State of New Jersey ex rel. v. JP Morgan Chase

Case Summary: ABA filed a coalition amicus brief urging the New Jersey Supreme Court to uphold a lower court ruling that barred Edelweiss, a private investment fund, from bringing a qui tam suit based on publicly disclosed information.

A private citizen (called a relator) files a qui tam lawsuit to report fraud against the government. The relator acts as a whistleblower, exposing the wrongdoing. If the lawsuit succeeds, the relator may receive a portion of the recovered funds. However, the public disclosure bar prevents relators from suing over fraud already publicly disclosed in federal hearings, reports, GAO audits, or news media. To bring a qui tam lawsuit, one must qualify as an “original source” with direct, independent knowledge beyond the public disclosure.

In 2015, Edelweiss, acting as a qui tam relator, sued major banks—including Chase, Citigroup, Wells Fargo, Morgan Stanley, and Bank of America—under the New Jersey False Claims Act. Edelweiss alleged the banks improperly set interest rates on variable-rate demand obligations (VRDOs) without considering bond-specific factors or market conditions and failed to genuinely remarket the bonds to lower the state’s borrowing costs. The banks countered that no law or contract required individualized rate-setting, and their practices followed industry norms and legal standards. The trial court dismissed the complaint, and the Superior Court of New Jersey Appellate Division affirmed, ruling the FCA’s public disclosure bar requires dismissal of Edelweiss’s complaint. Edelweiss appealed to the New Jersey Supreme Court.

ABA filed its amicus brief supporting the banks, arguing the public disclosure bar serves the FCA’s purpose of encouraging genuine whistleblower suits while preventing “parasitic lawsuits” by professional relators. The FCA encourages individuals with first-hand knowledge of fraud to report it, but qui tam suits risk parasitic claims by opportunists with no direct knowledge. To prevent this, the public disclosure bar blocks actions based on publicly disclosed allegations unless the relator has direct and independent knowledge. ABA explained that lawsuits like Edelweiss’s, which rely on information available to the public, add no value and cannot proceed.

ABA also argued that Edelweiss relied on information from websites that disseminate information to the public and thus constitute “news media” under the FCA. ABA stressed that Edelweiss is not a true whistleblower with valuable information but a professional relator seeking profit through repeated suits based on data any member of the public could access. Edelweiss relied on online data from Bloomberg, MSRB SHORT, and EMMA—websites that disseminate information to the public and qualify as “news media” under the FCA. This information cannot support a relator’s claim.