The False Claims Act (“FCA”) is the government’s primary tool in combatting procurement fraud. It allows the United States to litigate cases alleging fraudulent claims against governmental entities, and also allows whistleblowers (called relators) to bring such cases, litigate them on behalf of the government, and collect a share of the proceeds. The viability of the FCA depends on its ability to encourage whistleblowers to come forward and report fraud committed by contractors with the government. One limitation on whistleblowers’ ability to litigate FCA cases is the so-called public-disclosure bar, which bars claims that have been publicly exposed.1 This bar has an exception for whistleblowers who are original sources of their claims. Consistent with the legislative history of the FCA, the public-disclosure bar should be interpreted narrowly while the original-source exception should be interpreted broadly. In a groundbreaking decision, the Seventh Circuit held in United States ex rel. Leveski v. ITT Educational Services, Inc.,2 that a prior lawsuit against a defendant for the same claim should not trigger the public-disclosure bar when the later lawsuit discloses a different fraud scheme from the one alleged in the earlier lawsuit. A contrary ruling would have largely insulated fraudsters from FCA liability when they alter their method of committing fraud. Leveski builds on the teachings of two earlier recent Seventh Circuit cases.3 Each case in this trilogy reversed district court opinions that unduly restricted application of the FCA. Leveski is also seminal because it marked the first time that an appellate court held that an FCA lawyer could solicit whistleblower clients just like lawyers practicing in other areas are able to do. In Leveski, the district court sanctioned the lawyer who brought that lawsuit simply because the whistleblower did not know her legal right to bring such a case before that lawyer contacted her, even though there was no public disclosure and, even if there had been, the whistleblower was the original source of the allegations. The Seventh Circuit pointedly rejected such a punitive approach, holding: “The annals of legal history are full of examples of lawyers playing a vital role in encouraging parties to litigate.”4
United States ex rel. Leveski v. ITT Educational Services, Inc.: The Seventh Circuit Reinvigorates the False Claims Act to Combat Recruiting Abuses by For-Profit Schools,
Loy. U. Chi. L. J.
Available at: http://lawecommons.luc.edu/luclj/vol46/iss4/3