United States: Too Swift A Dismissal? A Relator Asks The Supreme Court To Weigh In On Standard Of Review For (c)(2)(A) Dismissals

What standard should a court follow in determining whether to grant a motion to dismiss by the United States of a relator's qui tam suit? A recently filed relator's petition for writ of certiorari in United States ex rel. Schneider v. JPMorgan Chase Bank (No. 19-678) asks the Supreme Court to determine that very question. See Petition for Writ of Certiorari, United States ex rel. Schneider v. JPMorgan Chase Bank (No. 19-678) (Nov. 20, 2019).

As we have written, prior to the issuance of the Granston Memo in January 2018, the government rarely invoked its authority under 31 U.S.C. § 3730(c)(2)(A) to dismiss a qui tam over the relator's objections. The Granston Memo, however, laid out a new policy for the DOJ in seeking dismissals of FCA cases. Specifically, the memo listed seven factors for the United States to consider in seeking dismissal of a qui tam suit, which primarily focused on curbing meritless or parasitic qui tam suits and controlling litigation brought on the United States' behalf. Since early 2018, the government has moved to dismiss 45 cases pursuant to its (c)(2)(A) authority. See Letter from Stephen E. Boyd, Assistant Attorney General, Office of Legislative Affairs, to Sen. Charles E. Grassley (Dec. 19, 2019). Courts have rendered decisions in 26 of those 45 cases, granting the government's motion to dismiss in all but one case.¹ Notwithstanding the overwhelming success the government has had when it has moved to dismiss FCA cases, however, courts have applied different standards in determining whether to dismiss these cases.

In Schneider, the question presented by the relator is whether the United States "is entitled to absolute deference regarding its decision to dismiss an FCA action under 3730(c)(2)(A), or whether the qui tam relator should be granted the right to demonstrate that the government's rationale for dismissal is 'fraudulent, illegal, or arbitrary and capricious.'" Petition for Writ of Certiorari, supra, at i. The circuits are split on this issue. Specifically, the relevant precedents in the Ninth and Tenth Circuits require the United States to (1) identify a valid governmental purpose and (2) a rational relation between the dismissal and the accomplishment of that purpose. See United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1339, 1145 (9th Cir. 1998); see also Ridenour v. KaiserHill Co., L.L.C., 397 F.3d 925, 936 (10th Cir. 2005). If the government meets this test, "the burden switches to the relator to demonstrate that the dismissal is fraudulent, arbitrary and capricious, or illegal." Sequoia, 151 F.3d at 1145. In the D.C. Circuit, however, the relevant precedent gives the government an "unfettered right" to dismiss a qui tam suit, subject to the exception of there being fraud on the court. Swift v. United States, 318 F.3d 250, 252 (D.C. Cir. 2003).

In Schneider, when granting the government's motion to dismiss, the DC district court followed the Swift standard, which the DC Circuit affirmed on appeal. Noting the circuit split, the Granston Memo and the government's increased use of its (c)(2)(A) authority within the last two years, Schneider urges the Supreme Court to grant his petition and to adopt the standard set forth in Sequoia. Schneider's petition argues that Swift renders § 3730(c)(2)(A)'s hearing requirement superfluous, in that it has no purpose but to serve as a formality before granting the United States' motion to dismiss. Rather, he argues that Sequoia reflects the better interpretation of (c)(2)(A) in adhering to the intent of the provision and in recognizing the significant role relators play in enforcing the FCA. See Petition for Writ of Certiorari, supra, at 9.

The Solicitor General and respondents in Schneider are currently set to file their responses to the relator's petition by early March, and we could learn soon thereafter whether the Supreme Court grants the relator's petition. That decision will have far-reaching implications for a number of cases that are currently pending, including cases currently before the First, Second, Fifth, Seventh, and Ninth Circuit Courts of Appeal, and we will be watching it closely.

Footnote

1 Note, however, that in June 2018, a district court denied a (c)(2)(A) motion in United States v. Academy Mortgage Corp., No. 16-cv-2120, 2018 WL 3208157 (N.D. Cal. June 29, 2018). DOJ appears not to have counted this dismissal in its December 2019 letter to Senator Grassley because the motion was filed before issuance of the Granston Memo.

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