DOJ’s Civil Fraud Director Addresses Recent FCA Policy Developments
On September 19, 2019, speaking at the Practising Law Institute’s Government Contracts 2019 event, Michael Granston, the Director of the Civil Fraud Division at the Department of Justice (“DOJ”), provided an update on the government’s enforcement activities under the False Claims Act (“FCA”).1 Granston’s comments focused on three key areas of recent DOJ FCA policy: (1) the use of agency guidance documents, (2) the dismissal of qui tam lawsuits by DOJ, and (3) cooperation credits for FCA defendants.
Granston first addressed the DOJ’s internal policy on the use of agency guidance documents, which was first announced in the January 25, 2018 memorandum by then-Associate Attorney General Rachel Brand (the “
Brand Memo”). Granston summarized the Brand Memo’s policy as requiring the DOJ to not rely on agency guidance documents to impose new obligations on third parties. Therefore, in asserting a violation of a duty owed to the United States in an FCA case, the obligation must come from a statutory, regulatory, or contractual requirement rather than any agency guidance. However, the Brand Memo’s policy does not prohibit all uses of agency guidance documents by DOJ, as such guidance can be used for other evidentiary purposes, such as showing awareness or materiality of a particular requirement or showing the existence of professional standards. Moreover, and of particular importance for potential FCA defendants, Granston stated that, when agency guidance documents are incorporated into a contract or certification, then the agency guidance can be the basis for false claims, as the agency guidance has become a contractual requirement in that circumstance.
Granston also discussed the DOJ’s policy regarding the dismissal of qui tam lawsuits, which was outlined in a January 10, 2018 memorandum signed by Granston himself (the “
Granston Memo”). The Granston Memo summarizes the factors the government may consider in assessing whether to dismiss qui tam cases, while also cautioning DOJ attorneys to use the factors judiciously. Granston stated that, in some instances, qui tam FCA cases are contrary to public interest, and the FCA allows the government to dismiss such actions. Granston noted that courts are currently grappling with which standard they must apply in considering a government’s motion to dismiss a qui tam lawsuit. The current debate focuses on whether the government has unfettered discretion in dismissing qui tam complaints, or whether the government must meet a rational basis standard. While a recent circuit court opinion on the issue, Weih Steve Chang v. Children’s Advocacy Center of Delaware, No. 18-2311 (3d Cir. Sept. 12, 2019), declined to take sides, Granston noted that two recent district court opinions denied government motions to dismiss, with the courts focusing their concerns on a failure to conduct an adequate investigation. With both of those district court decisions on appeal, the issue of the government’s ability to dismiss qui tam lawsuits is certainly an area to watch.
Granston wrapped up his presentation by speaking about the new DOJ policy on crediting potential defendants that disclose FCA violations or cooperate with FCA investigations. We have discussed this policy
before, and Granston summarized the policy as involving three types of cooperation: voluntarily disclosing wrongdoing that was not previously known to the government, cooperating with an ongoing investigation, or taking remedial action in response to an investigation. Granston stated that the benefits of such disclosure or cooperation may result in a lower damages multiplier and/or a reduction in civil penalties. As an example, Granston pointed to a voluntary disclosure that resulted in the government’s acceptance of a contractor’s proposed damages calculation during settlement and a public acknowledgment of the contractor’s cooperation. Notably, Granston stated that a contractor that merely follows the requirements of the Mandatory Disclosure Rule, found at Federal Acquisition Regulation (“FAR”) 52.203-13, would likely not qualify as a voluntary disclosure under the new cooperation credit policy.
Granston noted that all three of the aforementioned topics have been incorporated and expanded upon in the
Justice Manual, which provides internal guidance to DOJ prosecutors.
What This Means For You
Whenever a government enforcement attorney speaks, we listen. His or her perspective can be valuable in learning about current and future government enforcement priorities. Granston is no exception, especially in the world of FCA enforcement. His comments indicate that the DOJ is continuing to follow recently adopted FCA policies, without showing any signs of changing course. Government contractors should review the aforementioned policies to ensure they understand the potential implications as well as monitor the emerging conflict regarding the applicable standard for granting the government’s motion to dismiss a qui tam case.
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1 Granston prefaced his comments by stating that any opinions stated were his own and do not reflect the opinions of the Department of Justice.