Today, the Supreme Court handed over a win to both the government and the FCA defense bar, finding that the government has broad discretion to move to dismiss a relator-filed case at any point in the litigation. In U.S. ex rel. Polansky v. Executive Health Resources, Inc., the Court found that: (1) the government may move to dismiss even after its initial declination for good cause and so long as it intervenes and (2) Federal Rule of Civil Procedure 41(a) provides the standard for evaluating government dismissal motions under 31 USC § (c)(2)(A), and the government should be afforded "substantial deference" in these motions.
Justice Kagan delivered the 8-1 opinion for the Court. Justice Thomas — who has established himself as the Court's most prolific author in the FCA space, having drafted the opinions in Escobar and Schutte — dissented. Justices Kavanaugh and Barrett filed a concurring opinion.
In Polansky, the government initially had declined to intervene while the case was under seal. The relator proceeded with the case, and the parties spent years in discovery. Facing mounting discovery obligations and privilege issues, the government filed a motion to dismiss under (c)(2)(A). The district court granted the motion to dismiss, which the Third Circuit affirmed. The Third Circuit held that: (1) the government retains the power to seek dismissal of an action as long as it intervenes at some point in the case and (2) Federal Rule of Civil Procedure 41(a) supplies the appropriate standard for evaluating (c)(2)(A) dismissal motions. Polansky petitioned for certiorari, which the Court granted.
First, the Court held that the government may seek dismissal at any point in the case for good cause and so long as it intervenes. It found that (c)(2)(A) "applies only if the Government has intervened, but the timing of the intervention makes no difference. So the Government can file a (2)(A) motion to dismiss whenever (whether during the seal period or later) it has intervened." The Court relied on the statutory text, noting that, unlike other FCA provisions, subsection (c)(2)(A) does not apply when the government is a non-party. The Court thus rejected the government's view that "intervention is irrelevant." But it also rejected the relator's argument that the government must intervene while the case is under seal to exercise its authority under (c)(2)(A). The Court explained that a "seal-agnostic view of intervention's effects fits the FCA's Government-centered purposes" and if the government does not want a suit brought in its name to proceed because of a lack of merit, resource drain, or otherwise, it can intervene and seek dismissal, regardless of timing: that government interest, the Court noted, "does not diminish in importance because the Government waited to intervene."
Second, the Court held that the appropriate standard for evaluating government dismissal motions under (c)(2)(A) derives from Fed. R. Civ. P. 41(a), given that the Federal Rules are the "default rules" for civil litigation. The Court declined to adopt either the government's standard of "unfettered discretion" or the "complicated form of arbitrary-and-capricious review, with a burden-shifting component" argued by Polansky. In endorsing the Third Circuit's "Goldilocks position," it afforded "substantial deference" to the government's rationale in these cases, explaining that (c)(2)(A) motions "will satisfy Rule 41 in all but the most exceptional cases." Indeed, although the Court declined to articulate a precise standard for when Rule 41's requirements are met in an FCA case, it made clear that "a district court should think several times over before denying a motion to dismiss. If the government offers a reasonable argument for why the burdens of continued litigation outweigh its benefits, the court should grant the motion. And that is so even if the relator presents a credible assessment to the contrary."
We at Qui Notes welcome this development, particularly as several FCA cases we have litigated have been appropriately dismissed following government motions under (c)(2)(A), including U.S. ex rel. Borzilleri v. Bayer Healthcare Pharms., Inc., 24 F.4th 32 (1st Cir. 2022); U.S. ex rel. HCA, LLC v. Eli Lilly & Co., Inc., 4 F.4th 255 (5th Cir. 2021); U.S. ex rel. Borzilleri v. AbbVie, Inc., 837 F. App'x 813 (2d Cir. 2020); and U.S. ex rel. CIMZNHCA, LLC v. UCB, Inc., 970 F. 3d 835 (7th Cir. 2020). We are hopeful that the Court's decision in Polansky will encourage the government to increasingly step in and seek dismissal in appropriate cases, notwithstanding objections from relators.
Stay tuned for a follow up blog post from Qui Notes early next week when we dive into Justice Thomas's dissent noting that "[t]here are substantial arguments that the qui tam device is inconsistent with Article II and that private relators may not represent the interests of the United States in litigation." Justices Kavanaugh and Barrett noted their agreement with this statement in their concurrence.
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