In a recent denial of a petition for certiorari, the US Supreme Court declined to resolve the standard courts should use when evaluating government motions to dismiss in qui tam cases.
The US Supreme Court on April 6 denied a petition for certiorari in a case[1] that had the potential to give guidance on the standard for the level of deference courts should afford US Department of Justice (DOJ) decisions to dismiss relator-initiated False Claims Act (FCA) cases (qui tam cases) over the objection of the relator.
At issue is the proper standard for the DOJ’s authority to dismiss a qui tam action under Section 3730(c)(2)(A) of the FCA.[2] While that statutory provision 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,” it does not articulate the standard for a dismissal.
The US Courts of Appeals for the District of Columbia and for the Ninth Circuit have opined on the standard and stand at the forefront of decisions regarding the level of deference afforded to such motions to dismiss.
Affording the government the highest level of dismissal deference, the DC Circuit has held that the FCA vests in the government “an unfettered right to dismiss” a qui tam action.[3]
In contrast, since at least 1998, the Ninth Circuit (as subsequently followed by the Tenth Circuit) has required that the government (1) identify a valid government purpose; and (2) show a rational relation between that purpose and dismissal. If the government satisfies this two-step test, the burden shifts to the relator to demonstrate that the dismissal is fraudulent, arbitrary and capricious, or illegal.[4]
As a practical matter, for the following three reasons, these differing standards have not had a significant impact on day-to-day FCA practice:
Notwithstanding the above, issues surrounding government-initiated dismissals have become more prominent since January 2018, when then-Director of the Commercial Litigation Branch of DOJ’s Civil Fraud Section Michael Granston issued a memorandum (Granston Memo) directing DOJ attorneys to actively consider seeking dismissal of qui tam cases they deemed to be without merit or otherwise problematic, rather than merely declining to intervene.
As we discussed in a previous LawFlash, the Granston Memo reflects an effort by the DOJ, in exercising its role as a gatekeeper in FCA actions, to curb the number of declined qui tam cases in which it would be required to monitor and expend resources. This has become especially important, as there has been an uptick in qui tam filings while the rate of government intervention has remained static. In support of its directive, the Granston Memo cited the continuously increasing volume of qui tam lawsuits filed and the need for a more “judicious” use of resources by prosecutors.
Prior to the Granston Memo’s issuance, DOJ prosecutors infrequently had sought to dismiss qui tam cases. For example, a senior DOJ official recently observed that, in the three decades immediately preceding the Granston Memo, the DOJ had dismissed only 45 cases.[6] Since the Granston Memo’s issuance in January 2018, however, the official stated that there has been a significant increase in dismissal motions, with DOJ seeking dismissal in at least 45 qui tam cases during that approximately two-year time period.[7] Of course, even this increased rate of dismissal still affects only a small percentage of the more than 700 qui tam cases filed each year.
Regardless of the degree of judicial deference to such motions, the government has secured a number of qui tam dismissals over the past two years, including in the Ninth Circuit.
Accordingly, government attorneys should continue to seek and secure qui tam dismissals that they deem appropriate, since they easily can satisfy either of the two competing standards. And defendants should continue to press DOJ to exercise this authority in appropriate cases.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Chicago
Megan R. Braden
Tinos Diamantatos
Houston
B. Scott McBride
John W. Petrelli
Miami
Alison Tanchyk
New York
Kelly A. Moore
Martha B. Stolley
Daniel B. Tehrani
Philadelphia
Meredith S. Auten
John C. Dodds
Lisa C. Dykstra
Rebecca J. Hillyer
Ryan P. McCarthy
Zane David Memeger
John J. Pease, III
Eric W. Sitarchuk
Washington DC
Douglas W. Baruch
Giovanna M. Cinelli
Brad Fagg
Kathleen McDermott
Scott A. Memmott
Kenneth J. Nunnenkamp
Jennifer M. Wollenberg
Howard J. Young
[1] U.S. ex rel. Schneider et al. v. JPMorgan Chase Bank NA et al., case number 19-678 in the Supreme Court of the United States.
[2] 31 U.S.C. § 3730(c)(2)(A).
[3] See Swift v. U.S., 318 F.3d 250 (D.C. Cir. 2003); Hoyte v. Am. Nat. Red Cross, 518 F.3d 61 (D.C. Cir. 2008).
[4] See U.S. ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139 (9th Cir. 1998); see also Ridenour v. Kaiser-Hill Co., 397 F.3d 925 (10th Cir. 2005) (adopting the Ninth Circuit’s dismissal standard).
[5] See Brief for the U.S. in Opposition to Certiorari p.8, U.S. ex. rel. Schneider et al. v. JPMorgan Chase Bank NA et al., U.S. Supreme Court Case No. 19-678 (filed March 4, 2020).
[6] Deputy Associate Attorney General Stephen Cox Keynote Remarks, 2020 Advanced Forum on False Claims and Qui Tam Enforcement, Jan. 27, 2020.
[7] Id.