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Federal appeals court hears case challenging whistle-blower law

The US Court of Appeals for the Fourth Circuit [official website] heard arguments Tuesday in a case challenging the constitutionality of the False Claims Act [text], which allows citizen "whistle-blowers" to sue federal contractors for committing fraud against the government. American Civil Liberties Union (ACLU) [advocacy website] Senior National Staff Counsel Christopher Hansen appeared before the court and argued that the False Claims Act, which calls for court secrecy in fraud cases against the US government, violates the First Amendment protection of free speech, court transparency and separation of government powers. The ACLU, together with the Government Accountability Project (GAP) and OMB Watch [advocacy websites], filed the complaint [text, PDF] last year against the US Attorney General [official website]. The district court granted the government's motion to dismiss in August 2009, and the ACLU appealed the case [brief, PDF; reply brief, PDF]. The advocacy groups support open use of the court systems, while the government argues that the act encourages citizens to anonymously report cases of fraud [Bloomberg report] without fear of backlash.

The False Claims Act has recently received attention in the country's highest court. In March, the US Supreme Court [official website] ruled [JURIST report] 7-2 in Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson [Cornell LII backgrounder; JURIST report] that whistle-blowers cannot bring suit under the False Claims Act to recover misspent government funds if the information used in the lawsuits came from state or local agencies' reports or audits. The suit arose out of public record documents that detailed a failure to obtain bids for the clean-up and reconstruction of storm-damaged portions of North Carolina. The ruling could potentially bar thousands of lawsuits by whistle-blowers. However, Congress recently changed the language of the statute [SCOTUSblog report] as part of the health care reform bill [HR 3590 materials] signed into law [JURIST report] in March. It is unclear whether the new wording will affect the case on remand.

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