Graham County Soil and Water Conservation District v. U.S., ex rel. Wilson

The Supreme Court has agreed to decide whether lawsuits seeking to recover misspent federal funds are barred if the information behind the lawsuits came out in state or local agency reports or audits, rather than in a federal proceeding.

In 1995, a storm hit parts of western North Carolina causing extensive flooding and erosion. Graham and Cherokee Counties applied for assistance under the Emergency Watershed Protection Program. Under the program, the counties would perform or hire to perform the necessary cleanup and repair work, paying for 25 percent of the costs, while the United States Department of Agriculture paid for the rest.

During the cleanup, Karen Wilson, a secretary for the Graham Conservation District, raised concerns that she had about the legality of the awarded contracts. She filed suit in a North Carolina federal district court against Graham and Cherokee Counties, among others, under the False Claims Act.

She alleged a conspiracy that tainted the execution of the EWPP contracts and rendered the claims for reimbursement false within the meaning of the False Claims Act. The defendants moved for summary judgment, arguing that the information underlying Wilson's claim was public disclosure and thus barred the court jurisdiction over the case. The court agreed and dismissed.

On appeal, the 4th U.S. Circuit Court of Appeals reversed, holding that the audit reports that underlied Wilson's claim was not public disclosure for the purpose of the False Claim Act, and thus the district court was not barred from hearing her case.

This issue has divided the circuit courts

Question presented: Whether federal courts have jurisdiction over False Claims Act suits based on revelations in administrative reports or audits issued by state or local governments, as opposed to the federal government.

The Supreme Court held today that lawsuits seeking to recover misspent federal funds are barred if the information behind the lawsuits came out in state or local agency reports or audits, rather than in a federal proceeding.

In 1995, a storm hit parts of western North Carolina causing extensive flooding and erosion. Graham and Cherokee Counties applied for assistance under the Emergency Watershed Protection Program. Under the program, the counties would perform or hire to perform the necessary cleanup and repair work, paying for 25 percent of the costs, while the United States Department of Agriculture paid for the rest.

During the cleanup, Karen Wilson, a secretary for the Graham Conservation District, raised concerns that she had about the legality of the awarded contracts. She filed suit in a North Carolina federal district court against Graham and Cherokee Counties, among others, under the False Claims Act.

She alleged a conspiracy that tainted the execution of the EWPP contracts and rendered the claims for reimbursement false within the meaning of the False Claims Act. The defendants moved for summary judgment, arguing that the information underlying Wilson's claim was public disclosure and thus barred the court jurisdiction over the case. The court agreed and dismissed.

On appeal, the 4th U.S. Circuit Court of Appeals reversed, holding that the audit reports that underlied Wilson's claim was not public disclosure for the purpose of the False Claim Act, and thus the district court was not barred from hearing her case.

This issue has divided the circuit courts.

On March 30, the Supreme Court reversed and remanded the 4th Circuit decision in an opinion by Justice John Paul Stevens.

Justice Sonia Sotomayor authored her first dissent. She, along with Justice Stephen Breyer, argued that the majority had "misread the statutory text."

Question presented: Whether federal courts have jurisdiction over False Claims Act suits based on revelations in administrative reports or audits issued by state or local governments, as opposed to the federal government.