For more than 20 years, whistleblower suits under the False Claims Act have been automatically filed under seal and kept hidden for months, sometimes years, while the U.S. Department of Justice investigated the claims and decided whether to intervene.

Last week, lawyers for three advocacy groups tried to convince a federal appeals court that the 1986 law requiring the filing of qui tam complaints to remain secret for at least 60 days violates the public’s right to access court documents and unfairly blocks plaintiffs from speaking out about misconduct. Christopher Hansen, senior national staff counsel at the American Civil Liberties Union, told a panel of judges of the U.S. Court of Appeals for the 4th Circuit that the mandatory seal is “a gag on the clerk of the court, the judge and the court system as a whole.

“Congress doesn’t have the authority to make secret what the courts have historically made public,” Hansen argued.

The ACLU, the Government Account­ability Project and OMB Watch sued the Justice Department last year, arguing the law prevents the public from learning about alleged abuse of taxpayer money, such as military-contractor fraud in Iraq and Afghanistan. But a judge in the federal trial court in Alexandria, Va., ruled there is no First Amendment right of access to a qui tam complaint and dismissed the suit in August 2009.

Eric Fleisig-Greene of the Justice Department’s Civil Division, who argued the case for the government, said publishing a qui tam complaint on a public docket would tip off defendants to government suspicions and jeopardize the integrity of the federal investigation. Documents could be destroyed. Witnesses could vanish.

In court, Fleisig-Greene called the 60-day window a brief period that gives the government a chance to marshal resources. The seal, he said, also helps protect whistleblowers from the “great reprisal risk” of coming forward with claims of fraud. The Justice Department said qui tam whistleblowers can speak publicly about the facts of an underlying suit as long as they don’t divulge the existence of a complaint.

But lawyers for the plaintiffs said whistleblower complaints are rarely unsealed after 60 days, noting that the Justice Department regularly asks judges to extend the confidential period. In some cases, plaintiffs’ lawyers announce settlements at the same time a complaint is unsealed. At least a thousand qui tam cases remain under seal as of this year, according to the Justice Department.

During the Sept. 21 argument, ­judges Roger Gregory and Barbara Milano Keenan, an Obama nominee who was confirmed in March, at times appeared skeptical of the government’s position. The government, Gregory said, is making the court a “conspirator” in secret proceedings. “Our independence and transparency is really the soul of our court system in this country,” Gregory said.

U.S. District Judge James Dever III of Raleigh, N.C., who was sitting by designation, questioned whether the ACLU, which doesn’t represent whistleblowers, has standing to challenge the sealing provision. Dever said there is no qui tam plaintiff claiming a violation of speech rights. “Is there a willing speaker in this case?” the judge asked. “Who is it?”

For a whistleblower who participates in a qui tam suit, there is the potential for a sizable bounty — up to 30%, in some instances — from the recovery at the end of a successful case. The financial incentive for bringing a qui tam case under the False Claims Act was raised in court papers but not at oral argument.

Last year, Phillips & Cohen, a boutique plaintiffs’ firm in Washington that specializes in False Claims Act litigation, settled 10 cases in which clients received whistleblower awards totaling $184 million.

Several whistleblower lawyers in Washington who are not involved in the suit said there’s a general reluctance for plaintiffs to speak out and risk undercutting the chance of large payouts because the reward depends on how substantial the whistleblower helped in the action. A whistleblower who violates False Claims Act provisions risks having a suit dismissed. “The issue is not in my mind whether it’s appropriate to have the case under seal or not,” said Phillips & Cohen partner Peter Chatfield, who has represented whistleblowers in suits against health care providers and defense contractors. “The issue becomes, on any given case, how much time is appropriate to keep it under seal relative to the complexity of the case?”

Thomas Devine, legal director of the Government Accountability Project, said there’s no question whistleblowers “are vulnerable to heavy-handed Justice Department treatment if they don’t gag themselves while waiting for the government to act on the fraud charges.”

Devine said he was grilled by a Justice Department attorney for more than two hours after a story appeared in The Wall Street Journal in 2002 about a qui tam suit that was under seal. Devine said he was threatened with criminal prosecution. “I was told in more polite terms,” Devine said, “to keep my mouth shut if I knew what was good for me.”

Mike Scarcella can be contacted at mscarcella@alm.com.