The trial court found that the Rigsbys’ attorneys, including former tort lawyer Richard “Dickie” Scruggs, had violated the seal requirement on three occasions in August and September 2006 by disclosing the existence of the False Claims action to several media outlets, such as ABC and CBS News and The New York Times.
But the court refused to dismiss the lawsuit. Because the court found “no evidence” that the improper disclosures had “led to a public disclosure in the news media that this action had been filed,” it concluded that the breach had not “hampered the government’s investigation” and was not “severe.”
The court also found the Rigsbys had not authorized their attorneys’ violations and so had not “acted willfully or in bad faith.” The case went to trial on a bellwether claim involving one property. The jury unanimously found that State Farm had knowingly submitted a false claim and a false record.
The Fifth Circuit affirmed, adopting the district court’s balancing test for dismissal of seal violations.
In its high court petition, State Farm, supported by the U.S. Chamber of Commerce, the pro-business Washington Legal Foundation and the National Association of Criminal Defense Lawyers, claimed a three-way circuit split on the proper standard for dismissal of claims that violate the seal requirements.
National Law Journal