- The Washington Times - Wednesday, March 31, 2010

The Supreme Court on Tuesday placed limits on existing whistleblower lawsuits alleging local governments misused federal money, in a decision that produced newcomer Sonia Sotomayor’s first dissenting opinion.

But the just-enacted health care overhaul law contains a provision that changed the federal False Claims Act in a way that would appear to allow new, similar lawsuits to go forward.

The court voted 7-2 to hold that a technical, though important, aspect of the federal whistleblower law applies to local governments. One section of the law prohibits whistleblower lawsuits when public disclosure of the purported fraud occurs through a court hearing, a news report or congressional or administrative audit.

In an opinion by Justice John Paul Stevens, the court ruled that the language on administrative audits refers to a report prepared by any government, not just a federal government document. The question had divided federal appeals courts.

Justice Sotomayor dissented, saying her colleagues “misread the statutory text” to limit whistleblower claims. Justice Stephen Breyer joined the dissenting opinion.

But, in any event, the health care legislation signed by President Obama last week changed the false-claims law so that it now refers specifically to federal reports. Justice Stevens noted the change in a footnote to his opinion, but said it did not affect pending lawsuits.

Once allegations are disclosed publicly, often by the media, individuals face a higher hurdle in bringing fraud suits on the federal government’s behalf. Otherwise, people could read a newspaper account or an indictment and then rush to the courthouse to file suit.

The issue arose in a lawsuit alleging fraud on the part of the Graham County Soil and Water Conservation District in western North Carolina in the use of federal disaster assistance following a damaging storm in 1995.

The False Claims Act allows a whistleblower to collect up to 30 percent of a judgment against a party found liable.

Since Congress reinvigorated the Civil War-era law in 1986, those suits have returned more than $16 billion to the government.

The Supreme Court on Tuesday also:

• Ruled unanimously in a dispute over mutual fund fees that courts should apply a widely used standard that a fund adviser’s fee cannot be “so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s-length bargaining.”

• Unanimously reinstated the murder conviction of a black man in Michigan by an all-white jury, rejecting his claim that his right to an impartial jury was violated because there were too few blacks in a county’s jury pool.

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