Recent actions have confirmed that the DOJ intends to make good on its threats to dismiss False Claims Act Cases. Last year, an internal Department of Justice (DOJ) memorandum encouraging the department to make greater use of the Government’s power to dismiss False Claims Act cases over a relator’s objection was publicly leaked. Commentators have since wondered how aggressively the DOJ intends to use this power, but the government has remained tight-lipped.
In December, the Solicitor General sought to make use of this power, arguing that the Supreme Court should decline to hear an appeal of a Ninth Circuit decision and unexpectedly announcing that the government would exercise its authority to dismiss the case entirely if it were remanded to the district court. Brief for the United States as Amicus Curiae at 15, Gilead Sciences, Inc. v. U.S. ex rel. Campie, (No. 17-936). On January 7, 2019, the Supreme Court followed the DOJ’s lead and declined to hear the case.
This article was drafted by Emma Kaufman, Boston University School of Law class of 2020 and student in Bob Thomas‘ Health Care Fraud & Abuse seminar in Fall 2018.
The DOJ’s power to dismiss False Claims Act cases under C2A
One of the most important aspects of the False Claims Act is its qui tam provision, which allows a relator to bring a case in the name of the government even if the government declines to intervene and litigate itself. 31 U.S.C. § 3730(b) et seq. This provision, which also gives a part of the recovery to the relator, encourages whistleblowers to report fraud even when the government chooses not to prosecute it.
However, the United States remains the real party in interest, and Section 3730(c)(2)(A) of the False Claims Act allows the Government to dismiss a qui tam action “notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for hearing on the motion.” 31 U.S.C. § 3730(c)(2)(A).
Historically the government has made very sparse use of this power, and while it has used this power successfully at the district court level and prevailed in appeals therefrom, it has never dismissed or threatened to dismiss an FCA case once at the appellate level.
The Granston Memo Portends Greater Use of (c)(2)(A) dismissals
In January 2018, Michael Granston, Director of the DOJ Commercial Litigation Branch, Fraud Section, drafted a memorandum encouraging greater use of the Government’s dismissal power under (c)(2)(A) and outlining considerations for prosecutors in making the decision. Memorandum from Michael D. Granston, Dir., Dep’t of Justice Commercial Litig. Branch, Fraud Section to Attorneys, Commercial Litig. Branch, Fraud Section (Jan. 10, 2018). The factors include: limiting meritless or opportunistic claims, protecting agency policies and government litigation prerogatives, safeguarding classified information and security interests, preserving government resources, and addressing egregious procedural errors. That memorandum was not intended to be public, but it been widely circulated, and the DOJ does acknowledge that it has produced new internal guidelines on the use of (c)(2)(A) power.
In the intervening year, the government did not make many high-profile uses of this power, leading some commentators to believe that the Granston Memo had changed little about FCA practice.
The Solicitor General’s Announcement in Campie
The relators in Campie were former employees of Gilead who alleged that the pharmaceutical manufacturer told the FDA that it sourced its drug ingredients from “specified registered facilities,” but in reality “covertly contracted” with a Chinese manufacturer using an unapproved and unregistered plant. Brief for the United States as Amicus Curiae at 4, Gilead Sciences, Inc. v. U.S. ex rel. Campie, (No. 17-936).
Gilead later received FDA approval to use the Chinese manufacturer, but the relators allege this approval was based on “falsified or concealed data.” Id. After the DOJ declined to intervene, the district court dismissed the case, holding that the fraud alleged by the relators was not cognizable under the False Claims Act. On appeal, the Ninth Circuit reversed and allowed the case to proceed to discovery. The Defendant asked the Supreme Court to overturn the Ninth Circuit’s reversal. Surprisingly, the Solicitor General argued that not only was the Ninth Circuit correct and the Relator’s claims were viable, but that it would forcibly dismiss the case upon the Supreme Court’s refusal to take the case. The Solicitor General argued that “continued prosecution of the suit is not in the public interest” because it would “impinge on agency decisionmaking and discretion and would disserve the interests of the United States.” Id. at 15-16. This threatened exercise of the government’s dismissal power under § 3730 (c)(2)(A) highlights the uncertainty that relators face under the government’s new policy.
The consequences for the relator in Campie are devasting. After winning in the Ninth Circuit, the government’s actions threaten to terminate the case notwithstanding its merit. Should the Solicitor General follow through with his threat to dismiss the case under (c)(2)(A), the relators should be given an opportunity to demonstrate that dismissal is fraudulent, arbitrary and capricious, or illegal. United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139, 1145 (9th Cir. 1998). Depending on how the Ninth Circuit rules, the decision could exacerbate a conflict with other Circuits which adopt a standard giving the DOJ absolute authority to dismiss and thus pave the way for another petition of certiorari to the Supreme Court. United States v. Everglades College Inc., 855 F.3d 1279, 1286 (11th Cir. 2017); Swift v. U.S., 318 F.3d 250, 252 (D.C. Cir. 2003); Riley v. St. Luke’s Episcopal Hosp., 252 F.3d 749, 751 (5th Cir. 2001).
However, the Solicitor General’s actions also threaten a chilling effect on future qui tam cases. If (c)(2)(A) power is used more liberally, potential whistleblowers who already face an uphill battle may not come forward at all. This could severely decrease the effectiveness of the False Claims Act, which is currently one of the government’s primary fraud recovery and enforcement tools.
