On January 21, 2022, in U.S. ex rel. Borzilleri v. Bayer Healthcare Pharmaceuticals, Inc., the US Court of Appeals for the First Circuit widened the circuit split on the proper standard for granting the government's motion to dismiss a qui tam action, over the relator's objections, pursuant to Section 3730(c)(2)(A). No. 20-1066 (1st Cir. Jan. 21, 2022). Before this decision, other circuits had already taken three separate approaches. The Ninth, Tenth and Second Circuits follow the Sequoia Orange standard, which requires the government to (1) identify a valid governmental purpose and (2) establish a rational relation between the dismissal and the accomplishment of that purpose. By contrast, the DC Circuit's Swift standard is the most deferential, characterizing the government's right to dismiss as virtually "unfettered." And more recently, the Seventh and Third Circuits have applied Federal Rule of Civil Procedure 41's standard for voluntary dismissals to Section 3730(c)(2)(A) motions, thereby giving courts a "broad grant of discretion" to dismiss on "terms the court considers proper."
The First Circuit partly aligned itself more closely with the Swift standard, holding that the government must provide its rationale for dismissal so that the relator can attempt to convince the government to withdraw its motion at the statutorily mandated judicial hearing. But where Swift declined to answer when a court can deny the government's dismissal motion, the First Circuit expressly held that if the government does not withdraw its motion, then the district court must dismiss the case unless the relator shows that "the government is transgressing constitutional limitations or perpetrating fraud on the court" by seeking dismissal.
The Borzilleri relator was a physician and professional healthcare investment fund manager who filed suit in the District of Rhode Island in 2014, alleging that several pharmaceutical companies defrauded Medicare by supposedly colluding to inflate the price of certain multiple sclerosis drugs through "service fee" contracts. Soon after, the relator also filed a parallel qui tam suit in the Southern District of New York in 2015; the government later successfully moved to dismiss the New York case under Section 3730(c)(2)(A), and that dismissal was affirmed on appeal. See United States ex rel. Borzilleri v. AbbVie, Inc., No. 15-CV-7881 (JMF), 2019 WL 3203000, at *3 (S.D.N.Y. July 16, 2019); United States ex rel. Borzilleri v. AbbVie, Inc., 837 F. App'x 813, 816 & n.1 (2d Cir. 2020).
In the District of Rhode Island action, the government similarly declined to intervene and moved to dismiss. The government's motion cited its interest in preserving government resources, while also emphasizing that the relator's claims were unsubstantiated and the relator was not "an appropriate advocate" for the government (given his self-disclosed use of the qui tam process "to leverage his financial interests through securities trading"). The district court granted the government's motion to dismiss. In its decision, the district court recognized the absence of governing First Circuit precedent, but concluded that regardless of the precise standard, dismissal was appropriate even under the Sequoia Orange test, which was the least deferential of the three existing circuit standards.
On appeal, the First Circuit affirmed the district court's decision while articulating its own standard for dismissal under Section 3730(c)(2)(A). It rejected the Sequoia Orange approach, reasoning that nothing in the FCA's statutory text puts such a burden on the government. The First Circuit also rejected the Third and Seventh Circuits' approach on the ground that Rule 41 is not an appropriate guide for interpreting Section 3730(c)(2)(A). Instead, the First Circuit held that while the government never has the burden of justifying its dismissal motion, it must explain its reasons for dismissal, or else there can be no meaningful opportunity for the relator's objections to be heard. In this respect, the First Circuit echoed the Swift standard's premise that the dismissal hearing is meant to provide the relator with a formal opportunity to persuade the government to rescind its dismissal motion.
But the First Circuit then went further than the DC Circuit and explicitly held that the other purpose of the statutorily mandated hearing is to let the court assess any claim by the relator that either (1) the government's decision to dismiss transgresses constitutional limitations, such as equal protection principles and due process protections against arbitrary government action, or (2) the government is perpetrating fraud on the court. The First Circuit cautioned that if the relator seeks discovery to prove either of these improprieties, the district court may only grant such a request upon the relator's substantial threshold showing supporting his allegations. Beyond suggesting that the facts might rarely warrant invoking either of these two new exceptions to Swift's general rule of deference, the First Circuit deferred elaboration on these standards to future cases. Ultimately, the First Circuit affirmed the district court's dismissal because the relator merely presented disagreements with the government's conclusions about the sufficiency of its investigation and the qui tam action's potential for success, and failed to demonstrate any constitutional infirmities or fraudulent motives underlying the government's motion to dismiss.
The First Circuit's approach contributes to the growing circuit split on the standard governing motions to dismiss under Section 3730(c)(2)(A). However, in practice, the fact that courts routinely grant these motions suggests that the variations among the four legal standards will rarely change the outcome.
Originally Published 02 February 2022
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