DOJ Formalizes Guidance for Government Dismissal of Unmeritorious Qui Tam Suits
A Memorandum dated January 10, 2018 and authored by Michael Granston, Director of the Commercial Litigation Branch of the Fraud Section of the U.S. Department of Justice, was published on January 24, 2018 (the “Memorandum”). The Memorandum, addressed to DOJ attorneys, describes the factors that government attorneys should consider in deciding whether the government should voluntarily dismiss unmeritorious qui tam suits pursuant to 31 U.S.C. § 3730(c)(2)(A). This policy guidance, which was picked up by the legal press just yesterday, comes after a three-month period in which the DOJ, the relator’s bar, and the defense bar alike have paid more than customary attention to the circumstances under which DOJ might dismiss an unmeritorious qui tam suit.
On November 3, 2017, we commented on public statements made by Mr. Granston that the DOJ would, pursuant to 31 U.S.C. 3730(c)(2)(A), seek to dismiss unmeritorious qui tam suits. Although these statements caught many practitioners by surprise, most concluded that Mr. Granston was merely restating longstanding DOJ policy. However, the Memorandum plainly foretells greater – and welcome – DOJ attention to the burgeoning number of unmeritorious qui tam suits that are filed every year (along with meritorious suits), and the increasing likelihood of voluntary dismissal of those unmeritorious suits. Indeed, after stating that in the past the DOJ “has been circumspect with the use of this [voluntary dismissal] tool to avoid precluding relators from pursuing potentially worthwhile matters,” the Memorandum reminds government attorneys that the DOJ “plays an important gatekeeper role in protecting the False Claims Act, because in qui tam cases where we decline to intervene, the relators largely stand in the shoes of the Attorney General”. The Memorandum then identifies seven factors that DOJ attorneys should consider when evaluating whether the government should seek to dismiss a qui tam case under 31 U.S.C. § 3730(c)(2)(A):
- Whether the case lacks merit, either factually or in legal theory, and whether facially or if DOJ so concludes after completing an investigation. The Memorandum further clarifies that government attorneys may consider the merits of (and move to voluntarily dismiss) the case even after relator has been afforded an opportunity to further develop the case, but has been unable to do so.
- Whether the case is duplicative of and adds no useful information to an existing investigation.
- Whether the case threatens to interfere with agency policies and programs, as determined by the client agency and if dismissal is recommended by that client agency.
- Whether the DOJ’s litigation prerogatives, including the likelihood of unfavorable judicial precedent, must be protected by dismissal of the case.
- Whether dismissal is necessary to safeguard classified information and national security interests.
- Whether the government’s expected costs (of monitoring and participating in the case as a respondent) would likely exceed any expected gain from the case, including relative to other matters.
- Whether the relator’s actions frustrate the government’s ability to conduct a proper investigation.
These factors are neither mutually exclusive nor exhaustive, and the existence of multiple factors is more likely to warrant voluntary dismissal. The Memorandum also clarifies that government attorneys may seek to voluntarily dismiss a part, if not all, of a qui tam suit, and may do so at any time in the course of the investigation or litigation, but that in any event government attorneys should consult with and obtain the recommendation of the client agency. Finally, the Memorandum encourages government attorneys to warn relators of the deficiencies of their case and the likelihood of dismissal, so that relators can voluntarily dismiss their own actions.
The January 10 Memorandum should be regarded by all as an important and welcome development in False Claims Act enforcement, as it should provide a common baseline about which government attorneys, defendants, and relators alike can discuss and approach the appropriate treatment and disposition of unmeritorious FCA cases.