The Supreme Court left an 81-year-old retired engineer without a penny to show for his role in exposing fraud at a former nuclear weapons plant in a ruling that makes it harder for whistle-blowers to claim cash rewards.
James Stone stood to collect up to $1 million from a lawsuit he filed in 1989 against Rockwell International, now part of aerospace giant Boeing Co., over problems with environmental cleanup at the now-closed Rocky Flats nuclear weapons plant northwest of Denver.
A court eventually ordered Rockwell to pay the government nearly $4.2 million for false claims the company submitted. Stone could have received up to a quarter of Rockwell's payment, under the False Claims Act.
But Justice Antonin Scalia, writing in the 6-2 ruling Tuesday, said Stone was not entitled to recover any money because he lacked "direct and independent knowledge of the information upon which his allegations were based." Scalia said Stone had little connection to the jury's ultimate verdict against Rockwell.
The company must pay the entire penalty anyway. The only question before the court was whether Stone would get a cut.
The outcome was sought by business interests that were looking for the court to limit whistle-blowers in false claims lawsuits. Since Congress reinvigorated the Civil War-era law in 1986, those suits have returned $11 billion to the government. Recent high-profile cases include settlements with leading pharmaceutical manufacturers.
Chilling effect likely?
The decision will cause whistle-blowers, or relators, to think twice before they file false claims lawsuits, said Peter B. Hutt II, an expert in false claims lawsuits in Washington.
"The principal thing the court did is essentially try to preclude relators from engaging in fishing expeditions," said Hutt, a lawyer at the Miller and Chevalier firm.
James Moorman, president of the advocacy group Taxpayers Against Fraud Education Fund, agreed. Individuals whose information leads the government to pursue fraud can be told years later that they can't collect anything, Moorman said.
"No whistle-blower can afford to pursue a case to resolution under these circumstances," he said.
The Bush administration sided with Stone, arguing that it was in the government's interest to encourage whistle-blowers, even though the government keeps more money now that Stone has lost.
Hartley Alley, a Colorado-based lawyer who represented Stone, said the decision fails to recognize the importance of Stone's actions at Rocky Flats, now a Superfund cleanup site. "He is the one primarily responsible for exposing the criminal activities of Rockwell International at Rocky Flats," Hartley said.
In nearly four decades, some 70,000 plutonium triggers for nuclear bombs were made at Rocky Flats. Production was halted in 1989 because of chronic safety problems, prompting a raid by FBI agents. The Cold War ended before production could resume.
Company filed false claims
The company pleaded guilty in 1992 to violating federal environmental laws.
Hartley said Stone, who lives in Wheat Ridge, Colo., would not agree to an interview.
Once allegations are disclosed publicly, often by the media, individuals face a higher hurdle in bringing fraud suits on the government's behalf. Otherwise, people could read a newspaper account or an indictment and then rush to the courthouse to file suit.
The major exception to this rule is if an individual is an original source of the information, which Stone said he was. Stone did not file suit until after problems at Rocky Flats became public. He did, however, approach federal investigators with information about environmental issues before news accounts were published.
The company said his claim was implausible. Stone was laid off the year before Rockwell began submitting false claims saying it was meeting goals of treating low-level radioactive wastes at the former atomic weapons plant.
Justice John Paul Stevens, in a dissent joined by Justice Ruth Bader Ginsburg, said whistle-blowers should have to show only that their information led the government to the fraud, not that the claims ultimately proved to a jury must also have come from them. Justice Stephen Breyer did not take part in the case.
The case is Rockwell International v. U.S., ex rel Stone, 05-1272.