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False Claims Act Statistics, News & Analysis

  • 14
  • November
  • 2017

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Too Good To Be True? DOJ Teases Policy Shift to Dismiss Meritless Qui Tams

With good excuse, we at LLB are a bit late to the party on this bit of news. It appears that Michael Granston, the director of the DOJ Commercial Litigation Branch, Fraud Section — the office charged with guardianship of the FCA for all of DOJ — chose a health care compliance conference to announce what could be a major shift in enforcement policy. In an October 30 speech, which appears to have been covered only by RAC Monitor in the first instance, Granston announced that going forward, DOJ will move to dismiss cases it finds to be meritless, rather than permitting relators to litigate on their own.

Not to look a gift horse in the mouth, but color us a bit skeptical for a few reasons. The government has always had the ability to dismiss FCA cases over the objections of a relator (provided that the relator is given an opportunity to be heard on the motion before the court). But in practice, DOJ virtually never exercises this option, preferring instead to allow relators to carry on litigating non-intervened cases. DOJ has made the point explicitly in “statements of interest” filed in relator qui tam cases that the courts should not draw any inference from the government’s decision not to intervene as to the underlying merits of the fraud allegations. It seems odd for DOJ to announce what would be a seismic shift in this position in a compliance conference without any accompanying official announcement. Indeed, unlike prior DOJ policy shifts, there is no reference on the DOJ website to Granston’s speech (at least not yet) and no written policy that accompanies it (unlike, for example, the Yates Memo that garnered so much attention last year).

Even if one were to credit that DOJ means now to take a more aggressive stance in moving to dismiss unmeritorious cases, we still do not hold out much hope that much will change in practice. First, the government likely will continue to take the position that a case may be declined not because of its relative lack of merit, but because of the government’s limited enforcement resources. Since the vast majority of DOJ’s FCA recoveries come from relator cases, DOJ has a vested interest in keeping on good terms with the relator bar. If this “nuclear option” is exercised at all, it likely will be sparingly and reserved only for matters where it is abundantly clear that the relator’s allegations are entirely worthless. These are of course the types of cases that defendants most likely will achieve dismissal on their own — and while DOJ’s support will be most welcome, it will not obviate the need for defendants to file motions once a case is unsealed. Finally, courts may be loath to deny relators an opportunity to litigate, particularly since the qui tam provisions are included in the statute for precisely this purpose.

Still, the most obvious upshot of the potential change in policy is that in the pre-intervention investigation phase, defendants have an incentive to convince the government not only to decline intervention but also to actively seek dismissal. Cautious defendants responding to Civil Investigative Demands or Inspector General subpoenas (DOJ’s two favorite investigative tools when looking into under seal qui tams) often adopt a conservative approach in responding under the current climate. When the best case scenario is that the government chooses not to intervene but the relator carries on, the perennial concern is that information given to DOJ is essentially just free pre-suit discovery to the relator, particularly as the FCA CID provisions explicitly permit DOJ to share information and documents gleaned with relators. But if the prospect of convincing DOJ not only to decline but also to dismiss is real, defendants may adjust their own behavior accordingly towards more full-throated advocacy and information sharing. Of course, most putative defendants today strongly advocate to DOJ as to the worthlessness of relator FCA claims, so we question once again whether this change will materially affect practice.

Accordingly, we meet the DOJ announcement with a collective shrug. As the old saying goes — just in time for the holidays — the “proof of the pudding is in the eating.” We assure our readers that we will monitor closely and report whether DOJ is, in fact, moving to dismiss meritless relator claims. Otherwise, the speech, though welcome, is only so much window dressing.



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Authors

Craig D. Margolis

Craig D. Margolis Partner

Kathleen C. Cooperstein

Kathleen C. Cooperstein Associate

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