The US Supreme Court’s decision in United States ex rel. Polansky v. Executive Health Resources confirms the relative ease by which the US government can exercise its dismissal authority under False Claims Act (FCA) Section 3730(c)(2)(A). The decision makes clear that the government must intervene in order to dismiss, but reaffirms that this standard is very deferential to the government. Several justices also raised the prospect of a future constitutional challenge to the FCA’s qui tam provisions.
After an extensive analysis of the structure of Section 3730(c), the FCA provision setting forth the “Rights of the Parties” in qui tam cases, the Court held that the government may seek and obtain dismissal of a qui tam action over a relator’s objection “so long as it intervened sometime in the litigation, whether at the outset or afterward,” and that traditional Federal Rule of Civil Procedure 41(a) standards apply to that dismissal.
While clearing up a circuit split over the dismissal standard, this holding does not effect a sea-change in the government’s dismissal authority, as none of the competing standards imposed any heavy burden on the government. Rather, the issue in everyday FCA practice has been the government’s rare exercise of that prerogative in cases that clearly warranted such government action. To the extent that confusion over the dismissal standard served as an impediment in the past, that obstacle has been removed by this decision, which now provides a clear and easy path for the government to dismiss whenever doing so would “vindicate the Government’s interests.”
The Polansky opinion may prove more notable due to the constitutional issues raised by Justice Clarence Thomas. Dissenting from the Court’s opinion due to his belief that the government’s Section 3730(c)(2)(A) dismissal authority is limited to the seal period, Justice Thomas questioned the constitutionality of the qui tam provisions, particularly in non-intervened cases.
Although joining the main opinion on the merits, Justices Brett Kavanaugh and Amy Coney Barrett agreed with that aspect of Justice Thomas’s dissent, stating that “[t]here are substantial arguments that the qui tam device is inconsistent with Article II and that private relators may not represent the interests of the United States in litigation.” Accordingly, it appears that at least three justices are in favor of having the Court “consider the competing arguments on the Article II issue in an appropriate case.”
Under the FCA, the government delegates certain of its authority to private parties, known as “relators,” who can bring an FCA action in the government’s name and receive a share of the government’s recovery, if any. To bring such an action, relators must file the suit under seal, allowing the government to investigate the allegations.
At the conclusion of the seal period, the government must make an intervention decision and notify the court. If it elects to intervene, the government controls the litigation, including the right to dismiss the action. However, in the majority of qui tam cases, including Polansky, the government declines to intervene, leaving the relator the right to day-to-day control of the litigation, although the government remains the “real party in interest” in the action.
In these so-called “non-intervened” or “declined” cases, the FCA allows the government to intervene at a later time for “good cause.” In Section 3730(c)(2)(A), the FCA provides that if the government “proceeds with the action,” it may dismiss the case over the relator’s objection after notice and the opportunity for a hearing.
In Polansky, the petitioner-relator argued that the phrase “proceeds with the action” only applies if the government intervenes before the case is unsealed. However, as discussed below, the Court held that any time the government intervenes—even after an initial declination decision and unsealing of the case—the dismissal is governed by “the default rules in civil litigation,” the Federal Rules of Civil Procedure.
Under Rule 41(a), the plaintiff’s right to dismiss the case over objection is only “on terms that the court considers proper,” which varies with the procedural posture of the case. Applying this rule to qui tam cases, the Court emphasized that the government should be able to dismiss most cases regardless of the procedural posture:
The suit alleges injury to the Government alone. And the Government, once it has intervened, assumes primary responsibility for the action. Given all that, a district court should think several times over before denying a motion to dismiss. If the Government offers a reasonable argument for why the burdens of continued litigation outweigh its benefits, the court should grant the motion. And that is so even if the relator presents a credible assessment to the contrary.
The court found, reviewing the Third Circuit’s decision for abuse of discretion, that the government had met this lenient standard, and affirmed the case in full.
