Supreme Court to Determine DOJ’s Authority to Dismiss Relators’ FCA Cases

On June 21, 2022, the Supreme Court granted certiorari in United States ex rel. Polansky v. Executive Health Resources, Inc., a case which will decide whether the Department of Justice maintains the authority to dismiss False Claims Act (FCA) qui tam suits brought by private relators after it initially declines to intervene. The Court will also hear arguments concerning the appropriate standard for dismissal if the government has such authority.

The FCA authorizes private relators to file civil suits on behalf of the government and gives the government the choice whether to proceed with the action itself or decline to intervene. In the latter case, the relator can voluntarily dismiss the suit or continue the action on their own. However, the FCA also provides that “[t]he Government may dismiss the action notwithstanding the objections of the [relator],” on the condition that the relator first receives notice and opportunity for a hearing. Courts are sharply divided on whether, and when, the government can exercise its dismissal authority over a relator’s case after it declines to take over the action itself.

Relator Jesse Polansky filed the initial suit in 2012, alleging that EHR improperly billed for inpatient services that should have been provided on an outpatient basis. The government investigated EHR’s billing practices for two years before declining to intervene. Polansky proceeded with the suit, which remained in litigation for several years. In 2019, the government moved to dismiss under § 3730(c)(2)(A), and the district court granted the motion.

On appeal, the Third Circuit affirmed, agreeing with the Sixth and Seventh circuits that the government must intervene in order to exercise its dismissal authority. The Court rejected the view adopted by the D.C., Ninth, and Tenth circuits that intervention was not necessary.

The court also stepped into a circuit split on the standard for dismissal. It joined the Seventh Circuit in holding that the government’s motion to dismiss was governed by Fed. R. Civ. P. 41(a)’s requirements for voluntary dismissal. Rounding out the split, the D.C. Circuit has held that the government had an “unfettered right” to dismiss, the Ninth and Tenth circuits have required the government to show a “rational relation” to a valid purpose for dismissal, and the First Circuit recently held that “the government must provide its reasons for seeking dismissal” but that the district court should allow dismissal unless “the government is transgressing constitutional limitations or perpetrating a fraud on the court.”

The Supreme Court granted certiorari over the government’s objection to decide (1) whether the government waives its right to dismiss by declining to intervene at the outset, and (2), if not, what standard courts should apply when evaluating such a motion.

The court’s decision is likely to have practical effects for relators and defendants facing FCA suits.  In January 2018, Michael Granston, the director of the Commercial Litigation Branch, Fraud Section, issued a memo providing DOJ lawyers guidance on the factors to consider in evaluating possible dismissal of an FCA case under 31 U.S.C. § 3730(c)(2)(A). The factors outlined in the Granston Memo — including curbing meritless and opportunistic relator actions, preventing interference in government policies, and preserving government resources — have since been incorporated into the Justice Manual.

Since the release of the Granston Memo, courts have faced an increasing number of requests by DOJ to dismiss FCA cases — more than the DOJ has ever done previously. This significant uptick has forced courts to explore the nuances of § 3730(c)(2)(A) and define the parameters of the government’s power. With Polansky, the Supreme Court has the opportunity to resolve the circuit splits and reshape the breadth of the government’s authority within this sphere.