The United States Supreme Court recently agreed to hear a case interpreting the False Claims Act (“FCA”) that may affect the government’s involvement in pending and future matters. To resolve a circuit split, the Court will examine whether the government has the authority to dismiss an FCA suit after initially declining to intervene in the qui tam action and, if so, what standard applies to the dismissal.

The pending Supreme Court case, United States ex rel. Polansky v. Executive Health Resources, comes at a time when the government is exercising its dismissal authority with increased frequency. In January 2018, Michael Granston, the former director of the U.S. Department of Justice’s (“DOJ”) Commercial Litigation Branch, issued a memo instructing DOJ lawyers to consider more seriously and thoroughly whether to seek affirmative dismissals of potentially meritless FCA cases (the “Granston Memo”). Since the issuance of the Granston Memo—which identifies seven non-exhaustive considerations that tend to support dismissal—the DOJ has dismissed at least 50 meritless qui tam actions pursuant to 31 U.S.C. § 3730(c)(2)(A). Prior to the memo, DOJ exercised its dismissal authority just 45 times in approximately 30 years.

In the underlying FCA case before the Supreme Court, the relator alleged that a health care billing certification company enabled hospitals to overbill federal health care programs by certifying inpatient care for services that should have been certified as less-expensive outpatient services. The relator filed suit in 2012, and the government declined to intervene two years later. But, the government did not seek to dismiss the case until 2019, contending that the FCA vested the government with “complete discretion” to dismiss an FCA lawsuit at any point in the litigation under 31 U.S.C. § 3730(c)(2).

The relator disagreed with the district court and Third Circuit’s decision to grant the government’s motion to dismiss, arguing the government lacked authority to dismiss the case because it did not intervene in the case at the outset and should not have been granted dismissal on the merits. The Supreme Court will review the Third Circuit’s decision and settle on a uniform standard of review regarding the government’s attempts to dismiss qui tam actions under 31 U.S.C. § 3730(c)(2). To do so, the Court must resolve the current circuit split.

Ninth & Tenth Circuit: Burden Shifting Rationality Standard

The Ninth and Tenth Circuits adopted a two-step burden shifting “rationality standard."¹ First, the government must identify a valid government purpose and a rational relation between dismissal and accomplishment of that purpose. Second, if the government satisfies that showing, the burden switches to the relator to demonstrate that dismissal is fraudulent, arbitrary and capricious, or illegal. The Ninth Circuit concludes that the government’s dismissal authority is not limited by whether the government intervened at the start of the matter. And, the Tenth Circuit has expressly held that the FCA does not require government intervention before dismissal.

D.C. Circuit: Unfettered Right

The D.C. Circuit adopted a contrary second standard that affords the government an “unfettered right to dismiss” a qui tam action.² The court concluded that the FCA does not require the government to intervene to seek dismissal.

Seventh & Third Circuit Standard: Government Intervention & Rule 41

The Seventh Circuit rejected these two approaches and created a third standard wherein the government must intervene (which requires a showing of good cause if the government previously declined intervention) before seeking to dismiss, and the dismissal should be evaluated under Federal Rule of Civil Procedure 41’s standards for voluntary dismissal.³ The Third Circuit in Polansky agreed with the Seventh Circuit’s approaches.

First Circuit: Reasons for Seeking Dismissal

The First Circuit recently adopted a fourth standard, concluding that (i) although the government does not bear the burden of justifying its motion to the court, the government must provide its reasons for seeking dismissal so that the relator can “attempt to convince the government to withdraw its motion at the hearing”; and (ii) if the government does not agree to withdraw its motion, the district court should grant it unless the relator can show that, in seeking dismissal, the government is “transgressing constitutional limitations or perpetrating a fraud on the court.”⁴

Key Takeaways for Healthcare Providers

• While the United States does not voluntarily dismiss a significant number of FCA cases annually, the FCA provides an avenue for doing so. In recent years, DOJ has signaled growing focus on dismissing meritless FCA cases that do not further the statute’s goal of redressing fraud. Whether the Supreme Court imposes definitive standards on the timing or reasons for dismissal may affect DOJ’s ability to dismiss cases in the future.

• Monitoring the outcome of the forthcoming Polansky case in the Supreme Court is important for any health care provider or supplier under a pending FCA investigation or litigating an FCA case. The Court’s opinion may affect avenues available for defendants seeking to dismiss potentially meritless FCA cases beyond initiating resource-intensive litigation.