Supreme Court To Decide Standard For Government Dismissal Of False Claims Act Cases

The Supreme Court granted certiorari today in a case that will decide two important questions under the False Claims Act (FCA).  In United States ex rel. Polansky v. Executive Health Resources, Inc., the Relator asks the Court to decide:

  1.   Whether the government has authority to dismiss an FCA suit after initially declining to proceed with the action, and

2.  What standard applies if the government has that authority.

Relator Jesse Polansky is a former consultant to Executive Health Resources, Inc. (EHR), a company that assists hospitals and physicians in submitting bills to Medicare and other federal healthcare programs.  Petitioner alleged that EHR filed false claims by billing Medicare for inpatient medical services that should have been billed at lower outpatient rates.

The Petitioner filed his FCA qui tam action in 2012, and the United States declined to intervene in 2014.  In 2019, the government moved to dismiss the FCA action, citing the significant burden on government resources if the case continued, the need to protect privileged information, and the government’s doubts about the Relator’s credibility and his ability to prove any FCA violation.

The Third Circuit first decided that the government may move to dismiss an FCA action after declining to intervene, but held that the government must first intervene in the action before moving to dismiss.  The Court of Appeals nevertheless construed the government’s motion to dismiss as including a motion to intervene.

As to the standard to apply, the Third Circuit followed the Seventh Circuit, holding under Fed. R. Civ. P. 41 that a pre-answer government motion to dismiss should be granted as long as the Relator receives an opportunity to be heard, subject only to the bar on arbitrary government action.  After a responsive pleading, the case may only be dismissed by an order in the discretion of the district court, and dismissal should generally be allowed absent some prejudice to defendant, particularly as the government is dismissing a case brought in its name.  The Third Circuit held that the district court had examined all issues including the interests of all the parties, and had not abused its discretion in ordering a dismissal.

The first issue raised by this case, whether the government has the authority to dismiss an FCA case after initially declining, is not likely to give the Supreme Court much concern.  Other circuit courts have held that a motion to intervene is not necessary, and even the Third Circuit deemed the motion to dismiss as including a motion to intervene rather than hold that the failure to move to intervene required reversal.

The second issue, however, the correct standard to apply, has resulted in several different approaches in various circuit courts, Even the government’s brief opposing certiorari found three separate approaches in addition to the one adopted by the Third and Seventh Circuits.

• District of Columbia Circuit – The government has virtually unfettered discretion to dismiss an FCA action brought in the name of the United States.
• Ninth and Tenth Circuits – The government may dismiss an FCA action as long as there is a rational basis for that disposition.
• First Circuit – The government motion to dismiss should be granted unless the Relator establishes that the decision to dismiss transgresses Constitutional limitations or that the government is perpetrating a fraud on the Court.

By granting certiorari, the Supreme Court will decide the standard for a government dismissal of a FCA action after it declines to intervene, providing clarity to the lower courts on addressing these motions.  The clarification of this standard is particularly important since the 2018 Granston Memorandum encouraged more aggressive use by DOJ attorneys of motions to dismiss in declined FCA actions.