Jeffrey S. Bucholtz, jbucholtz@kslaw.com; Alexander K. Haas, ahaas@kslaw.com
The False Claims Act's qui tam action is a distinctive and atypical form of litigation. Through the qui tam mechanism, Congress created a unique way for the United States to recover for false claims by empowering private persons—relators—to file suit "for the person and for the United States Government." 31 U.S.C. § 3730(b). While allowing private persons to file suit on behalf of the government, Congress ensured through a variety of means that the government would retain substantial control over cases brought in its name. In addition to the government's powers to intervene and take over the prosecution of a qui tam action, to settle such an action, and to limit or even halt discovery that would interfere with a government investigation, the government also has the power to unilaterally "dismiss [a qui tam] action notwithstanding the objections" of a relator. Id. § 3730(c)(2)(A). Yet the most striking thing about the government's dismissal power is how rarely the government exercises it—only a handful of times since the 1986 amendments to the False Claims Act created the modern qui tam action.
The Government's Power To Dismiss A Qui Tam Action
The plain language of the Act imposes no constraint on the reasons why the government may elect to dismiss a qui tam action. Even where the government assumes the relator's allegations to be meritorious, the government may dismiss a qui tam action because the amount of money at stake is too small to justify devoting government resources to the matter, or because pursuit of the action could threaten other government interests.
Nor does the Act contemplate a significant role for the courts in reviewing the government's exercise of its dismissal authority. The dismissal provision does entitle the relator to "an opportunity for a hearing" on the government's dismissal motion, § 3730(c)(2)(A), but it notably does not set forth a standard by which the court is to judge the dismissal motion. The dismissal provision thus contrasts sharply with the Act's settlement provision, which authorizes the government to settle a qui tam action over the relator's objection but only if the court finds that the settlement is "fair, adequate, and reasonable under all the circumstances," id. § 3730(c)(2)(B). The D.C. Circuit thus has concluded that "the function of a hearing when the relator requests one is simply to give the relator a formal opportunity to convince the government not to end the case," with the decision whether to end the case remaining squarely with the government. While courts have used different formulations, all agree that the government's dismissal authority is unfettered and unreviewable or very nearly so.
This unilateral dismissal authority is important because it is essential to the constitutionality of the qui tam mechanism. Allowing private persons to sue on behalf of the government may be constitutional if the government retains authority to control whether or how such suits go forward. But any significant constraint on the government's power to decide that a case brought in its name should not go forward would raise serious separation-of-powers concerns. The Constitution gives the Executive—not private persons—the authority and responsibility to "take Care that the Laws be faithfully executed." U.S. Const., art. II, § 3. As a result, "[t]he decision whether to bring an action on behalf of the United States is therefore 'a decision generally committed to [the government's] absolute discretion.'"
The Government's Reluctance to Dismiss Qui Tam Actions Results In Costs For All Concerned Including the Government and the Public Interest
Why this unilateral dismissal authority has been so infrequently invoked is harder to understand. It has been used only a relative handful of times since the 1986 Amendments to the False Claims Act, and usually in cases that plainly qualified as extraordinary. For example, the government has chosen to dismiss qui tam actions involving classified programs where the government was concerned that continued litigation would risk exposure of sensitive national security information. And the government dismissed a qui tam case claiming that paying then-Senator Obama's salary violated the FCA because he is not a citizen. But other examples are few and far between.
The tiny number of government dismissals looks even tinier when viewed in the context of the recent explosion in qui tam litigation. Over 750 new cases were filed in fiscal year 2013 alone. This explosion of private persons attempting to sue on behalf of the government has left the government itself unable to keep up: there are estimated to be thousands of qui tam actions pending under seal awaiting the government's decision as to whether to intervene, and the government nearly always obtains an extension of the statutory 60-day deadline to make that decision.
