Earlier this summer, the Supreme Court issued its decision in U.S. ex rel. Polansky v. Executive Health Resources Inc., holding that (1) the government may intervene and move to dismiss a qui tam case at any point in the litigation under Section 3730(c)(2)(A) and (2) courts should apply the lenient Federal Rule of Civil Procedure 41(a) voluntary dismissal standard when evaluating government dismissal motions. Polansky did not outline the contours of the hearing requirement within Section 3730(c)(2)(A),1 but the Second Circuit recently addressed this issue in Brutus Trading LLC v. Standard Chartered Bank et al., holding that the requirement can be satisfied by written submissions alone.
The relator, Brutus Trading LLC, brought this FCA suit against Standard Chartered Bank alleging that the bank facilitated illegal transactions linked to Iran in violations of U.S. sanctions and defrauded the government by concealing the extent of its illegal conduct when entering into a deferred prosecution agreement in 2012. Brutus further argued that it was entitled to a share of Standard Chartered's forfeiture payment in connection with a settlement with the government in 2019. The government moved to dismiss pursuant to Section 3730(c)(2)(A), arguing that Brutus' complaint was both legally and factually deficient, and litigating would waste government resources. Brutus filed opposition and sur-reply briefs in response. The district court granted the government's motion on the papers without holding a hearing. Brutus appealed, arguing, in part, that the district court's failure to hold an "evidentiary hearing" violated the statutory hearing requirement and due process. The appeal was pending when the Supreme Court granted certiorari in Polansky, so the Second Circuit held the appeal in abeyance until the decision was issued in June 2023.
Last week, the Second Circuit affirmed the district court's dismissal in a summary order ruling, rejecting all of Brutus' arguments. With respect to the hearing requirement, the court found that "the district court afforded Brutus the opportunity to be heard via its written submissions." The circuit court acknowledged that although Polansky "did not mandate universal requirements for [the FCA] hearing in every case," it did "confirm[] that, in order to comply with the FCA's 'hearing' requirement, a district court must exercise some degree of scrutiny in evaluating the government's motion to dismiss." The Second Circuit therefore rejected Brutus' argument that the district court "held no hearing of any kind," because the district court satisfied the hearing requirement by "carefully considering" "the parties' voluminous briefs, declarations, and exhibits before granting the government's motion."
Stay tuned as we continue to monitor further post-Polansky developments. In the meantime, you can find our previous analyses on the Polansky decision here and here.
Footnote
1. 31 USC § 3730(c)(2)(A) provides: "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."
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