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Senator Grassley Drafting Legislation to Potentially Limit DOJ Dismissal Power in FCA Cases

August 05, 2020

Senator Chuck Grassley plans to propose legislation that would require the US Department of Justice to state its reasons for dismissal of qui tam cases over the objection of the relator.

On July 30, 2020, National Whistleblower Appreciation Day, Senator Chuck Grassley (R-Iowa) announced plans to introduce legislation that potentially could pose hurdles to the US Department of Justice’s (DOJ’s) authority to dismiss relator-initiated False Claims Act (FCA) cases (“qui tam” cases) over the relator’s objection.[1] Senator Grassley has been a long-time proponent of relator-friendly amendments to the FCA and was the primary author of the 1986 amendments that introduced relator rights to pursue FCA actions.

Pursuant to Section 3730(c)(2)(A) of the FCA, DOJ has long had the authority to dismiss a qui tam action over a relator’s objection “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.”[2] Yet, in the first 30 years since Congress provided DOJ with this express statutory grant, it rarely invoked it. In fact, in public remarks in late June 2020, then Principal Deputy Assistant Attorney General Ethan Davis confirmed that between 1986 and 2018, DOJ had moved to dismiss only 45 qui tam cases under this FCA provision.[3] The pace of dismissals picked up markedly – while still representing only a small fraction compared to the 700-plus annual qui tam filings – following issuance of the so-called “Granston Memo” in January 2018. That Memo, named for its author, then-Director of the Commercial Litigation Branch of DOJ’s Civil Fraud Section, Michael Granston, directed DOJ attorneys to affirmatively consider dismissal as part of the department’s intervention decision in qui tam cases. As we have discussed previously here, the Granston Memo enumerates seven non-exhaustive factors or circumstances in which it may be appropriate for DOJ to seek dismissal. The Granston Memo principles since have been incorporated into Section 4-4.111 of the Justice Manual. And, as Ethan Davis reported in his remarks a few weeks ago, DOJ moved to dismiss approximately 50 qui tam cases in the two years following the Granston Memo.[4] This renewed emphasis on weeding out particularly meritless qui tam cases at an early stage was welcomed by industry and the defense bar as a step in the right direction.

The increased exercise of that dismissal authority has led to disputes over the standard of review to be applied by courts acting on Section 3730(c)(2)(A) motions. The statute itself provides no express standard, leaving courts to craft their own. As we previously discussed here, a circuit split on this question is evidenced by the US Court of Appeals for the DC Circuit’s highly deferential standard – holding that the FCA vests in the government “an unfettered right to dismiss” a qui tam action[5] – while the US Court of Appeals for the Ninth Circuit (and others) require a minimal showing by the government with respect to its rationale for dismissal. The US Supreme Court declined to resolve this split when, earlier this year, it denied certiorari in U.S. ex rel. Schneider et al. v. JPMorgan Chase Bank NA et al.[6] That denial likely was influenced by the Justice Department’s views – expressed in the Solicitor General’s brief – that both standards afford broad deference to the government’s dismissal decisions in qui tam cases, and any differences in how the circuits analyze the issue are rarely, if ever, outcome determinative.[7]

Amidst all of this renewed activity related to the longstanding dismissal authority, Senator Grassley has joined the fray. In September 2019 and May 2020 letters to Attorney General William Barr, the senator expressed his disagreement with DOJ’s increased number of motions to dismiss qui tam actions and the substantial deference afforded by the courts to those dismissal motions.[8] In a December 2019 response, DOJ sought to minimize the concern, noting that it had sought to dismiss less than 4% of the more than 1,170 qui tam cases filed between the Granston Memo’s release and that point, that it investigates every qui tam case and that “neither the government, the taxpayers, nor future whistleblowers benefit when poorly devised cases proceed.”[9]

In his May 2020 letter, Senator Grassley conveyed his displeasure with DOJ’s position as articulated in the brief submitted to the Supreme Court.[10] In particular, he took issue with DOJ’s position that courts should afford DOJ the highest level of deference when it exercises its dismissal authority. Hinting that he might seek to propose legislation that would reflect a change from DOJ’s position, Senator Grassley wrote, in a handwritten postscript that “I don’t know the number of times the courts have ruled, or DOJ did something harmful, to carrying out the spirit of the False Claims [Act]. And, thank God, I, or Senator Leahy, have been successful passing legislation to correct such judicial or administrative mal-interpretation.”[11] Thus, it is not a surprise that Senator Grassley has indicated plans to introduce legislation seeking to limit DOJ’s dismissal authority.

In light of the recent substantial outlay of government funding in connection with the coronavirus (COVID-19) pandemic, it is likely that qui tam filings will continue to increase. Accordingly, DOJ’s dismissal powers are of paramount importance to ensure parasitic or other problematic qui tam cases are not permitted to proceed beyond the government’s declination. Regardless of the showing the government may be required to offer to justify dismissal, whether minimal or more substantial, the Justice Department has an obligation to ensure that qui tam suits that it has investigated and determined to be meritless, or which otherwise infringe on federal priorities and create unwarranted burdens on federal resources, are not permitted to proceed in the government’s name. DOJ has the requisite statutory tool to dismiss these cases. It should not hesitate to use it.

We will continue to monitor these developments and any proposed legislation to limit these important powers.

CONTACTS

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Chicago
Megan R. Braden
Tinos Diamantatos

Dallas
Sheila A. Armstrong
Danny S. Ashby
Steve Korotash

Houston
B. Scott McBride
John W. Petrelli

Miami
Alison Tanchyk

New York
Kelly A. Moore
Martha B. Stolley
Daniel B. Tehrani

Philadelphia
Meredith S. Auten
John C. Dodds
Lisa C. Dykstra
Rebecca J. Hillyer
Matthew J.D. Hogan
Ryan P. McCarthy
Zane David Memeger
John J. Pease, III
Kenneth A. Polite, Jr.
Margaret Erin Rodgers Schmidt
Shevon L. Scarafile
Eric W. Sitarchuk

Washington, DC
Douglas W. Baruch
Giovanna M. Cinelli
Brad Fagg
Kathleen McDermott
Scott A. Memmott
Matthew S. Miner
Kenneth J. Nunnenkamp
Stephen E. Ruscus
Jennifer M. Wollenberg
Howard J. Young



[2] 31 U.S.C. § 3730(c)(2)(A).

[4] Id.

[5] See Swift v. U.S., 318 F.3d 250 (D.C. Cir. 2003); Hoyte v. Am. Nat. Red Cross, 518 F.3d 61 (D.C. Cir. 2008).

[6] U.S. ex rel. Schneider et al. v. JPMorgan Chase Bank NA et al., case number 19-678 in the Supreme Court of the United States.

[7] See Brief for the U.S. in Opposition to Certiorari p.8, U.S. ex. rel. Schneider et al. v. JPMorgan Chase Bank NA et al., U.S. Supreme Court Case No. 19-678 (filed March 4, 2020).

[10] See Grassley May 2020 Letter, supra note 8.

[11] Id.