The US Supreme Court’s June 21 order granting certiorari in Polansky v. Executive Health Resources signals the Court’s intention to settle a circuit court split on the procedure and standard by which the government can exercise its dismissal authority under 31 USC § 3730(c)(2)(A) of the False Claims Act in declined qui tam cases.
While the circuit split is obvious, the Court’s decision to expend its resources on this False Claims Act (FCA) question—as opposed to ones of far greater importance that remain unresolved—is somewhat surprising. That is because, in reality, the government rarely deploys its broad powers to dismiss—although it has exercised this power more after the issuance of the “Granston Memo”—and that reluctance to act both predates the circuit split and cannot be attributed to it.
In fact, under any of the competing standards, the burden on the government in exercising its near plenary power to dismiss is fairly low. As a result, barring the Court’s adoption of the petitioner-relator’s unsupported (and likely unconstitutional) position that the government forfeits its right to dismiss FCA cases if it does not intervene at the outset, the Court’s resolution of the circuit split over the dismissal procedure and standard is unlikely to materially affect day-to-day FCA practice.
The grant of certiorari follows several recent circuit court decisions interpreting § 3730(c)(2)(A), which allows the government to dismiss a case over a relator’s objections, and its interaction with the standard under § 3730(c)(3), which establishes a “good cause” standard for the government to intervene in cases where it initially declines to intervene. Although circuits have taken somewhat different approaches on this issue (the relator’s petition in Polansky argues there are four to five different standards), all of them agree that the government has broad discretion to dismiss qui tam cases, even when it initially declines to intervene.
Approximately 20 years ago, two circuit courts set the stage for the split now before the Supreme Court with the US Court of Appeals for the Ninth Circuit in United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139 (9th Cir. 1998) requiring a rational connection between dismissal and a valid government purpose and the US Court of Appeals for the District of Columbia Circuit in Swift v. United States, 318 F.3d 250 (DC Cir. 2003) stating that the government has “unfettered discretion” to dismiss.
More recently, following the Justice Department’s January 2018 “Granston Memo” (incorporated into the Justice Manual at 4-4.111), which recognized government dismissal as “an important tool to advance the Government’s interests, preserve limited resources, and avoid adverse precedent,” there has been a slight uptick in the anemic rate of government dismissals under § 3730(c)(2)(A). That modest increase in dismissals created opportunities for other circuits to weigh in on the dismissal standard debate and, in some instances, add another procedural requirement to the dismissal process.[1]
While there are some technical and minor practical differences between the standards being applied by the circuits and thus the burden on the government when seeking dismissal under 31 USC § 3730(c)(2)(A), all of the standards are deferential to the government. That deference to the government is fully justified, both on a plain reading of the FCA, but also in recognition of the fact that the government remains the real party in interest in declined qui tam cases and that status must allow for it to step in and end qui tam actions that it deems as not serving the government’s or public’s interest.
Thus, regardless of which dismissal standard the Supreme Court deems most appropriate, and no matter which procedure the Court decides the government must use, the government’s ability to exercise its dismissal authority should not be materially impacted by the Court’s review. Conversely, the relator’s extreme argument that the government has no dismissal authority following its initial intervention decision would drastically alter the status quo on this subject and likely will be rejected by the Supreme Court. Thus, any significant impact from the Court’s decision to hear this case is expected to come not from its substantive ruling on the dismissal authority, but from any other statements it makes regarding FCA jurisprudence along the way.
This procedural review by SCOTUS will impact FCA cases across all industries, including healthcare, FDA, life sciences, defense, and government contractors.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact the authors, Douglas W. Baruch, Jennifer M. Wollenberg, and Paul Mayer, or 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
Amy E. Schuh
Eric W. Sitarchuk
Washington, DC
Giovanna M. Cinelli
Brad Fagg
Scott A. Memmott
Sandra Moser
Kenneth J. Nunnenkamp
Amanda B. Robinson
Howard J. Young
[1] See, e.g., United States ex rel. CIMZNHCA, LLC v. UCB, Inc., 970 F.3d 835 (7th Cir. 2020) (requiring intervention for government dismissal); Borzilleri v. Bayer Healthcare Pharms., Inc., 24 F.4th 32 (1st Cir. 2022) (holding that the government must provide its reasons for dismissal but placing the burden on a relator to show that the government is “transgressing constitutional limitations or perpetuating a fraud on the court” to avoid dismissal).