Unexpected Problems with the Qui Tam Seal

By law, qui tam cases must be filed under seal.  This means that there is no public record of the case having been filed, and the defendant is unaware of the case until the seal is lifted.  A plaintiff who breaks the seal by discussing the seal publicly may forfeit all right to recover in the action – even if the government takes it over, and wins a judgment or enters into a settlement.  While it is fairly simple to avoid issuing a press release, the seal requirement can cause complications in unexpected circumstances, where the legal requirement to stay silent conflicts with a different legal requirement to disclose.

Conflict #1: Pending Cases Against the Same Defendant

Many qui tam whistleblowers are employees or ex-employees of the defendant, and may have other lawsuits against the same defendant, for wrongful discharge, violation of the WARN Act (which requires advance of layoffs by large employers, or age, race, or gender discrimination).  In such a case, a plaintiff may be asked at trial or at deposition whether they have any other pending cases against the same defendant.  Disclosure will break the seal, refusing to answer might result in dismissal of the other action, and a false answer could lead to both loss of the other case and a charge of perjury.

Conflict #2: Disclosure of Assets

Bankruptcy Courts require disclosure of all assets to the Bankruptcy court.  This disclosure is filed publicly.  A pending lawsuit, including a qui tam action, is an asset, because it may result in receiving money in the future.  Again, disclosure to the Bankruptcy Court may break the seal, but failure to disclose could be Bankruptcy fraud, potentially a criminal violation.

The same issues commonly arise in divorce and child support proceedings:  Assets must be disclosed.

Conflict #3: Government Program Eligibility

Eligibility for many government programs–ranging from Small Business Administration loans to some Veterans Benefits to Section 8 housing subsidies and food stamps–also depends on the assets of the applicant, although the requirements for disclosure vary widely from program to program, and some may not require disclosure of pending lawsuits.

If you have a pending qui tam case and any of these situations arise in your life, make sure to talk to your qui tam attorney before taking any action.  DON’T RELY SOLELY ON YOUR DIVORCE OR BANKRUPTCY ATTORNEY.  Even the most experienced attorneys in these areas may never have come across a qui tam plaintiff before, and may accidentally break the seal or otherwise get you into trouble.

Berger Montague  has successfully advised many of our clients through these minefields, without any additional cost to them.