Supreme Court to review DOJ’s dismissal authority in False Claims Act Qui Tam cases | Wiley Kidney LLP

What: The United States Supreme Court recently granted certiorari on a petition seeking to restrict the ability of the US Department of Justice (DOJ) to reject the False Claims Act (FCA) who tam case, even if the DOJ has determined that the case is likely to be without merit or that it will be costly for the government to pursue it.

Takeaways and industry impacts:

On June 21, 2022, the Supreme Court announced its decision to hear United States ex rel. Polansky v. Executive Health Resources Inc. in which the Relator-Petitioner raises two issues central to the DOJ’s ability to seek and obtain the FCA dismissals who tam case under 31 USC § 3730(c)(2)(A). The first is whether the DOJ loses its right to ask for a case to be dismissed if it initially declined to intervene. The second is, if the DOJ retains its power to dismiss after the denial, what standard of review should the courts apply to such motions to dismiss. In other words, is the 3730(c)(2)(A) hearing “simply a forum for the parent” to try to persuade DOJ not to dismiss, “or s an adversarial hearing to inform the district court’s decision? The Supreme Court’s upcoming decision could provide more clarity and more incentive for the GM to dismiss without merit or unnecessary who tam actions earlier in the litigation, perhaps as soon as its decision not to intervene.

The second issue – the standard of dismissal – essentially boils down to the courts’ deference to DOJ motions to dismiss. who tam Shares. Although circuit courts have enacted numerous standards to address this issue – discussed in detail below – all outstanding standards show deference to the United States, the true interested party in a who tam stock. If the Supreme Court rules that the DOJ has an “absolute right” to obtain dismissals, as one circuit has decided, the DOJ may be encouraged to fire more who tam Shares. Alternatively, if the Supreme Court upholds the approach of other circuits that a motion to dismiss filed later is subject to stricter judicial review, the DOJ may have an incentive to seek the dismissal of weaker cases earlier in the proceeding. , before defendants have even engaged in the costly exercises of bringing their own motions to dismiss and engaging in discovery. Whatever exact standard the Supreme Court adopts, it is likely to uphold the deference currently given to the DOJ. Indeed, as the DOJ points out in its opposition to the request for certiorari“no court of appeal has ever held that a who tam the action is expected to proceed on” a motion to dismiss from the DOJ.

On the issue of intervention, the Relator asks the Supreme Court to find that the DOJ loses its ability to later seek dismissal if it initially refuses to intervene in the case. No appellate court has ever accepted this argument, and the Supreme Court is unlikely to do so, as the United States remains the true interested party in an FCA case. However, if the Court were to somehow restrict the DOJ’s power to remove, it could motivate the DOJ to expedite its decision and step in for removal as soon as it has completed its investigation. rather than risk the prospect losing control of a problem. who tam stock.

Context of Qui Tam shares: Under the FCA, Congress offered private citizens, known as “reporters,” the ability to step into the shoes of the United States and file lawsuits, known as “who tam shares” – in his name. A parent may allege that a defendant made a false demand for payment from the government in violation of section 3729(a)(1). After a reporter files such a complaint, Section 3730(b)(2) gives the DOJ the ability to investigate and decide whether to “step in and pursue the action.” Even if the DOJ declines to intervene, Section 3730(c)(3) allows it to intervene later “upon showing cause.”

In particular, the DOJ may decide – even over the objection of a parent – to reject the who tam action under section 3730(c)(2)(A), which states that “[t]The government may dismiss the action over the objections of the person bringing the action if the person has been notified by the government of the filing of the petition and the court has given him or her an opportunity to be heard on the petition. CAF does not, however, provide a standard for assessing such requests. Since 2018 Memo Granstonwhich has been incorporated into the guidelines of the Justice Manual, there has been a modest increase in motions to dismiss under section 3730(c)(2)(A) and a corresponding increase in the parent’s interest in challenging the DOJ’s referral authority.

Division of the four-way circuit: Traditionally, courts have been split on the DOJ’s revocation authority under section 3730(c)(2)(A), but have agreed that intervention is not necessary for such revocation. . On one side of the split, the Ninth Circuit in 1998 used a “rational relationship” test for the first time in Sequoia Orange Co. c. Baird-Neece Packing Corp., which required the DOJ to identify a valid governmental objective justifying the dismissal and to establish a rational relationship between the achievement of that objective and the dismissal. He also noted that Section 3730(c)(2)(A) permits dismissal without intervention and does not “limit the government’s dismissal authority based on the mode of intervention.” The Tenth Circuit also followed the “rational relationship” standard. On the other side of the historic split, the DC Circuit in 2003 articulated the DOJ’s “absolute right to fire” in Swift v. United States. This opinion also noted that an intervention is not required for dismissal, but if it were, the motion to dismiss could be interpreted to include a motion to intervene.

