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DOJ Formalizes Guidance for Government Dismissal of Unmeritorious Qui Tam Suits

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):

  1. 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.
  2. Whether the case is duplicative of and adds no useful information to an existing investigation.
  3. 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.
  4. Whether the DOJ’s litigation prerogatives, including the likelihood of unfavorable judicial precedent, must be protected by dismissal of the case.
  5. Whether dismissal is necessary to safeguard classified information and national security interests.
  6. 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.
  7. 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.

 

Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.

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Partner

Mr. Paddock's practice primarily involves healthcare fraud and abuse matters, particularly those relating to civil False Claims Act, physician self-referral (Stark Law), and anti-kickback issues. He often advises clients on compliance and transactional matters, the conduct of internal investigations related to potential fraud and abuse issues, and responding to and defending against government anti-fraud and abuse enforcement efforts and regulatory inquiries, including qui tam and government allegations of False Claims Act violations. He is an active member of...

202-747-1954
David T. Fischer, Sheppard Mullin, Government Contracts lawyer, Investigations attorney
Special Counsel

David T. Fischer is a special counsel in the Government Contracts, Investigations & International Trade Practice Group in the firm's Washington, D.C. office.

Mr. Fischer's practice focuses on representing individuals and companies in civil and regulatory government enforcement actions, including false claims act and antitrust matters. Mr. Fischer has represented both plaintiffs and defendants in these matters, including qui tam whistleblowers in False Claims Act matters, and has conducted internal investigations for national and international companies; represented parties in qui tam actions; assisted companies and individuals in responding to federal and state governmental investigations; and represented companies in both antitrust litigation and merger investigations. 

202-747-3270
Matthew Turetzky, Government Contracts, Sheppard Mullin, Law firm
Associate

Matthew Turetzky is an associate in the Government Contracts, Investigations and International Trade Practice Group in the firm's Washington, D.C. office.

Matthew's practice focuses on False Claims Act litigation in federal district and appellate courts, government contractor-specific litigation and counseling, and bid protests before the Government Accountability Office and Court of Federal Claims. Matthew also assists with other government contracts and complex civil litigation matters.

202-218-0018