State Farm Fire & Casualty Co. v. United States ex rel. Rigsby | |
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Argued November 1, 2016 Decided December 6, 2016 | |
Full case name | State Farm Fire and Casualty Company v. United States ex rel. Cori Rigsby, et al. |
Docket no. | 15-513 |
Citations | 580 U.S. ___ ( more ) 137 S. Ct. 436; 196 L. Ed. 2d 340 |
Case history | |
Prior | United States ex rel. Rigsby v. State Farm Fire & Cas. Co., 794 F.3d 457 (5th Cir. 2015); cert. granted, 136 S. Ct. 2386 (2016). |
Court membership | |
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Case opinion | |
Majority | Kennedy, joined by unanimous |
Laws applied | |
False Claims Act |
State Farm Fire & Casualty Co. v. United States ex rel. Rigsby, 580 U.S. ___ (2016), was a case in which the Supreme Court of the United States clarified the consequences of violating the False Claims Act's requirement that cases be kept under seal. [1] In a unanimous opinion written by Justice Anthony Kennedy, the Court held that a violation of the False Claim Act's seal requirement does not require the dismissal of a complaint. [2]
State Farm Fire and Casualty Company is an insurance company. [3] Prior to 2005, State Farm offered two types [fn 1] of insurance policies to homeowners: flood insurance, which would be reimbursed by the federal government's National Flood Insurance Program, and general homeowner insurance, which would be paid directly by State Farm. [3] After Hurricane Katrina, a State Farm contractor instructed its insurance adjusters to falsely classify wind damage as flood damage so that the federal government, rather than State Farm, would assume liability for the insurance. [5] In 2006, two of these former State Farm claims adjusters, the Rigsby sisters, filed a qui tam suit against State Farm under the False Claims Act. [6] The Act required that the complaint against State Farm be kept secret (under seal) for at least 60 days. [7] While the case was still under seal, the adjusters' attorney disclosed the existence of the complaint to journalists at ABC, the Associated Press, and The New York Times . [8] [fn 2] State Farm then filed a motion to dismiss based on the theory that the adjusters violated the False Claims Act's seal requirement, but the District Court denied the motion and the adjusters ultimately won at trial. [10] State Farm filed an appeal in the United States Court of Appeals for the Fifth Circuit, but the Fifth Circuit affirmed the District Court's ruling on the seal violations. [11] State Farm filed another appeal to the Supreme Court of the United States, which granted certiorari in 2016. [2]
In a unanimous opinion written by Justice Anthony Kennedy, the Supreme Court affirmed the Fifth Circuit's ruling and held that a violation of the False Claim Act's seal requirement does not require dismissal of a complaint. [12] Justice Kennedy explained that the False Claims Act did not specify a remedy for violations of the seal requirement, but that the structure of the act indicates that dismissal is not required when parties violate the seal requirement. [13] He stated that "had Congress intended to require dismissal for a violation of the seal requirement, it would have said so." [14] Furthermore, Justice Kennedy stated that monetary penalties or other forms of attorney discipline were still available to sanction and deter future seal violations. [15]
Writing for The National Law Review , Evan Panich noted that "the Court made no definitive ruling" about the kinds of sanctions that would be sufficient to deter future violations of the Act's seal requirement. [16] In his analysis of the case for SCOTUSblog , Ronald Mann commented that "the dominant feature of the court’s quick, unanimous resolution of the case is an overt avoidance of any specific articulation of standards for use by the lower courts." [17] National Public Radio correspondent Nina Totenberg wrote that this case was the "first of many" lawsuits alleging that State Farm "evaded its responsibility by manipulating the reports of its own adjusters and engineers." [18]
The False Claims Act (FCA) is an American federal law that imposes liability on persons and companies who defraud governmental programs. It is the federal government's primary litigation tool in combating fraud against the government. The law includes a qui tam provision that allows people who are not affiliated with the government, called "relators" under the law, to file actions on behalf of the government. This is informally called "whistleblowing", especially when the relator is employed by the organization accused in the suit. Persons filing actions under the Act stand to receive a portion of any recovered damages.
State Farm Insurance is a group of mutual insurance companies throughout the United States with corporate headquarters in Bloomington, Illinois. Founded in 1922, it is the largest property, casualty, and auto insurance provider in the United States.
Kerri Rigsby and Cori Rigsby (Moran) are the American sisters who worked for eight years at E.A. Renfroe Company and were managers overseeing catastrophe claims adjusters. Kerri and Cori Rigsby are also the whistleblowers who proved to a Mississippi jury that State Farm committed fraud against the U.S. government. The sisters claim State Farm ignored or minimized wind damage to avoid payments relating to Hurricane Katrina and instead attributed damage to flooding so that the National Flood Insurance Program would cover the claims. The jury verdict was upheld by the U.S. Court of Appeals for the Fifth Circuit, was then affirmed 8-0 by the United States Supreme Court. The Rigsbys were managers who worked in Gulfport, Mississippi for a subcontractor hired by State Farm to adjust wind and flood claims after Hurricane Katrina. They were the first to uncover a fraudulent scheme by State Farm to improperly categorize wind damage as flood damage. This mischaracterization was very important because State Farm had to pay for wind damage out of its own pocket under State Farm homeowner policies, while flood damage was paid by the federal government under FEMA's flood policies. Over the course of several months, the sisters amassed thousands of pages of documents related to State Farm's activities. The Rigsbys' landmark win was historic because they were the first to prove that an insurance company defrauded the government in FEMA's National Flood Insurance Program despite testimony by FEMA’s Executive Director that, after investigating the allegations, he personally didn’t believe that there was any fraud by State Farm, and he confirmed that FEMA had not asked State Farm to repay any money to the National Flood Insurance Program. However, according to court documents, the sisters took the documents without authorization. Their actions in regard to these documents is the subject of ongoing legal action. Eventually, their story went public when ABC's 20/20 show aired it in August 2006. In 2008, Judge Senter of the U.S. District Court of the Southern District of Mississippi found that the sisters and their attorneys had acted unethically when the Scruggs Katrina Group paid the sisters $150,000 per year each to testify, and barred them from testifying or using any of the documents that were taken. Scruggs was later forced to withdraw as their attorney because he improperly paid them for downloading and giving him the State Farm claims files and other documents to use in his lawsuits against State Farm. Scruggs also was later disbarred after pleading guilty to conspiracy to bribe a state circuit court judge in 2008 and separately, to improperly influence another state court circuit judge. He was sentenced to serve five years and seven years, to run concurrently, on the two guilty pleas.
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Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662 (2008), was a decision by the Supreme Court of the United States holding that plaintiffs under the False Claims Act must prove that the false claim was made with the specific intent of inducing the government to pay or approve payment of a false or fraudulent claim, rather than merely defrauding a contractor. Congress overruled this decision with the Fraud Enforcement and Recovery Act of 2009.
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