In a March 4, 2020 brief to the Supreme Court, the Department of Justice (DOJ) appears to take a broad view of its dismissal authority under the False Claims Act (FCA). DOJ’s position has provoked vocal criticism from Senator Grassley, a long-time advocate for whistleblowers, and raises questions about the proper scope, if any, of the DOJ’s ability to dismiss an FCA case brought by a whistleblower when the DOJ declines to intervene.
The FCA was enacted in 1863 as a tool to deter fraud against the government. Congress strengthened the FCA in 1986 when it amended the qui tam provisions of the law to provide financial incentives and the procedural structure to whistleblowers – or “relators” – so that individuals could bring FCA cases on behalf of the government. If a relator sues under the FCA, the DOJ has 60 days (with extensions for good cause) to investigate the allegations raised in the complaint and decide whether to “intervene” and pursue the case or decline intervention.
While the relator is typically permitted to pursue the case on the government’s behalf if the government decides to decline intervention, the FCA gives the government the right to dismiss the suit over the relator’s objections. Specifically, the FCA provides that “[t]he 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.” 31 U.S.C. § 3730(c)(2)(A).
On January 10, 2018, the DOJ issued guidance, known as the Granston Memo, encouraging U.S. attorneys to consider seeking dismissal of qui tam actions under this provision in certain circumstances where the government declines intervention. Prior to the Granston Memo, the government sought dismissal of qui tam claims only in very rare circumstances. But, according to the DOJ, a record number of qui tam actions have been filed in recent years, but the rate of intervention in those actions has remained relatively stable; begging the question whether newly filed qui tam actions were meritorious or worth the expenditure of limited government resources.
In response to the Granston Memo, Senator Grassley, among others, opposed the DOJ’s dismissal authority and raised concerns that the exercise thereof “could undermine the purpose of the False Claims Act by discouraging whistleblowers and dismissing serious fraud on the taxpayers.” That opposition was recently renewed in response to the DOJ’s articulation of its dismissal authority in briefing submitted to the Supreme Court.
The Circuit Courts are split as to the level of judicial review to apply to the DOJ’s decision to dismiss a qui tam action. The Ninth and Tenth Circuits, for example, hold that the DOJ is able to dismiss a qui tam action only when the dismissal bears a “rational relationship” to a legitimate government purpose. The D.C. Circuit, on the other hand, has held that the DOJ has an unfettered right to dismiss a qui tam action without any judicial constraint.
In U.S. ex rel. Schneider v. JP Morgan Chase, the Supreme Court is tasked with resolving that circuit split and deciding whether and to what extent the DOJ’s decision to dismiss a qui tam action is subject to judicial review. The DOJ’s position in that case is a resounding no. The DOJ argued that it has “unfettered discretion” to dismiss a qui tam action and its judgment on the issue amounts to “an unreviewable exercise of prosecutorial decision.”
In a May 4, 2020 letter addressed to Attorney General William Barr, Senator Grassley renewed his opposition to the DOJ’s dismissal authority, noting he “vehemently disagree[d]” with the DOJ’s position in Schneider. Senator Grassley notes that, since the Granston Memo was issued, the DOJ has sought to dismiss 45 FCA qui tam cases pursuant to § 3730 – an amendment which Grassley himself authored. As one of the lead authors of the 1986 amendment, Senator Grassley is in a unique position to describe how Congress intended § 3730 to be interpreted, and his letter explains why the DOJ’s interpretation of that provision is incorrect.
The Supreme Court has yet to render a decision in Schneider, however Senator Grassley does not appear to be waiting on the judiciary to prove his point. His most recent letter to the Attorney General concluded by requesting DOJ submit a written brief to address his concerns. His vehement disagreement with the DOJ’s position is some evidence that even a Supreme Court decision in the DOJ’s favor may be short lived.
The attorneys at Chilivis Grubman represent clients of all types and sizes in connection with False Claims Act investigations and litigation. If you need assistance with such a matter, please contact us today.
1. See here for more information regarding the circuit split.