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False Claims Act case survives lawyer’s premature disclosure, 4th Circuit says

BALTIMORE — A lawyer’s premature disclosure of her client’s sealed whistleblower lawsuit does not necessarily doom the litigation, a U.S. appeals court ruled Monday in reviving a construction worker’s claim that a Maryland company violated the federal False Claims Act during building projects in Washington.Free speech bandages

Saying “no harm, no foul,” the 4th U.S. Circuit Court of Appeals ruled that a federal judge in Greenbelt wrongfully dismissed with prejudice Brian K. Smith’s suit against Clark Construction Group LLC and its Shirley Contracting Company LLC subsidiary because his attorney had violated a statutory 60-day non-disclosure period by telling Smith’s employer of the lawsuit within that time.

The 60 days, during which the lawsuit is under seal, is intended to give federal investigators time to examine the allegations, prevent the alleged fraudster from being alerted to the investigation and protect the company’s reputation by ensuring mere allegations of fraud by a private citizen are not disclosed in advance of the government’s finding, the 4th Circuit said.

None of these goals was placed at risk by the premature disclosure, the court added.

“Although Smith’s attorney’s breach of the seal requirement tipped off defendants, the government was still able to investigate the alleged fraud and determine whether it was already investigating the same issue,” Judge James A. Wynn Jr. wrote for the three-judge panel of the 4th Circuit.

“The government even suggested that the fact that defendants knew about the False Claims Act claim would allow for early responses to the government’s questions, allowing it to ‘better evaluate the relator’s [Smith’s] claims and speed the determination about whether [to intervene],’” Wynn added in the published opinion. “Additionally, because the seal violation involved disclosure between the parties rather than the public, defendants’ reputations suffered no harm. Accordingly, the False Claims act does not support the district court’s dismissal of Smith’s claims with prejudice.”

Smith’s trial attorney, Tina D. Greene, declined to comment Monday on the court’s decision, saying she had not had the opportunity to read it. Greene is a Silver Spring, Md. solo practitioner.

Smith claims his employer, Shirley, violated the federal Davis-Bacon Act by paying him less than prevailing wages for his construction work on federal building projects at the National Museum of African-American History and Culture, the National Zoo and City Market in 2012 and 2013.

He further claimed in the lawsuit, filed Jan. 2, 2013, that Shirley and its parent company, Bethesda-based Clark, violated the False Claims Act by fraudulently certifying its compliance with the Davis-Bacon Act in documents submitted to the U.S. Department of Labor, as required of federal contractors. Smith, of Washington, also alleged that Shirley reassigned him further from his home and reduced his hours in retaliation for having brought a complaint to the Department of Labor.

Greene, the trial attorney, properly filed the False Claims Act suit under seal but then called Clark’s in-house counsel the next day to tell him of the filing, according to the 4th Circuit’s opinion. A day later, Greene contacted Shirley’s personnel office to request Smith’s employment records, explaining she had recently filed a False Claims Act complaint naming the company as a defendant, the opinion stated.

The federal government investigated and chose not to intervene, the opinion added.

Senior U.S. District Judge Roger W. Titus dismissed the case, agreeing with the defendants that Greene had violated the 60-day non-disclosure requirement by telling them about the filing. He also dismissed the retaliation claim, saying Smith had failed to show that Shirley knew of his False Claims Act allegations prior to the reassignment.

The 4th Circuit vacated and remanded Titus’ dismissal of the False Claims Act allegation as well as the retaliation claim, saying it should be heard at trial.

“An employer undertakes a materially adverse action opening it up to retaliation liability if it does something that well might have dissuaded a reasonable worker from making or supporting a charge of discrimination” or of filing false claims, Wynn wrote. “Here, Smith alleged that after lodging a complaint with the Department of Labor that resulted in an investigation, he was transferred to a lower-paying job site that substantially increased his commute time and transportation costs. This action might well dissuade a reasonable worker from whistleblowing.”

The companies deny the allegations.

In its decision, the 4th Circuit made clear it does not condone Greene’s premature disclosure.

“We in no way minimize the significance of the violation in this case: By directly informing the defendants of Smith’s qui tam [False Claims Act] claim, Smith’s attorney risked serious interference with the government’s opportunity to investigate the alleged fraud,” Wynn added in a footnote to his opinion. “That risk appears not to have materialized in this case. But such disclosures have the potential to frustrate the purposes of the seal provision in a way that merits dismissal with prejudice, and qui tam claimants are well advised to comply strictly with the FCA’s seal requirements.”

Neither Smith’s appellate counsel nor the companies’ attorney returned telephone and email messages seeking comment Monday.

Smith is represented on appeal by Jerry A. Miles II, of Deale Services LLC in Rockville. Randall A. Brater, of Arent Fox LLP in Washington, represents Clark Construction and Shirley Contracting.

Judges Henry F. Floyd and Pamela A. Harris joined Wynn’s opinion.

The case is Brian K. Smith v. Clark Construction Group LLC et al., No. 14-1406.

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