On June 21, the U.S. Supreme Court granted certiorari in United States, ex rel. Polansky v. Executive Health Resources, Inc. The Court agreed to hear the case which concerns the issue of whether or not the U.S. government can dismiss False Claim Act whistleblowers' qui tam suits after initially declining to intervene in them. The case also concerns what standard applies to such a dismissal if the DOJ does have such authority. There is currently a clear and intractable conflict in the circuits on this important statutory question.

Under the False Claims Act, individual whistleblowers may bring qui tam lawsuits against fraudsters on behalf of the U.S. government. The Department of Justice (DOJ) has the opportunity to intervene in qui tam suits and take over the proceeding. However, when DOJ declines to intervene in and litigate the qui tam case the statute permits the whistleblower to pursue the case in the name of the United States and to litigate the case against the defendant in federal court.

In instances where the DOJ does initially intervene, it has the authority to dismiss the suit by giving the whistleblower notice of a motion to dismiss and the opportunity for a hearing on the motion. The Supreme Court will resolve whether DOJ’s dismissal authority extends to cases in which the DOJ initially declined to intervene but later seeks to intervene to dismiss the whistleblower’s suit.

False Claims Act whistleblowers have been an invaluable asset in the U.S. government’s efforts to fight government contracting fraud. Since the False Claims Act was modernized in 1986, qui tam suits have allowed the government to recover over $7 billion from fraudsters. Hundreds of millions of these recoveries occurred in cases where the DOJ declined to intervene.

If the Supreme Court grants DOJ the broad authority to dismiss cases in which it did not intervene, it threatens the efficacy of the False Claims Act. In recent years recoveries from qui tam suits have been in sharp decline due in large part to the DOJ’s tendency to dismiss strong whistleblower suits without just cause. However, qui tam recoveries in DOJ-declined whistleblower cases have been on the rise. For example, in 2021 alone the taxpayers recovered over $479 million in whistleblower cases where DOJ refused to participate and the whistleblower litigated the qui tam case without the government’s participation.

The Polansky case provides the Supreme Court with the opportunity to put some limits on the DOJ’s dismissal authority in whistleblower cases where the government initially declined to intervene. Whether the Court will establish specific standards that the government must meet before a court can grant DOJ’s request to dismiss a whistleblower’s case is unknown, but the stakes are high. If the Supreme Court permits DOJ to shut down DOJ-declined whistleblower cases without any due process, it risks influence peddling by contractors with inside ties to the government and opens the door to lobbying the government to dismiss whistleblower cases. When President Abraham Lincoln signed the original False Claims Act into law, policing corruption within the government contracting agencies was one of the law's principal aims.

In many DOJ-declined cases whistleblowers and their counsel are willing to carry the litigation risks and burdens, as is their right under the False Claims Act. Although it should not be difficult or burdensome for the government to demonstrate why an otherwise meritorious whistleblower case alleging fraud by a government contractor should not be allowed to proceed without the government, the government has vigorously resisted judicial review of its dismissal authority and DOJ has opposed establishing any standards to govern these dismissals.

The DOJ’s ability to dismiss qui tam suits has raised concern from Senator Charles Grassley (R-IA), the chief architect of the 1986 amendments which modernized the False Claims Act, that the DOJ is abusing its dismissal authority in DOJ-declined whistleblower cases. Grassley’s False Claims Amendments Act of 2021, which is cosponsored by Senators Richard Durban (D-IL), John Kennedy (R-LA), Patrick Leahy (D-VT) and Roger Wicker (R-MS), would, among other reforms, require the government to bear the burden of proving sufficient reasoning for the dismissal of a qui tam suit. This bill was approved by the Senate Judiciary Committee.

United States, ex rel. Polansky v. Executive Health Resources, Inc

The Polansky case stems from a qui tam suit filed by Jesse Polansky, a former employee of Executive Health Resources, in 2012. Polansky alleged that Executive Health was falsely certifying inpatient hospital admissions as medically necessary, leading to the overbilling of Medicare.

The DOJ chose to not intervene in the case, but then in 2019 moved to dismiss it. The U.S. District Court for the Eastern District of Pennsylvania granted the DOJ’s motion to dismiss. Polansky appealed this dismissal. In October 2021, the Third U.S. Circuit Court of Appeals ruled against Polansky. It determined that the DOJ’s motion to dismiss could be considered a motion to intervene and dismiss and that the DOJ only had to prove that its dismissal would not prejudice a party.

Polansky appealed this ruling to the Supreme Court which granted certiorari for the case on June 21.

Circuit Split

The Third Circuit ruling in Polansky added to a multi-way split amongst circuit courts on the DOJ’s authority to dismiss qui tam suits. In Swift v. United States, the D.C. Circuit held that the government has unfettered discretion to dismiss a False Claims Act whistleblower suit. In contrast, in United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., the Ninth Circuit ruled that the DOJ must prove that the dismissal serves a valid government purpose. Lastly, in United States ex rel. Borzilleri v. Bayer Healthcare Pharmaceuticals, Inc., the First Circuit held that the DOJ may dismiss a case if it provides reasoning for doing so and allows the whistleblower the chance to persuade the government to retract the dismissal.

Other FCA Issues

Polansky is not the only False Claims Act case which may be heard by the Supreme Court in the near future. There is currently a petition for a writ of certiorari before the Supreme Court for the case United States ex rel. Schutte v. SuperValu Inc. In that case, the Seventh Circuit ruled that while the company submitted false claims, it did not do so “knowingly” because it acted based upon a reasonable, though incorrect, interpretation of the law.

In May, Senator Grassley filed an amicus brief urging the Supreme Court to hear the case and to reverse the Seventh Circuit’s ruling. "SuperValu’s radical departure from the statute continues a lamentable tradition of some courts interpreting the FCA in an unduly restrictive fashion, which Congress and this Court repeatedly have stepped in to correct. The Court should grant certiorari to repair this tear in the FCA. If it is not set right, it will not be long before the centerpiece of the government’s anti-fraud arsenal becomes unusable,” Grassley states in the brief.

There are also petitions for writ of certiorari that have been filed in two other whistleblower cases, Owsley v. Fazzi Associates and Johnson v. Bethany Hospice, each requesting the Court to review an alleged split in the circuits as to what standard should apply when pleading fraud with particularity under the False Claims Act. The Supreme Court has asked the United States to file briefs in response to the petitions in both cases.

The next term at the Supreme Court has the potential to be very active in deciding cases under the False Claims Act. The outcome of these cases could determine whether the False Claims Act will continue to be an effective tool to combat government fraud or whether the law will be narrowed or weakened in a substantial way.