, Inc., 501 U.S. 32 (1991) (district courts’ inherent power to impose sanctions)
- United States ex rel. Lujan v. Hughes Aircraft Co., 67 F.3d 242 (9th Cir. 1995) (articulating factors for dismissing sealed FCA complaints)