U.S. Supreme Court to Decide Standard for DOJ Dismissal of Qui Tam Cases

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Does the federal government have the authority to dismiss a False Claims Act (FCA) suit after initially declining to intervene? And what standard should courts apply to a government motion to dismiss a whistleblower suit? On June 21, 2022, the Supreme Court granted certiorari in United States, ex rel. Polansky v. Executive Health Resources, Inc. (No. 21-1052), a case examining whether the U.S. Department of Justice – after declining to prosecute a qui tam action – has the authority to dismiss the action, and if so, what standard applies to the motion to dismiss.

As Polansky set forth in his petition, Circuits have adopted various standards for DOJ’s dismissal authority. For example, the Ninth Circuit has adopted a two-step, burden shifting test, while the DC Circuit has concluded that the government has an unfettered right to dismiss a qui tam case. In the Ninth Circuit, the government must first identify a valid government purpose and a rational relation between dismissal and accomplishment of that purpose. If the government meets that burden, the burden shifts to the relator to demonstrate that dismissal is fraudulent, arbitrary and capricious, or illegal. In contrast, the DC Circuit, noting the Executive Branch’s “historical prerogative to decide which cases should go forward in the name of the United States,” concluded that the FCA’s hearing requirement does not permit the courts to decide if “the Executive is acting rationally and in good faith.”

In Polansky, the case now before the Supreme Court, the Third Circuit rejected the approaches of the other circuits and concluded that the government’s dismissal authority is controlled by Federal Rule of Civil Procedure 41(a)(2), which provides that “once an action has passed the ‘point of no return,’ with the filing of the defendant’s responsive pleading, then ‘an action may be dismissed at the plaintiff’s request only by court order, on terms that the court considers proper.’” The Third Circuit affirmed the district court’s grant of the government’s motion to dismiss, which was filed several years after the government declined to intervene, noting “Rule 41(a)(2)’s ‘broad grant of discretion’ to shape the ‘proper’ terms of dismissal.”

By agreeing to review Polansky, the Supreme Court has signaled that it may be ready to provide a uniform standard by which courts can assess a government motion to dismiss a qui tam case. While government motions to dismiss are still relatively rare, they have become more prevalent and more often directly sought by defendants since the release of the Granston Memo in 2018. Having a clear understanding of the standard for such dismissals is important not just for DOJ, but for all parties involved in FCA cases.

The Supreme Court is still considering petitions on several other important FCA issues, including the standard for determining whether a defendant acted “knowingly” and the standard for pleading fraud with particularity.

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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