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DOJ Seeks Dismissal of FCA Qui Tam Case to Escape Onerous Discovery Obligations

On August 20, 2019, the United States exercised its authority under the False Claims Act (FCA) to seek dismissal of a relator’s qui tam suit because of the defendant’s burdensome discovery demands, in Polansky v. Executive Health Resources, Inc.  Since the lawsuit’s inception in 2012, the U.S. Department of Justice (DOJ), the U.S. Department of Health and Human Services' (HHS) Centers for Medicare and Medicaid Services (CMS), and other government agencies have attempted to fend off a series of burdensome Touhy requests but failed to do so.  Meanwhile, the scope of discovery has ballooned.  Collectively, DOJ and HHS have deployed six attorneys to work this case.  And, to top it off, DOJ is concerned about relator’s credibility and his ability to prove a FCA violation.  DOJ’s dismissal request thus comes as no surprise.

We previously blogged about the government’s authority to dismiss a qui tam suit under Section 3730(c)(2)(A) of the FCA.  As encouraged by the Granston Memo, if the United States determines that pursuing the case is not in its best interest – for example, if the claims lack merit or litigating them would impose an undue burden on scarce governmental resources – it has discretion to seek dismissal of even meritorious suits.  Federal courts apply different standards to analyze the limits of that discretion.  The D.C. Circuit has held that this discretion is “unfettered” while the Ninth and Tenth Circuits (and recently the E.D. Pennsylvania, in United States ex rel. SMSPF v. EMD Serono, Inc.) require a “rational relationship” between dismissal and a valid governmental interest. 

DOJ articulated reasons in its motion that arguably meet both standards.  First and foremost, the discovery obligations have diverted government resources away from other important enforcement priorities.  The following timeline shows the government has been quite involved in the matter despite its status as a third party that does not wish to intervene:

  • The United States declined to intervene on June 27, 2014, but Polansky decided to move forward.

  • The court held a bellwether trial on a sampling of claims implicated by Polansky’s suit.  It then ordered additional discovery limited to the period preceding CMS’ Two Midnight Rule clarification issued in October 2013 (pertinent to the propriety of inpatient versus outpatient treatment).

  • From December 2018 through September 2019, Executive Health Resources (EHR) issued subpoenas to six governmental entities seeking tens of thousands of pages of documents and testimony that implicate sensitive and deliberative information.  The government became ensnared in motion practice and discovery responding to these subpoenas.    

  • Meanwhile, in December 2018, it was discovered that relator possessed 14,000 documents he took from CMS upon his departure. 

  • Multiple hearings followed between December and January, 2019.  The court eventually ordered that the documents be produced to EHR, despite the government’s objection that the documents contained material protected by the deliberative privilege.

  • By June, the government had produced 42,000 pages of documents. 

  • Polansky decided to amend his complaint a third time to narrow his case, which (ironically) led to the court expanding the scope of discovery into claims post-dating CMS’ October 1, 2013 clarification of the Two Midnight Rule.

  • In July, EHR requested yet more discovery from the government.  A Special Master ordered that more documents be produced, including documents from three new custodians.

  • The government objected, but the court overruled, ordering production “forthwith on a rolling basis” 

Beyond the discovery burden already imposed, the government doubts Polansky can prove his claims.  Claims with little to no merit, combined with unduly burdensome discovery obligations, clearly fall within the scope of cases that the Granston memo encouraged DOJ attorneys to dismiss.

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About this Author

Jane Haviland, Securities Attorney, Mintz Levin Law Firm
Associate

Jane’s practice in litigation is supported by her experience with the Office of the State Auditor in Massachusetts and her service as a law clerk and legal intern.

While with the Office of the State Auditor, Jane worked directly with auditors to outline, organize, and compose initial drafts of audit reports to highlight significant findings and make clear and concise recommendations to the auditee. She also performed legal research and analysis of the General Laws and Code of Massachusetts Regulations in order to confirm that auditees complied...

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Karen Lovitch, health care, Medicare, Compliance, Licensing, MIntz Levin
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Karen is the Practice Leader of the firm’s Health Law Practice. She counsels health care clients on regulatory, transactional, and operational issues, including Medicare coverage and reimbursement, the development and implementation of health care compliance programs, and licensure and certification matters. In addition, Karen advises clients on the legal, practical, and fraud and abuse implications of business arrangements and sales and marketing practices. Her experience includes matters related to the anti-kickback statute, the Stark law, state statutes prohibiting kickbacks and self-referrals, and the federal Physician Payments Sunshine Act.

Karen applies her compliance and regulatory experience in transactional as well as litigation contexts. In addition to counseling health care entities on regulatory matters arising in connection with mergers and acquisitions, she has successfully defended clients subject to state and federal surveys, Medicare and Medicaid overpayment and reimbursement appeals, and state licensure proceedings. Karen also represents clients subject to state and federal investigations alleging violation of the anti-kickback statute, the federal False Claims Act, and other state and federal laws.

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