Supreme Court Backs DOJ’s FCA Dismissal Power; Dissent Questions Relator’s Role in Declined Cases

In its second major False Claims Act decision in as many weeks, the Supreme Court sided with the Department of Justice in U.S. ex rel. Polansky v. Executive Health Resources, Inc., holding that the government may move to dismiss actions over the objections of the relator (whistleblower) even in cases where the government initially declined to intervene. Three Justices also expressed concerns about the constitutionality of allowing a relator to litigate a non-intervened case, potentially setting the stage for future defense challenges.

A. Statutory and Case Background

Those familiar with the False Claims Act (FCA) know that one of its central features is the qui tam mechanism, which allows a whistleblower (known as a “relator”) to file a lawsuit asserting claims on behalf of the government and to share in any recovery.[1] After a relator files a lawsuit, the DOJ investigates and decides either to intervene and assume primary responsibility for litigating the case, or to decline the case and permit the relator to litigate it. In considering whether the DOJ retains the ability to dismiss qui tam cases after declining them, lower courts had split on the proper procedure and standard of review. Just two weeks after clarifying the meaning of “knowingly” in relation to ambiguous statutes,[2] the Supreme Court held that the DOJ may intervene in a declined case and move to dismiss the action despite a relator’s objections.[3] In affirming the Third Circuit, the Court also clarified that the DOJ need only offer “a reasonable argument for why the burdens of continued litigation outweigh its benefits”[4] and that the broad voluntary dismissal framework of Federal Rule of Civil Procedure 41(a) governs.[5]

As the Court has noted in other cases the FCA’s statutory text is frequently ambiguous. In relevant part, it states the DOJ “may dismiss the action” even if the relator objects, so long as DOJ provides the relator with notice and “an opportunity for hearing on the motion.”[6] The FCA is silent as to whether that power continues to apply in cases where the government declines to intervene. Lower courts had largely assumed the DOJ’s dismissal authority applied in all cases and focused on the standard of judicial review applicable to the DOJ’s motion to dismiss. Appellate courts’ positions ranged from the D.C. Circuit’s highly deferential view (“unfettered” dismissal authority retained by the government even after declining intervention),[7] to the Ninth Circuit’s more stringent one (requiring the government to justify dismissal with reasons “rationally related to a legitimate government interest”).[8] Clarification became increasingly necessary after the recent increase in dismissal motions, prompted in part by the DOJ’s “Granston Memorandum.”[9] A pair of unprecedented district court denials of two such motions intensified controversy over the issue.[10]

In Polansky, the relator, a physician formerly employed by the defendant,[11] filed a qui tam alleging the defendant violated the FCA by fraudulently billing Medicare for inpatient care that was actually provided on an outpatient basis, which the government reimburses at a lower rate.[12] The DOJ declined to intervene, and the relator proceeded to litigate the action, engaging in extensive discovery for five years before the DOJ changed its position and moved for dismissal.[13]  The district court granted the motion, finding the DOJ had “thoroughly investigated the cost and benefits” of continued litigation of the case and had reached a “valid conclusion.”[14]   On appeal, the Third Circuit affirmed, holding that the DOJ may move to dismiss after initially declining intervention, provided it later intervened,[15] and that the highly deferential Rule 41(a) standard is the proper test of such motions.[16] 

B. The Majority Endorses Broad Dismissal Power

The Court’s 8–1 decision affirming the Third Circuit was a resounding endorsement of the DOJ’s position. Writing for the Court, Justice Elena Kagan focused on the text of the FCA, characterizing the government’s interest in the suit as “the predominant one” in all cases,[17] an interest that “does not diminish . . . because the government waited to intervene.”[18] Accordingly, even in cases where the DOJ initially declined to intervene, it may subsequently intervene at any time and move to dismiss the action over the relator’s objections.[19] As to the test for such motions, the Court called the Third Circuit’s position the “Goldilocks” point between the D.C. Circuit’s “unfettered discretion” stance and the relator’s argument for rigorous judicial review of the DOJ’s reasons.[20] Continuing the Court’s reliance on longstanding, generally applicable standards to clarify the FCA, Justice Kagan turned to the Federal Rules of Civil Procedure and adopted the Rule 41(a) framework governing voluntary civil dismissals.[21] Given the rule’s permissive nature and the centrality of the government’s interest in FCA actions, the Court held the DOJ need only offer “a reasonable argument for why the burdens of continued litigation outweigh its benefits,”[22] and “a district court should think several times over before denying a motion to dismiss.”[23]

The Court’s decision is not surprising, given the tenor of oral argument.[24] There, questioning by Justices from across the Court’s philosophical spectrum revealed a shared constitutional unease over reading the statute to restrict the government’s prerogative to control its own litigation.[25] Ultimately, the majority’s decision leaves the DOJ in control of determining when the potential downside from ongoing qui tam litigation merits dismissal—even over the objections of a relator who has spent time and resources litigating the case on the government’s behalf.

