Supreme Court To Review DOJ’s Authority to Dismiss Qui Tam FCA Suits Over Objections From Relators

Sheppard Mullin Richter & Hampton LLP

[co-author: Arushi Pandya]*

On June 21, 2022 the Supreme Court granted certiorari in Polansky v. Exec. Health Res., 17 F.4th 376 (3d Cir. 2021), allowing the Court to review the Department of Justice’s (“DOJ”) authority to dismiss qui tam suits brought under the False Claims Act (“FCA”), over objections by the relators. The case invites the high Court to decide two key issues: (1) whether the DOJ has the authority to dismiss qui tam suits where it declined to intervene, and (2) what standard of review applies to such requests for dismissal. 

The FCA allows the federal government to recover fraudulently-obtained federal funds, plus significant additional monetary damages and penalties. It also allows whistleblowers (or “relators”) to bring claims on behalf of the federal government, where the DOJ then has discretion to either intervene and prosecute the case, or allow the relators to prosecute the cases on their own as qui tam actions. However, the FCA gives the DOJ the authority to dismiss qui tam actions “notwithstanding the objections” of relators initiating the actions upon a noticed motion. See 31 U.S.C. § 3730(c)(2)(A). These types of dismissals of qui tam suits have become increasingly popular in recent years, with the DOJ outlining seven standards for seeking dismissals in a 2018 memorandum by Michael D. Granston. These factors include: (1) curbing meritless qui tam actions, (2) preventing parasitic or opportunistic qui tam actions, (3) preventing interference with agency policies and programs, (4) controlling litigation brought on behalf of the government, (5) safeguarding classified information and national security interests, (6) preserving government resources, and (7) addressing egregious procedural errors.

In Polansky, the relator filed his FCA claim in 2012 accusing defendants of overbilling Medicare by falsely certifying inpatient services as medically necessary. The government declined to intervene, but after seven years of costly litigation borne by the relator and the defendants, the DOJ moved to dismiss the entire case under § 3730(c)(2)(A), which the district court granted. On appeal, the Third Circuit found that the DOJ had the authority to dismiss qui tam suits over the objection of the relator, so long as it intervened before moving to dismiss, which it could do at any point in the litigation. The Third Circuit also rejected the standards of review applied by other Circuits to permit DOJ dismissal – discussed further below – instead applying the standard of review for voluntary dismissals under the Federal Rules of Civil Procedure, Rule 41, which gives the district court a “broad grant of discretion” to review the request for dismissal.

The Supreme Court’s decision not only will address DOJ’s authority to dismiss a qui tam suit where it has failed to intervene, but also will bring timely resolution to sharp disagreements among Circuit Courts regarding the appropriate standard of review for dismissals under FCA § 3730(c)(2)(A). These standards have ranged from the D.C. Circuit’s granting DOJ “unfettered” discretion to dismiss qui tam cases, to the Ninth Circuit requiring the DOJ to demonstrate a rational relation between the dismissal and a valid governmental purpose. In fact, Polansky argued in his petition for certiorari that Circuit Courts had articulated at least five potential standards of review.

If the Supreme Court affirms the DOJ’s authority to dismiss qui tam suits over the objections of relators, defendants will be more likely to actively pursue that option throughout the course of the qui tam litigation even well after DOJ has initially declined intervention as a way out of FCA claims. It also could have a chilling effect on relators considering pursuit of qui tam suits when their time and resources could be wasted by a dismissal by DOJ well after its initial declination to intervene. However, Senator Chuck Grassley has expressed strong distaste for the DOJ’s use of its dismissal authority and has sponsored a bill requiring the DOJ to provide sufficient reasoning when seeking dismissals. The Supreme Court’s decision may inspire a further response from Congress.

*Arushi Pandya is a law clerk in the firm’s Washington, D.C. office.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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