On August 10, 2015, the US Court of Appeals for the Fourth Circuit held in Smith v. Clark/Smoot/Russell that a relator's violation of the sealing requirements in a False Claims Act (FCA) case need not lead to dismissal if the violation does not incurably frustrate the statutory purpose of sealing the case ( (4th Cir. Aug. 10, 2015)). The court also clarified the pleading requirements under FRCP 9(b) for FCA claims.

The plaintiff worked for the construction-company defendants on federal construction projects. Under the Davis-Bacon Act, the construction companies were required to pay their workers no less than the locally prevailing wages and to certify that they had paid the appropriate wages. The plaintiff alleged that the defendants falsely certified compliance with the Davis-Bacon Act on payrolls they submitted to the government for payment because:

The plaintiff's counsel filed the complaint under seal in camera, as required by the FCA. However, the day after filing the complaint, the plaintiff's counsel called counsel for one of the defendants to inform him that the complaint had been filed and to request that the defendants cease retaliating against the plaintiffs. The plaintiff's counsel also contacted a human resources representative for one of the defendants to request copies of the plaintiff's employment records, but he refused to send a copy of the complaint to the defendants. A few weeks after the plaintiff's counsel sent a copy of the complaint to the Government, an attorney representing one of the defendants contacted the Government to request a copy of the complaint. The Government realized that there was little point in maintaining the seal when the defendants were aware of the action and moved for a partial lifting of the seal to allow the Government to better evaluate the relator's claims. The Government ultimately decided not to intervene in the action.

The defendants jointly filed a motion to dismiss the case, arguing, among other things, that the plaintiff's violation of the sealing requirements mandated dismissal and that the complaint did not adequately allege fraud under FRCP 9(b).The district court granted the motion to dismiss, and the plaintiff appealed.

The Fourth Circuit held that, as recognized by other Circuit Courts of Appeal, a violation of the sealing requirement may result in the sanction of dismissal. However, if the violation is not an incurable and egregious frustration of the "statutory objectives underlying the filing and service requirements," dismissal may not be warranted. The Fourth Circuit noted that objectives of the sealing requirement include:

The Fourth Circuit found that the violation of the sealing requirements in this case did not incurably frustrate these purposes. The Government itself had stated that the defendants' knowledge of the claims allowed it to better evaluate them, and because the disclosure was not made to the public, there was no harm to the defendants' reputations. Although the defendants were "tipped off," the Government was still able to investigate the alleged fraud. Therefore, the case should not have been dismissed on this ground.

The Fourth Circuit also addressed the district court's other rationales for dismissing certain counts, including the district court's findings that the plaintiff's fraud claims were deficient under FRCP 9(b). The Fourth Circuit reiterated that, to state an FCA claim, a plaintiff must at a minimum describe the:

The Fourth Circuit found that the plaintiff's complaint did include the required allegations about the defendants' misrepresentations, and that the information provided was sufficient to alert the defendants to the particular circumstances for which they would have to prepare a defense. As a result, the Fourth Circuit reversed the district court's dismissal with prejudice of the counts on appeal.