In May 2011, the U.S. Supreme Court issued its opinion in Schindler Elevator Corp v. Kirk, in which the court held that the False Claims Act does not allow information from Freedom of Information Act (FOIA) requests as a basis for suits. The Court's decision will have a negative impact on the ability of employees to report or oppose illegal activity of employers and to use the False Claims Act quit tam suits as a tool to keep companies accountable and prevent fraud in government contracts.

The plaintiff, Daniel Kirk, brought a qui tam suit against his employer, Schindler Elevator Corp., alleging that the company made hundreds of false reports regarding hiring veterans in order to win government contracts and seeking damages on behalf of the U.S. To supplement his personal observations from his employment regarding Schindler Corp. reporting practices, Kirk cited documents that his wife received in response to requests that she made under the FOIA.

The district court held that Kirk's suit could not go forward because of the public disclosure bar within the False Claims Act, which prevents plaintiffs from relying on "public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media" as a basis for suit. The district court concluded that Freedom of Information Act requests constitute government "reports" or "investigations" for the purposes of the False Claims Act.

The court of appeals disagreed and reversed, but the Supreme Court agreed with the district court's classification of FOIA requests as falling under the type of information that the FCA public disclosure bar intended to disallow as bases for suits. Justice Thomas, writing the majority opinion, noted that allowing FIOA requests to be the sole basis for a whistleblower lawsuit under the FCA would be to allow the sort of "opportunistic" suits that the FCA drafters intended to discourage by including the public disclosure bar.

The Court's decision that future qui tam suits will need to be based solely on personal observations of employees makes the task of bringing such suits much more difficult for employees, who may have suspicions that a company is doing something wrong based on observations made while working, but who lack the documents to substantiate those suspicions.

Additionally, the holding seems to give corporations a dangerous free pass, in that if they disclose huge amounts of information to the government - even potentially incriminating information - they can then use the public disclosure bar as a way to prevent FCA suits based on that information, claiming that the information is a "government report."

The Supreme Court's decision has stuck a blow to the effectiveness of the FCA as a means for employees to help the government police companies and prevent fraud. Employees looking to hold companies responsible will now unfortunately have a much more difficult time getting their day in court.