Rules are tightened in whistle-blower suits

WASHINGTON —  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 as much as $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 ordered Rockwell to pay the government nearly $4.2 million for false claims that the company submitted. Stone could have received as much as 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.

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 Miller and Chevalier.

The Bush administration sided with Stone, arguing that it was in the government’s interest to encourage whistle-blowers, even though the government would keep more money if Stone lost his case.

Hartley Alley, a Colorado-based lawyer who represented Stone, said the decision failed to recognize the importance of Stone’s actions at Rocky Flats, now a Superfund cleanup site.