The question raised in Polansky was whether and, if so, under what circumstances or standard the government can dismiss a qui tam case following the government’s initial non-intervention decision. The Court clearly and directly answered that question:
The Government may move to dismiss an FCA action under [Section 3730(c)(2)(A)] whenever it has intervened—whether during the seal period or later on. The applicable standards for deciding such a motion are those set out in Federal Rule 41.
The Court further made clear that satisfying Rule 41 should be relatively easy for the government and affirmed that the government had done so in this case.
The Government, in moving to dismiss, enumerated the significant costs of future discovery in the suit, including the possible disclosure of privileged documents. At the same time, the Government explained in detail why it had come to believe that the suit had little chance of success on the merits. . . . The Government gave good grounds for thinking that this suit would not do what all qui tam actions are supposed to do: vindicate the Government’s interests. Absent some extraordinary circumstance, that sort of showing is all that is needed for the Government to prevail on a (2)(A) motion to dismiss.
In so holding, the Court noted that government dismissal should be routinely granted, even accounting for the relator’s right to object to dismissal. Moreover, while the Court rejected arguments that the government need not intervene in a case in order to exercise its dismissal authority, the Court suggested that the “good cause” intervention standard under the FCA effectively merges with the justification for dismissal such that, if the government’s grounds for dismissal are sufficient, that would constitute good cause for intervention.
Indeed, in affirming the Third Circuit’s decision in all respects, the Court noted that the government had not formally intervened in the action before seeking dismissal, but that the lower court nevertheless had treated the motion to dismiss as a motion to intervene.
As most FCA practitioners are aware, Justice Thomas has authored all of the Supreme Court’s FCA decisions in the past several years and those opinions have been unanimous. The Polansky decision is therefore unusual not only because of the dissent, but also because that dissent came from Justice Thomas.
In dissent, Justice Thomas disagrees with the majority’s view of the rights of the government in declined qui tam cases. Performing his own textual analysis of Section 3730(c), he concludes that the government’s right to “proceed with the action” only refers to cases where the government chooses to intervene at the outset. As such, because certain rights attach to relators following a government declination, Justice Thomas believes that the FCA does not permit the government to exercise its dismissal authority post-declination even if it later intervenes for good cause.
More significantly, Justice Thomas, joined by Justices Kavanaugh and Barrett (who provided a concurring opinion), suggests that this scenario—in which a relator is proceeding with an action that the government wants to dismiss—gives rise to Article II standing questions and the constitutionality of the FCA’s qui tam provisions.
Justice Thomas lays out the constitutional concerns, noting that executive power “can only be exercised by the President and those acting under him.” He notes that “‘conducting civil litigation . . . for vindicating public rights’ of the United States is an ‘executive functio[n]’ that ‘may be discharged only by persons who are Officers of the United States’” (quoting Buckley v. Valeo, 424 U.S. 1, 138–140 (1976)). Because relators are not Officers of the United States, “[i]t thus appears to follow that Congress cannot authorize a private relator to wield executive authority to represent the United States’ interests in civil litigation.”
Justice Thomas acknowledges that “these are complex questions,” but all three justices appear to invite a constitutional challenge on these grounds in the appropriate case.
The Polansky opinion regarding the government’s dismissal procedure and standard does not materially alter the FCA landscape. While it settles the circuit court split on the appropriate dismissal standard and makes clear that the government must intervene in order to exercise its Section 3730(c)(2)(A) authority, this standard—like the competing ones—is extremely deferential to the government.
Now that the standard has been clarified, the question is whether the government will take this opportunity to actually exercise that authority in a more routine fashion. To date, for reasons the government has not publicly explained, the government has sought dismissal in only a very small fraction of the 600-700 qui tam cases that are filed every year, with the unfortunate effect of allowing many meritless qui tam actions to proceed.
The more significant impact of this case may be the constitutional issues raised in the dissent. The invitation to new constitutional challenges to the qui tam provisions surely will be accepted, and, as those challenges work their way back to the Supreme Court, it appears that there will be an audience primed to address them.
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