DoJ Revisits Standard for Qui Tam Dismissal

The Department of Justice has released a new memo addressing the standard for dismissal of relator lawsuits under the False Claims Act, and both the content and the tone of the memo are starkly different from what might have been expected under previous administrations. Precisely how this memo will change routine practice is “difficult to predict,” as the saying goes, but the memo is at the very least a suggestion that some of the less credible qui tam suits will have a very short shelf life, indeed.

Resources an Issue for DoJ                                                             

The DoJ memo says the annual total of qui tam actions has neared or exceeded 600 new matters in each of the past several years, a disclosure that might surprise no one, given the related provisions of the Affordable Care Act. However, the rate of federal interventions “has remained relatively static,” the memo stated, although the department must nonetheless expend resources to monitor cases in which the government ultimately does not intervene.

One might impute a number of motives for the memo overall, but one thing is clear: DoJ is seeking to economize when it comes to dealing with relator lawsuits, as demonstrated by the passage directing the reader’s attention to “the government’s limited resources.”

The memo points out that the department can dismiss an action over the relator’s objections, although that relator may be entitled to an appeal of that decision. DoJ lists seven factors that seem to have driven dismissals since 1986, including the curbing of meritless cases and prevention of relators who seek to piggyback onto an ongoing government investigation. Another factor would be whether the federal agency affected by the action expects the case to interfere with the policies and programs of that agency.

Standard for Dismissal Clarified

In addition to the factors cited above, the memo states that dismissal is an option to address a case pockmarked with “egregious procedural errors,” citing the case of Surdovel v. Digirad Imaging as an instance. This case was dismissed in 2013 after government attorneys determined that the relator had “failed to serve the United States with the complaint and disclosure of all material facts.” However, the memo indicated that federal attorneys should feel free to leverage both the unfettered discretion and the rational basis standards for dismissal.

As might be expected, the D.C. District Court is one jurisdiction where the unfettered discretion standard is at work, although the Ninth and Tenth Circuits have made use of the rational basis test. The memo argues that even the rational basis standard “was intended to be a highly deferential” standard, and the memo advises a federal attorney to notify the court as to the basis for a motion to dismiss in jurisdictions where a standard has not been identified.

The memo offers some tactical advice, suggesting for instance that prosecutors separately assert any alternative grounds for seeking dismissal, citing the bars on public disclosure and pro se relators as examples. This approach provides independent legal bases for dismissal, but partial dismissal is another tactic available to federal attorneys.

Interestingly, the memo concludes with language suggestive of a view that the rate of meritless qui tam actions is on the rise, stating that relators have dismissed more than 700 actions since the beginning of 2012 when the department declined to participate. This more routine withdrawal of a qui tam, the memo states, “has significantly reduced the number of cases where the government might otherwise have considered seeking dismissal.”

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