Whistleblowers and the False Claims Act’s Public Disclosure Bar

The False Claims Act’s “public disclosure bar” can sometimes prevent a whistleblower from pursuing a lawsuit based on information that has been disclosed in particular settings, such as government hearings, government reports, and news reports. In light of this provision, a company facing a potential whistleblower action may consider self-reporting potentially unlawful activity to government authorities before a whistleblower files.

“Beating the whistleblower to the punch” may be a useful strategy in some circumstances, but one should seek legal advice before moving forward. Self-disclosure has become a complicated area, and courts disagree on whether it triggers the public disclosure bar.

The U.S. District Court for the Western District of Tennessee recently held that self-reporting unlawful activity to government officials does not trigger the public disclosure bar. In Unites States ex rel. Cox III v. Smith & Nephew, Inc. the corporate defendant had disclosed the potentially unlawful activity to a government agency before the whistleblower filed suit. The defendant later moved to dismiss, claiming that its self-reporting constituted a public disclosure. The court denied the motion, and the whistleblower was permitted to proceed. With this ruling, the Western District of Tennessee joined the U.S. Court of Appeals for the First Circuit in holding that self-reporting to government officials is not the type of public disclosure that will nullify a whistleblower action.

The U.S. Court of Appeals for the Seventh Circuit has taken the very opposite position. But the Western District of Tennessee concluded that the Seventh Circuit was “an outlier” on the issue and characterized its view as “untenable.”

Before a company self-reports, it should seek legal counsel.

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