United States: Department Of Justice Memorandum Provides Guidance For Evaluating Dismissal Of Qui Tam FCA Cases

Key Points

  • Department of Justice (DOJ) has released a memorandum detailing seven nonexhaustive factors to be considered by its attorneys in making the important determination of whether to dismiss False Claims Act (FCA) qui tam actions in which DOJ has chosen not to intervene.
  • DOJ's memorandum comes on the heels of several significant decisions reversing more than $1 billion in FCA qui tam judgments and resulting in precedent that will be used against DOJ in future cases.
  • The memorandum serves as an important first step toward the appropriate enforcement of FCA qui tam claims.

Over the last four months, two federal courts have issued decisions in False Claims Act (FCA) qui tam cases in which Akin Gump Strauss Hauer & Feld LLP represented the defendants United States ex rel. Harman v. Trinity Indus., Inc.,  872 F.3d 645 (5th Cir. 2017) and United States ex rel. Ruckh v. CMC II, LLC, 2018 U.S. Dist. LEXIS 5148 (M.D. Fla. Jan. 11, 2018). In those cases, the courts collectively reversed more than $1 billion in FCA judgments and entered judgments, in full, for Akin Gump’s clients. In both cases, the Department of Justice (DOJ) refused to intervene and participate as a party, and, the courts issued comprehensive decisions that will be cited against the government in future litigation. Also in both cases, a real risk existed that the defendants, which courts found to be providing valuable, nonfraudulent services, would exit the relevant marketplace, which ultimately would harm the government’s interest, if appropriate relief was not granted.

On January 24, 2018, in part to stem the type of abusive FCA qui tam actions that are described above, DOJ released a memorandum providing DOJ attorneys with new guidance for evaluating the potential dismissal of actions in which DOJ has determined that it will not intervene. DOJ often declines to intervene in such cases, but the FCA allows qui tam relators to pursue those actions on the government's behalf. With a sharp uptick in FCA cases in recent years, the memorandum addresses when dismissal may be appropriate rather than the DOJ merely declining to intervene. The guidance in the memorandum empowers the DOJ to exercise its authority to dismiss qui tam actions more freely, where it has only done so sparingly in the past. Among other reasons highlighted in the memorandum, dismissing meritless FCA qui tam actions preserves judicial resources and allows DOJ to ensure that resulting precedent effectively furthers the purpose of the statute. The guidance provides a first step toward the appropriate enforcement of FCA claims.

Background

On January 10, 2018, the Director of DOJ's Commercial Litigation Branch, Fraud Section issued a memorandum regarding the dismissal of FCA cases pursuant to 31 U.S.C. 3730(c)(2)(A) (the memorandum was not publicly released until January 24). The memorandum was sent to all attorneys in the Fraud Section of DOJ's Commercial Litigation Branch, as well as Assistant U.S. Attorneys handling FCA cases. The goal of the memorandum is to "provide a general framework for evaluating when to seek dismissal . . . and to ensure a consistent approach to [dismissal] across the Department."

Factors Supporting Dismissal

While the FCA empowers DOJ to dismiss FCA qui tam actions, it does not itself set forth specific grounds warranting dismissal. In issuing its memorandum, DOJ reviewed every dismissal since 1986 and emphasized seven factors historically prevalent in such dismissals.

Curbing Meritless Qui Tam Actions

The first type of case identified by the memorandum for dismissal is an action that lacks merit due to defective legal theories or frivolous factual allegations. The memorandum notes that such actions may not be apparent until after the government completes an initial investigation of the claims.

Preventing Parasitic or Opportunistic Qui Tam Claims

The second type of case warranting dismissal is an action that duplicates a current government investigation without adding any useful information. These so-called parasitic or opportunistic actions benefit the relator's counsel, but not the government, and thus do not serve the intended purpose of the statute.

Preventing Interference with Agency Policies and Programs

The third type of case for dismissal is an action that may interfere with an agency's policies or the administration of its programs. For example, the guidance cites Akin Gump case United States ex rel. Harman v. Trinity Indus., Inc., 872 F.3d 645 (5th Cir. 2017), for the proposition that actions may both lack merit and raise a "risk of significant economic harm that could cause a critical supplier to exit the government program or industry."

Controlling Litigation Brought on Behalf of the United States

The fourth type of case identified by the memorandum is an action warranting dismissal when necessary to "protect the Department's litigation prerogatives," including interference with ongoing litigation, the risk of unfavorable precedent or creation of obstacles to settlement of intervened claims.

Safeguarding Classified Information and National Security Interests

The fifth type of case identified is an action warranting dismissal to safeguard classified information, especially in the intelligence agency and military contracts space.

Preserving Government Resources

The sixth type of case identified for dismissal is an action where costs are likely to exceed any expected gains, such as prohibitively high costs for monitoring or participating in extensive litigation or liability for defendant's litigation costs if the defendant prevails. Again, such actions are likely to benefit only relator's counsel and not the government and, as such, do not serve the purpose of the statute.

Addressing Egregious Procedural Errors

The seventh type of case identified by the memorandum is an action where "problems with the relator's action frustrate the government's efforts to conduct a proper investigation."

Practical Considerations

The memorandum also notes several practical considerations that may affect DOJ's decision to seek dismissal, including, but not limited to:

  • other factors not included in the memorandum's nonexhaustive list of factors,
  • alternative and independent legal bases for dismissal other than Section 3730(c)(2)(A),
  • partial dismissal of some defendants or claims,
  • consultation with the affected agency to determine whether dismissal is appropriate,
  • timing of dismissal to minimize costs and safeguard information, and
  • advising relators of any perceived deficiencies and the prospect of future dismissal.

Conclusion

Meritless qui tam actions harm not only the companies and individuals against whom they are directed, but also the interest of the United States, which the FCA is intended to protect. Meritless qui tam cases run the risk of developing case law contrary to the interests of FCA plaintiffs which, in turn, could be cited against DOJ when it wants to pursue what it believes to be a valid action. In seeking to protect the public, the court system and itself, DOJ's memorandum is a good first step. In the past, however, DOJ has promulgated other guidance, such as in the 1998 Holder Memo Regarding Guidance on the Use of the False Claims Act in Civil HealthCare Matters, that it never operationalized and that may have been promulgated more to forestall congressional action to amend the FCA than to achieve meaningful reform. DOJ's actual conduct going forward, in light of this memorandum, will be the key to determining the memorandum's import. If DOJ intends for this memorandum to constitute substantive reform and not be merely a public relations effort, two trends must become apparent over the coming year: (1) there will be an actual, tangible increase in the number of FCA actions that DOJ moves to dismiss; and (2) there will be a reduction in the number of qui tam lawsuits pursued because DOJ, when it declines, will have successfully persuaded the relator not to litigate the case. Hopefully, DOJ will enforce its memorandum, and all of its beneficial goals will be achieved.

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
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