C. Three Justices Raise a Constitutional Question

While the majority’s holding was unsurprising, three Justices unexpectedly questioned the constitutional legitimacy of the qui tam mechanism.  As the sole dissenter, Justice Clarence Thomas read the FCA’s text to preclude the DOJ from moving to dismiss a qui tam case after declining to intervene.[26] Because this construction would cause the government to lose control over any qui tam case it declined despite being the real party in interest, Justice Thomas urged further review of the “serious constitutional questions” raised by his interpretation.[27] In a concurring opinion, Justice Brett Kavanaugh, joined by Justice Amy Coney Barrett, endorsed the majority’s statutory construction but still urged the Court to address the “‘substantial arguments that the qui tam device is inconsistent with Article II’ . . . in an appropriate case.”[28]

Questions about the constitutionality of the qui tam provisions are not new. Since Congress strengthened the qui tam mechanism through its 1986 amendments to the FCA, defendants have raised various constitutional challenges, including asserting that the qui tam provisions violate Article II’s Take Care and Appointments clauses and the doctrines of separation of powers and standing. All prior challenges have been unsuccessful, and the Court has previously noted that the First Congress “enacted a considerable number of [qui tam] statutes,” which suggests the approach is deeply rooted in the Nation’s history and legal traditions.[29]

Nevertheless, Justice Thomas’s dissent argues that the “FCA’s qui tam provisions have long inhabited something of a constitutional twilight zone.”[30] In particular, he focuses on the Appointments Clause, which specifies the manner of appointing “Officers of the United States.”[31] According to Justice Thomas, “private relators may not represent the interests of the United States in litigation[] [b]ecause ‘the entire executive Power belongs to the President alone’” and a relator is not an appointed officer of the United States.[32]

That line of reasoning draws upon a maximalist view of the so-called “unitary executive” theory, which posits that any restrictions on the President’s ability to control those who exercise executive power are unconstitutional.[33] Although the newly intensified qui tam controversy threatens to introduce a partisan issue into the normally non-partisan FCA, there are a number of ways to avoid a constitutional collision. One is suggested by the DOJ’s argument in prior Appointments Clause challenges that a qui tam relator is not an “officer of the United States,” but instead performs a function that is “fundamentally personal in nature, stemming from his capacity as a plaintiff pursuing what is in essence a partially assigned claim.”[34] And, even if a relator is an “officer,” in recent cases endorsing a robust view of the unitary executive theory the Court has continued to recognize exceptions to the clause, including for “inferior officers with limited duties and no policymaking or administrative authority.”[35] As a result, while the separate writings in Polansky are likely to trigger additional constitutional challenges by defendants in FCA cases, it is unclear whether Justice Thomas’s reasoning will gain any traction in the lower courts.

D. Conclusion

The majority opinion provides a straightforward endorsement of the DOJ’s dismissal authority and preserves the longstanding practice of courts deferring to the DOJ’s discretionary decisions. The dissent and concurrence threaten to undermine the viability of all non-intervened qui tams, which constitute approximately 60%  of all cases brought under the FCA. Dinsmore’s FCA Team[DP1] will continue to monitor the impact of Polansky to see whether the DOJ increases its use of dismissal authority and whether any court endorses a constitutional challenge to the qui tam provisions.

[29] Vermont Agency of Natural Res. v. U.S. ex rel. Stevens. 529 U.S. 765, 776–77 (2000); see also id. at 778 (holding that the history and structure of the qui tam provisions “leave[] no room for doubt that a qui tam relator under the FCA has Article III standing”). In Riley v. St. Luke’s Episcopal Hospital, a three-judge panel of the Fifth Circuit held that non-intervened qui tam actions violate the Take Care Clause in Article II and the constitutional doctrine of separation of powers, but the full Fifth Circuit, sitting en banc, reversed that decision. 196 F.3d 514 (5th Cir. 1999), rev’d 252 F.3d 749 (5th Cir. 2001). And, at least four circuit courts have rejected Appointments Clause challenges. See U.S. ex rel. Stone v. Rockwell Int’l Corp., 282 F.3d 787, 804-805 (10th Cir. 2002), 92 F. App’x 708 (2004), cert. denied on constitutional issue, 548 U.S. 941 (2006), rev’d on other grounds, 549 U.S. 457 (2007); Riley, 252 F.3d at 757–58 (en banc); U.S. ex rel. Taxpayers Against Fraud v. General Elec. Co., 41 F.3d 1032, 1041 (6th Cir. 1994); U.S. ex rel. Kelly v. Boeing Co., 9 F.3d 743, 757-759 (9th Cir. 1993), cert. denied, 510 U.S. 1140 (1994).