CBP Prior Disclosures Don't Prevent Whistleblower Claims, Says Gov't in OtterBox Case
Prior disclosures of customs violations don’t protect companies from False Claims Act whistleblower lawsuits, said the U.S. Attorney for the District of Colorado in a brief filed Nov. 8. The government filed the brief as part of a lawsuit brought by Colorado customs broker Bonnie Jimenez against her former employer OtterBox. Jimenez alleges OtterBox knowingly failed to include assists in the transaction value of cellphone cases it imported from China over a five-year period (see 13100701). She says she repeatedly warned top management at the company, and was eventually fired for her trouble. As the whistleblower in a False Claims Act case, Jimenez stands to share in the proceeds if the Colorado U.S. District Court assesses penalties and damages against OtterBox. The U.S. government hasn’t intervened in the lawsuit, and declined to take a position on OtterBox’s alleged misdeeds in its brief. But it said OtterBox’s prior disclosure did not begin a formal CBP penalty proceeding, and doesn’t preclude Jimenez’ whistleblower suit.
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The government was responding to a motion to dismiss filed by OtterBox in September. OtterBox had cited a provision of the false claims act that bars whistleblower suits for violations that are already the subject of a civil suit or administrative civil money penalty proceeding. OtterBox had filed a prior disclosure of its valuation violations a year before Jimenez filed her whistleblower case. The company said the prior disclosure marked the beginning of a CBP penalty proceeding, so Jimenez was prohibited from pursuing a False Claims Act case. To allow the lawsuit to proceed would discourage other companies from filing future prior disclosures, said OtterBox.
In its Nov. 8 brief, the government argued that the prior disclosure does not prevent Jimenez from pursuing a False Claims Act whistleblower suit. CBP penalty proceedings are initiated by a penalty notice or pre-penalty notice, the government said, not by prior disclosures. CBP still has a choice on whether or not to begin a penalty proceeding after a prior disclosure is filed, it said. And because prior disclosures are treated as confidential business information and not disclosed to the public, companies wouldn’t be discouraged from filing prior disclosures if False Claims Act whistleblower suits were still possible. For example, in this case Jimenez had no idea OtterBox had filed a prior disclosure. To the contrary, if prior disclosures barred whistleblower suits, then companies would be incentivized to file haphazard prior disclosures to avoid False Claims Act liability.
Email ITTNews@warren-news.com for a copy of the government’s brief.