Court Limits Authority of DOJ to Dismiss Relator Claims

April 23, 2019

TheGranston Memoraised concerns that the U.S. Department of Justice (DOJ) would employ its authority under 31 U.S.C. § 3730 tounderminequi tamrelator actions. Since the Memo was issued, the DOJ moved to dismiss 11 Anti-Kickback Statute cases brought by a professional relator, the National Health Care Analysis Group (“NHCAG”). In those cases, the Government asserted its position that it had absolute discretion to dismiss actions. A federal court in Illinois recently challenged this position.

Under the False Claims Act, the DOJ may “dismiss” a relator’s suit “notwithstanding the [relator’s] objections… if the [relator] has been notified by the Government of the filing of the motion and the court has provided the [relator] with an opportunity for a hearing on the motion.” 31 U.S.C. § 3730(c)(2)(A). This provision’s plain text, however, raises an important question: what is the purpose of the court hearing? The D.C., Fifth, and Eight Circuit Courts of Appeals concluded that this FCA provision “give[s] the government an unfettered right to dismiss an action,” rendering the DOJ’s decision to seek dismissal “unreviewable” by the district court.Swift v. United States., 318 F.3d 250, 252 (D.C. Cir. 2003);see also Riley v. St. Luke’s Episcopal Hosp., 252 F.3d 749, 753 (5th Cir. 2001);United States ex rel. Rodgers v. Arkansas, 154 F.3d 865, 868 (8th Cir. 1998). The Ninth and Tenth Circuits have carved out a role for the court, developing a “two step analysis… to test the [DOJ’s] justification for dismissal: (1) identification of a valid government purpose; and (2) a rational relation between dismissal and accomplishment of the purpose.”United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139, 1145 (9th Cir. 1998);Ridenour v. Kaiser-Hill Co., LLC, 397 F.3d 925, 940 (10th Cir. 2005). If the DOJ establishes both those elements, “the burden switches to the relator to demonstrate that the dismissal is fraudulent, arbitrary and capricious, or illegal.”Sequoia Orange, 151 F.3d at 1145;Ridenour, 397 F.3d at 940.

In arecent NHCAG case,the court refused to grant the DOJ’s request for dismissal.United States ex rel. CIMZNHCA, LLC v. UCB, Inc., No. 17-CV-765-SMY-MAB, 2019 U.S. Dist. LEXIS 64267, at *6-8 (S.D. Ill. Apr. 15, 2019). The court preferred that more rigorous test because it better served “the role of the judiciary in ensuring constitutional checks and balances” and did not “render[] the hearing specifically provided for in the statute superfluous.”Id.at *7-8 (“In providing the relator an opportunity for a hearing on the Government’s motion to dismiss, did Congress intend for courts to be relegated to simple [sic] providing a venue, hosting the parties, and sitting idly by while the relator pleads its case to the Government (something the relator can do outside the courtroom and without the expenditure of judicial resources)?”). The court concluded that the DOJ’s general investigation of all 11 NHCAG cases was insufficient to demonstrate justifiable reasons for Government in dismissing this particular case.Id.at *9-10. Instead, according to the court, the DOJ should have specifically investigated the claims against these particular defendants and provided a cost-benefit analysis specific to that case.Id.at *10. The court’s decision seems to have been at least partially driven by its distaste for the DOJ’s attacks on the professional relator’s “business model and litigation activities.”Id.at *11.

This decision highlights a major unresolved question after the Granston Memo—the scope of courts’ authority to review DOJ decisions to seek dismissal of relator cases. Whether there needs to be a justification acceptable to the court before dismissal will be left unanswered until the Supreme Court resolves the split between the federal circuits.