United States: Justice Department Issues Guidance On Dismissing Qui Tam False Claims Act Cases Over Relators' Objections

Last Updated: January 26 2018
Article by Jonathan G. Cedarbaum, David W. Ogden and Carl J. Nichols

On January 10, the head of the Justice Department's Civil Frauds Section issued an internal memorandum instructing all Department attorneys handling False Claims Act (FCA) cases to consider whether, when declining to intervene, the government should go further and move to dismiss meritless cases over relators' objections.1 While the impact of the memo will only become clear in the coming months and years, it appears to mark a significant initiative by the Justice Department to articulate standards for the government's rarely exercised authority to compel the dismissal of qui tam actions, thus providing important grounds for defendants facing FCA claims to argue for the Department's help.

Seven Criteria for Dismissing Cases

The FCA expressly empowers the government to dismiss qui tam actions over a relator's objections so long as the government gives the relator notice and the court holds a hearing on the motion. See 31 U.S.C. § 3730(c)(2)(A).2 Courts have held that the government has either "unfettered" discretion or, at most, the standard of review for government decisions to dismiss over a relator's objections is extremely deferential.3

The January 10 memorandum identifies seven non-exclusive circumstances in which Justice Department attorneys should consider moving to dismiss:

  • when "a qui tam complaint is facially lacking in merit—either because relator's legal theory is inherently defective, or because the relator's factual allegations are frivolous";
  • when "a qui tam action duplicates a pre-existing government investigation and adds no useful information to the investigation";
  • when "an agency has determined that a qui tam action threatens to interfere with the agency's policies or the administration of its programs and has recommended dismissal to avoid these effects";
  • when "necessary to protect the Department's litigation prerogatives";
  • when necessary "to safeguard classified information";
  • when "the government's expected costs are likely to exceed any expected gain"; and;when "problems with the relator's action [would] frustrate the government's efforts to conduct a proper investigation."

For cases in which a U.S. Attorney's office and the Civil Division collaborate, the Assistant Attorney General for the Civil Division must approve dismissal motions. For cases in which a U.S. Attorney's office handles the case alone, the U.S. Attorney may approve seeking dismissal "unless dismissal would present a novel issue of law or policy."

Implications

The January 10 memo is significant for several reasons.

First, the memo likely will lead to an increase in the number of cases in which the Department exercises its power to dismiss cases in which it has chosen not to intervene. The memo recognizes that the government has an interest in "curbing meritless qui tams." It begins by noting that while the last several years have witnessed "record increases in qui tam actions filed . . . the rate of interventions has remained relatively static." It instructs Department attorneys that the Department's authority to dismiss cases gives it "an important gatekeeper role," a role that is appropriate given the fact the statute otherwise empowers private persons to represent the interests of the United States. That the memo entrusts the head of the Civil Division or, in some cases, the U.S. Attorneys with authority to approve motions to dismiss, rather than requiring approval by the Deputy Attorney General, also marks a break with Department practice that is likely to increase the frequency of use of the government's dismissal authority under subsection 3730(c)(2)(A).

As important, by articulating standards that should be employed by Department attorneys in considering whether to use the power to dismiss qui tam actions, the memorandum affords defense counsel criteria with which to advocate for its use in specific cases. This will both structure the dialogue and give increased credibility to arguments that line up with the rationales it sets forth. At the same time, it will give relators' counsel criteria against which to argue against use of the government's dismissal authority. As such, it is like to usher in a new era in which dialogue about use of the government's authority is more principled and perhaps more common.

Second, the memo recognizes that a qui tam complaint's meritlessness may itself suffice to warrant dismissal. Although its first criterion for dismissal refers to facial meritlessness, the memo goes on to state that "[i]n certain cases, even if the relator's allegations are not facially deficient, the government may conclude after completing its investigation of the relator's allegations that the case lacks merit." Thus, even some cases that not facially meritless may be selected for dismissal if evidence available to the government shows them to be groundless. Thus, if a defendant can promptly marshal such evidence and present it to the government, the government may be willing to dispose of the case.

Third, the memo recognizes that there is a substantial class of cases in which claims that may not be obviously without merit nevertheless should not proceed. These include cases the conflict with the government's interests in a number of contexts, including interference with agency policies, disruption of classified programs or damaging disclosure of classified information, interference with government processes, including investigations, and an important additional category: when the government's costs (presumably viewed broadly) are likely to exceed any gain.

Fourth, the memo in effect establishes a discretionary government-knowledge bar that may provide a basis for dismissal in many cases when the public-disclosure bar would not apply. As many courts have held, for the public-disclosure bar to warrant dismissal, the qualifying disclosures must have been made to the public, not just to the government.4 But the memo's second criterion recognizes a qui tam claim's overlap with an ongoing government investigation, even one that has not been publicly revealed, may justify dismissal.

Fifth, the memo expressly recognizes that the Justice Department should defer to a client agency's recommendations about dismissing an action that may interfere with the agency's policy or programmatic priorities. While the Department has always consulted with client agencies in FCA cases, it has sometime resisted giving greater weight to agency recommendations than to its own judgments about the possibility of recovering money for the Treasury.

* * *

For a comprehensive review of FCA developments during the past year, please read our 2017 FCA Year-in-Review report, available here.

Footnotes

1 The memorandum, available here, is marked "Privileged and Confidential; For Internal Government Use Only." The National Law Journal published it on January 24. See C. Schneier, DOJ Memo Urges Government Lawyers to Dismiss 'Meritless' FCA Cases, National Law Journal (Jan. 24, 2017).

2 Subsection 3730(c)(2)(A) provides:

(A) The Government may dismiss the 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 a hearing on the motion.

3 See Hoyte v. Am. Nat. Red Cross, 518 F.3d 61, 63, 65 (D.C. Cir. 2008) (government's right to dismiss "unfettered"); Riley v. St. Luke's Episcopal Hosp., 252 F.3d 749, 753 (5th Cir. 2001) (similar); United States ex rel. Rodgers v. Arkansas, 154 F.3d 865, 868 (8th Cir. 1998) (similar). United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139 (9th Cir. 1998) ("rationally related to a legitimate government purpose.").

4 See Cause of Action v. Chicago Transit Authority, 815 F.3d 267, 274-277 (7th Cir. 2016) (collecting decisions and suggesting Seventh Circuit should re-consider its minority view to the contrary).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Jonathan G. Cedarbaum
David W. Ogden
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions