January 31, 2018
In October of 2017, the U.S. Department of Justice (DOJ) signaled a sea change for how it handles meritless qui tam litigation. Michael Granston, Director of DOJ’s Commercial Litigation Branch of the Civil Fraud Division, announced at a conference in Washington, D.C. that DOJ would file a motion to dismiss when it decides a qui tam case is without merit rather than allowing the relator to proceed. On January 24, 2018, DOJ publicly released a new memorandum cementing Granston’s announcement and providing guidance to all DOJ attorneys for assessing whether the dismissal hammer should be brought to bear on questionable cases.
There is no doubt that qui tam litigation has played a major role in the False Claims Act (FCA) arena for several years. While the government has always had the authority to dismiss an FCA case pursuant to 31 U.S.C. § 3730(c)(2)(A), it has rarely done so in the past. Instead, DOJ would generally allow qui tam cases to proceed so long as the relator was willing to do the work and bear the cost – even if DOJ did not believe the case had merit. As recognized by Granston in making this announcement, the policy shift reflects the government’s recognition that meritless qui tam cases place a significant burden on both industry and the court system. Going forward under this new guidance, when government counsel concludes that a qui tam case is baseless, they should file a motion to dismiss the case.
The January 2018 memorandum outlines a number of factors that DOJ attorneys should consider in evaluating qui tam cases, including whether dismissal is appropriate. The “non-exhaustive” list includes:
- Curbing meritless qui tams;
- Preventing parasitic or opportunistic qui tam actions;
- Preventing interference with federal agency policies and programs;
- Controlling litigation brought on behalf of the United States;
- Safeguarding classified information and national security interests;
- Preserving government resources; and
- Addressing egregious procedural errors.
The memorandum also provides practical guidance for DOJ attorneys in making these evaluations. It counsels against being tied to an “all or nothing” stance, noting that in certain cases, it may be appropriate for the government to seek only partial dismissal. Furthermore, the memo urges attorneys to work closely with the affected agencies when deciding whether to move for dismissal. It also encourages government attorneys to advise the relator before moving for dismissal, as some relators might choose to voluntarily dismiss his or her case.
Of course, courts will not be required to grant the government’s motion to dismiss in qui tam cases. In fact, the memorandum analyzes the current federal circuit split on the deference that courts should give to DOJ motions for dismissal. Some courts, including the D.C. Circuit, have adopted a policy of giving the government’s motion for dismissal an “unfettered discretion” type test. Others, including the Tenth Circuit, have applied a more “rational basis” test. While the new guidance maintains that the “unfettered discretion” test is correct, it urges attorneys to argue that the Tenth Circuit “rational basis” test was intended to be highly deferential to the government’s prerogative. The Fourth Circuit Court of Appeals, which encompasses Virginia, Maryland, West Virginia, North Carolina, and South Carolina, has not yet had the opportunity to rule on a § 3730(c)(2)(A) motion, so it is unclear which standard the court would apply in those states.
Regardless of the legal standard, judges will undoubtedly give strong consideration to the government’s decision to request dismissal of a meritless case. Assuming DOJ attorneys follow through under the new guidance, this policy shift should help weed out meritless FCA suits and deter would-be whistleblowers and their attorneys from pursuing tenuous cases in the first place.
If you have any questions or need assistance regarding these strategies or other advice on qui tam litigation and the False Claims Act, please contact Hancock Daniel’s Healthcare Investigations and Enforcement Actions team.
The information contained in this advisory is for general educational purposes only. It is presented with the understanding that neither the author nor Hancock, Daniel, Johnson & Nagle, PC, is offering any legal or other professional services. Since the law in many areas is complex and can change rapidly, this information may not apply to a given factual situation and can become outdated. Individuals desiring legal advice should consult legal counsel for up-to-date and fact-specific advice. Under no circumstances will the author or Hancock, Daniel, Johnson & Nagle, PC be liable for any direct, indirect, or consequential damages resulting from the use of this material.