Moreover, the simple reality is that many, if not most, declined qui tam actions are meritless. The government intervenes in a small minority of qui tam actions—about 25 percent over the last several years. Yet the vast majority of the $27.2 billion the government has recovered under the FCA since 1986 has come from that small subset of intervened cases. In stark contrast, the much larger universe of declined cases has produced less than $1 billion in recovery. The government's official line is that declining to intervene is not a statement on the merits of a qui tam action, but courts can be forgiven for being skeptical. The explosion in FCA litigation has ensured that most federal judges have seen enough qui tam actions to know that a government declination likely signals that the relator's allegations are flawed factually or legally or both, even if the courts are circumspect enough to generally avoid voicing this common-sense intuition explicitly.
So why isn't the government exercising its dismissal authority to get rid of meritless cases? After all, in certain cases the government has exercised its dismissal power even while conceding that the relator's claims were or may have been meritorious. If dismissing a meritorious qui tam action can be an appropriate exercise of the government's authority, dismissing a meritless one surely must be as well. Bringing an early end to a case that would otherwise subject the defendant, the court, and the government itself to burden and expense without providing any benefit to the government is plainly rational.
The FCA requires the government, when notified of a qui tam case, to investigate the relator's allegations. Sometimes the government is unable to reach a firm conclusion as to the truth of the relator's allegations; sometimes the facts are clear enough but the law is murky. Where the government thinks the relator's claims present a close case—not strong enough to warrant intervention, but strong enough to have the potential to bring some recovery to the Treasury—it makes sense that the government would want the relator to be able to pursue the case. And sometimes the court will push a case forward before the government has finished its investigation, and the government declines because it does not know what to think about the merits of the case. The government may also decline in some cases it believes meritorious, because it expects the relator's counsel to pursue the case and hopes to conserve its own resources. But in many cases, the government conducts a full investigation and concludes with confidence that the case lacks merit. How does it serve the public interest to allow such a meritless case to be pursued in the government's name? Why does the government simply decline to intervene in these cases rather than dismiss them? Surely it is more than the stray "birther" case that warrants dismissal.
The answer appears to be that the Department of Justice, which enforces the FCA, simply does not view its mission as encompassing this sort of gatekeeping function. That choice not to exercise the gatekeeping authority provided by Congress imposes obvious costs on defendants, who have to endure the burden and expense of discovery and litigation in cases that lack merit. To be sure, defendants are often successful, eventually, in winning in declined cases. But they almost never can recover their attorney's fees and thus are left to shoulder substantial expenses even if they win in court. See 31 U.S.C. § 3730(d)(4). The government's refusal to dismiss meritless qui tam cases also burdens the courts in direct and obvious ways. And it burdens the government itself, which incurs costs to monitor the enormous docket of declined qui tam cases and often gets dragged into those cases through discovery.
But a less obvious, but very significant, cost weighs on the government. By failing to exercise its authority to dismiss meritless qui tam actions, the government makes it harder for relators to prevail in borderline cases—where the relator's claim may not be strong enough for the government to bring that claim itself, but is substantial enough to create a potential for recovery for the government. The government may indeed have a rational reason for wanting those cases to go forward despite its own declination. But the government's neglect of its dismissal authority means that meritless declined cases are lumped in with borderline ones, potentially causing courts to view declined cases skeptically as a class.
The Government Should Act as the Gatekeeper Congress Intended and Exercise Its Dismissal Authority
If the government showed itself willing to weed out meritless qui tam actions, courts would be less likely to view a mere declination—as opposed to a declination coupled with a dismissal—as signaling that a case lacks merit. That approach would serve the public interest. It would help unclog court dockets, spare innocent defendants the burdens of pointless litigation, and conserve the government's own resources—enabling the government to focus on worthwhile qui tam actions as well as its myriad other important duties. As the guardian of the public interest, the Department of Justice should embrace this role and vigorously exercise the dismissal authority that Congress provided.
If the Department is unmoved by the plight of courts struggling with congested dockets or defendants forced to bear litigation expenses for no good reason, perhaps the harm to FCA enforcement will resonate instead. Each declination, in a world where declination and intervention are the only options, risks saddling the relator with a presumption that her claim lacks merit. And each meritless and wasteful qui tam action that a court has to hear makes the court more skeptical about FCA cases going forward. The government's abdication of its dismissal authority thus threatens to give the FCA itself a bad name. Congress gave the government the power to dismiss qui tam actions for good reasons, and the Department should take up its responsibility.