In ruling on the recent wave of 3730(c)(2)(A) motions, the courts have widely applied the “absolute right” to reject the standard or avoid the question by finding that the GM met either standard. But some courts have charted new paths. In 2020, the Seventh Circuit applied a new normal in United States ex rel. Cimznhca, LLC v UCB, Inc. who continued to reinforce the DOJ’s position of broad authority to fire who tams. He avoided both Orange Sequoia and Fast standards, finding that Federal Rule of Civil Procedure 41(a)(1)(A)(i) provided an “absolute” right for the DOJ to dismiss an action by serving a notice of dismissal at any time “before the party adverse means either a response or a motion for summary judgment. By rejecting unfettered discretion, the Seventh Circuit explained that the standard “renders the hearing specifically provided for in statute superfluous and belies the role of the judiciary in providing constitutional checks and balances.” While acknowledging that such hearings “often serve[s] no big goal,” the Seventh Circuit noted that his approach offers at least one meaningful opportunity for one. If the Rule 41(a)(1) notice period and corresponding “absolute” right to terminate have passed, then the DOJ would request the Rule 41(a)(2) termination and hearing.” could be used to determine what terms of dismissal are “appropriate.” This standard of “appropriate terms,” however, is subject to judicial discretion and is not well defined in the FCA context.

Then in 2021, the Fifth Circuit dug a fourth way in United States ex rel. Health Choice Alliance, LLC v Eli Lilly and Company Incidentifying two conditions for the DOJ to be permitted to seek dismissal under Section 3730(c)(2)(A): (1) the DOJ must notify the reporter of its motion to dismiss and (2) the court must provide the relationship with “an opportunity for a [meaningful] hearing on the motion” as set forth in Section 3730(c)(2)(A). Shortly thereafter, the Third Circuit in the ongoing litigation adopted the Seventh Circuit dismissal standard. Later, the first circuit of United States ex rel. Borzilleri v Bayer Healthcare Pharmaceuticals, Inc. largely adopted the DC Circuit’s “absolute right” standard, explaining that courts should only deny motions to dismiss if the government “transgresses constitutional bounds” or “attempts to commit fraud against the court.”

The case: The Supreme Court granted certiorari hear the case of United States ex rel. Polansky v. Executive Health Resources Inc. (21-1052), which involves allegations that the defendant (EHR), a healthcare billing certification company, tricked hospitals and doctors into fraudulently billing Medicare. The Relator filed its initial complaint under seal in 2012, and after a two-year investigation, the DOJ declined to intervene. In August 2019, the DOJ filed for dismissal of the action under section 3730(c)(2)(A). In its motion, the DOJ argued that the dismissal was appropriate “based on its overall assessment of the case and in light of recent discovery orders that impose[d] an additional burden on the United States requiring the production of sensitive and privileged government documents, as well as the actions of the parent (including those for which the Court has imposed sanctions) that may reduce their ability to prove certain aspects of the case and which may require the commitment of additional government resources.

In its decision on the DOJ’s motion to dismiss in 2019, the U.S. District Court for the Eastern District of Pennsylvania declined to apply the then-current section 3730(c)(2)(A) dismissal standard (Orange Sequoia Where Fast, concluding instead that the DOJ was successful in either. The court dismissed the case with prejudice.

On appeal, and particularly after new developments in the Circuit’s split from Section 3730(c)(2)(A), the Third Circuit upheld the dismissal, but took a different approach. First, he ruled that the DOJ could not seek the dismissal of a who tam action if she was not a party to the case. Since the DOJ initially declined to intervene in the case, the Court ruled that the DOJ should intervene before seeking to dismiss the action.

Second, the Third Circuit opted for the Seventh Circuit dismissal standard. Consistent with the Seventh Circuit’s approach, the Third Circuit interpreted the “DOJ’s motion to dismiss to include a motion to intervene.” She also found that under Rule 41 of the Rules, the District Court did not abuse its discretion in dismissing the case.

In January 2022, the Relator filed a subpoena certiorariasking the Supreme Court to answer “[w]Whether the government has the power to dismiss an FCA lawsuit after it initially declined to pursue the action, and what standard applies if the government has that power. Despite opposition from defendant-respondent and the DOJ, the Supreme Court announced on June 21, 2022 that it would hear the case.

The Supreme Court will likely resolve the circuit divide by deciding which standard courts should apply when evaluating motions under 3730(c)(2)(A). Lawyers and potential parties on both sides of the issue should stay tuned for the Supreme Court’s next ruling, which is expected during the court’s next term.

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