In a recent memorandum, the US Department of Justice provided guidance to its attorneys on when they should seek dismissal of False Claims Act cases filed by relators. This appears to be the first directive advising DOJ attorneys of when they should consider filing motions to have qui tam actions dismissed, and the memo’s contents could be welcome news for defendants currently involved in qui tam litigation.
In a memorandum dated January 10, Michael D. Granston, director of the Commercial Litigation Branch of the Fraud Section in the US Department of Justice’s Civil Division, articulated a policy to attorneys in the branch and all Assistant US Attorneys handling False Claims Act cases that they should seek dismissal of certain qui tam actions instead of merely declining to intervene. The Department memo memorializes statements that Mr. Granston made during the Health Care Compliance Association’s Health Care Enforcement Compliance Institute in Washington, DC in late October.
While the Department has always had the ability to seek dismissal of qui tam cases under Section 3730(c)(2)(A) of the False Claims Act, it has rarely exercised this right in the past, instead choosing only to decline to intervene. The Department’s policy change is an effort to curb the number of nonintervened qui tam cases for which the Department must expend resources and monitor. This has become especially important, considering there has been an uptick in qui tam filings while the rate of government intervention has remained static. It is also important in light of the growing trend of relators litigating nonintervened qui tam cases.
Section 3730(c)(2)(A) of the False Claims Act
Although rarely used, Section 3730(c)(2)(A) of the False Claims Act permits the attorney general to dismiss a qui tam action over a relator’s objection if “the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.” The False Claims Act does not provide a standard for deciding when to dismiss a qui tam action at the Department’s request. Only two circuits have proffered such a standard: The US Court of Appeals for the Ninth Circuit requires the Department to identify a “valid government purpose” that is rationally related to dismissal, while the US Court of Appeals for the DC Circuit has held that the Department has an “unfettered right” to dismiss a qui tam action. Unsurprisingly, the Department memo endorses the “unfettered” discretion standard offered by the DC Circuit, but recommends that attorneys argue that the government’s basis for dismissal satisfies any potential standard for dismissal under Section 3730(c)(2)(A).
The Seven Factors
The Department memo identifies seven nonexhaustive factors that Department attorneys should consider when evaluating whether to seek dismissal of a qui tam action under Section 3730(c)(2)(A). These factors are not mutually exclusive, and the Department advises that relying on more than one factor for dismissal is often appropriate along with other familiar grounds for dismissal in False Claims Act cases (e.g., the first-to-file bar).
The Department advises that seeking dismissal may be appropriate where
- the relator’s legal theory is inherently defective or the factual allegations are frivolous, even if the complaint is not facially deficient;
- the case provides no new information to a duplicative, preexisting government investigation, and dismissal would prevent an “unwarranted windfall” to the relator, who has added no value to the investigation;
- the case may have the effect of obstructing an agency from administering its policies or programs, including if a suit could divert resources of the accused away from their work or cause a valuable supplier to exit a government program;
- the case may interfere with the Department’s litigation prerogatives, including the fact that the relator’s action may interfere in the government’s own ongoing litigation or attempts at settlement, or a risk that pursuit of the action may lead to an unfavorable precedent;
- the case may implicate classified information or matters of national security, and dismissal is necessary to prevent disclosure of such information;
- the Department’s expected costs in participating in the case, even in a limited way, are likely to exceed any expected gain, including the costs that would be associated with discovery needed from the government if the action were allowed to continue and the risk of the government becoming liable for defense costs if the defendant were to prevail; or
- the relator has obstructed the government’s ability to adequately investigate the claims, e.g., where the relator has failed to disclose facts to the government.
These factors are accompanied by citations to cases in which the Department has successfully and unsuccessfully sought dismissal pursuant to each factor, and where applicable, under the different standards of review.
The memo closes with other points that Department attorneys should consider when seeking dismissal under Section 3730(c)(2)(A), like advising the affected agency in advance of seeking dismissal and considering partial dismissal in appropriate cases.
The memorandum appears to encourage government attorneys to seek dismissal earlier in a case, if possible, because courts may disfavor such motions that have not been filed until the end of discovery or shortly before trial. Nonetheless—and of interest to defendants in ongoing qui tam litigation in which the Department’s intervention decision has since passed—the Department advises that dismissal may nevertheless be appropriate at a later stage. In the memo, the Department explains that such a reevaluation may be particularly warranted when there has been a significant intervening change in the law or evidentiary record.
The memo represents a significant shift in the Department’s attitude toward its role as gatekeeper to reduce the number of meritless or otherwise problematic qui tam cases that continue past the Department’s decision not to intervene. On its face, the memo directs Department attorneys to exercise a rarely applied right under the False Claims Act to dismiss qui tam cases instead of merely declining to intervene.
For parties involved in ongoing qui tam litigation and for those who may become involved in a future action, the memo provides a roadmap for discussion with the government attorneys handling those matters and empowers those government attorneys to seek dismissal. For parties involved in qui tam cases where the Department has declined to intervene, this memo provides a rare opening to request that the Department seek dismissal, particularly if there has been a significant change of law after the declination, like the US Supreme Court’s decision in Universal Health Services, Inc. v. US ex rel. Escobar; if there have been unique developments in the factual record; or if the case implicates other factors outlined in the memo.