Federal employee not barred from bringing qui tam action based on information learned while on the job

Law Reporter, Jun 2003

Holmes v. Consumer Ins. Group, 318 F.3d 1199 (10th Cir. 2003).

The Tenth Circuit Court of Appeals, sitting en banc, held that a postal service employee qualified as a "person" entitled to bring a qui tam action, despite her status as a federal employee and the fact that her job duties included uncovering and reporting fraud.

Here, Holmes served as a postmaster. She learned a postal customer was claiming and receiving a bulk postal rate-to which it was not entitled-at another post office. Holmes reported the situation to postal service authorities, who began an investigation. Holmes subsequently filed a qui tam action.

The U.S. government intervened and moved to dismiss Holmes as a party based on the "public disclosure" bar of the qui tam statute, 31 U.S.C [sec] 3730(e)(4), which bars any action based upon the public disclosure of allegations or transactions in a federal investigation, unless the person bringing the action is the original source of the information. The trial court granted the motion and the Tenth Circuit affirmed. The Tenth Circuit then agreed to hear the case en banc.

Reversing, the court examined the government's contention that Holmes did not qualify as a potential relator, or plaintiff, under the False Claims Act's general qui tam provision, 31 U.S.C. [sec] 3730(b)(1). The government argued that a government employee who (1) obtains information about fraud in the scope of his or her employment and (2) is required to report that fraud, is not a "person" entitled to bring a qui tam action.

The court noted that "person" is not defined in the act. Congress, in enacting the 1986 amendments to the act, did not consider the question of whether government employees should be allowed to use information obtained in the course of their employment as the basis for a qui tam action, the court found. If the court were to interpret the word "person" in the "unusual" manner urged by the government, it would, in effect, rewrite the statute, the court said.

The court considered the language of section 3730(b)(1), which states that a person may bring a qui tam action "for the person and for the United States Government." Here, Holmes brought the action in her individual capacity and sought relief for herself and the government. In filing her complaint, Holmes was not acting within the scope of her employment, the court noted. She was not acting "as the government," because she was not employed to file suit under the act, and there is no indication that the preparation or filing of her suit occurred substantially within the time and space limits imposed on her employment by the government. Thus, even though she may have been acting in her official capacity when she obtained the information that formed the basis of the qui tam complaint, it is apparent that she was acting in her individual capacity-as a "person"-when she filed and pursued die action.

There is nothing in the act expressly precluding federal employees from filing qui tam suits, the court noted. If Congress had intended to exclude some or all government employees, it knew how to do so in a much clearer fashion than by use of the phrase "for the person and the U.S. government," die court said.

Accordingly, die court remanded.

Plaintiff's Counsel

Craig D. Joyce, Denver, Colo.