Whistle-Blower Rule Tightened

By Greg Stohr
Bloomberg News
Wednesday, March 28, 2007

The Supreme Court limited the ability of whistle-blowers to collect damages in suits claiming that the federal government was defrauded, siding with Boeing in a case stemming from safety issues at a Colorado nuclear plant.

The court, voting 6 to 2 in Rockwell v. United States, said retired engineer James S. Stone can't share in a $4.2 million award he and the U.S. government won in a suit against Rockwell International, now part of Boeing. The ruling, which reversed a lower court, might also bar Stone from collecting legal fees.

The decision reduces the incentive for people to press claims under the False Claims Act, which lets whistle-blowers sue on behalf of the federal government and then share in any recovery. Although Boeing will still have to pay the full award, Stone won't be able to collect any of it.

Stone accused the company of making false statements about environmental, health and safety activities at its Rocky Flats nuclear weapons facility, near Denver. The government later joined his suit against Rockwell.

The high court dispute centered on the requirement that whistle-blowers be the "original source" of information about wrongdoing. The majority said Stone didn't meet that requirement because the focus of the case shifted during the litigation and the jury's findings against the company were not based on information he provided.

"Stone did not have direct and independent knowledge of the information upon which his allegations were based," Justice Antonin Scalia wrote for the court. Chief Justice John G. Roberts Jr. and Justices Anthony M. Kennedy, David H. Souter, Clarence Thomas and Samuel A. Alito Jr. joined Scalia in the majority. Justice Stephen G. Breyer did not take part in the case.

Justices John Paul Stevens and Ruth Bader Ginsburg dissented, saying the majority had misinterpreted the False Claims Act. Stevens said the court should have focused on "the facts in the public domain at the time the action is commenced."

Stone worked at Rocky Flats until 1986, when he was laid off. While there, he questioned the company's plan for disposing of toxic sludge by mixing it into cement.

Soon after his departure, Stone began giving information to the FBI and the Environmental Protection Agency about various environmental, safety and health problems at the plant. The government's investigation culminated in 1992, when Rockwell pleaded guilty to 10 federal environmental violations.

In a civil case, a jury concluded that Rockwell had defrauded the government from April 1987 to September 1988. The U.S. Court of Appeals for the 10th Circuit in Denver upheld the award.

The high court, in reviewing the case, declined to consider Boeing's broader argument that the False Claims Act is unconstitutional.


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