Earlier this month, the Director of the Justice Department’s Civil Frauds Section issued a memorandum directing all DOJ attorneys evaluating False Claims Act (FCA) whistleblower cases to consider whether the government’s interests are best served by seeking a dismissal of questionable cases. The memorandum was first published by The National Law Journal and is available here.
The memo appears to signify a significant shift in the way in which DOJ will view cases brought by private whistleblowers, also known as qui tam cases. The FCA gives the government the right to seek dismissal over the plaintiff’s objection pursuant to 31 U.S.C. § 3730(c)(2)(A). But, historically, DOJ has only moved to dismiss a very small percentage of such cases. This historical reluctance has been frustrating to industries frequently hit by qui tam cases because even meritless cases can be expensive and time consuming to defend.
In addition to the apparent increased consideration of seeking dismissal, the memo also twice references the importance of consulting with any agency impacted by the qui tam complaint. DOJ normally consults with affected client agencies on qui tam cases, but this could signal that at least for cases that meet the below criteria, DOJ will weigh agency input more heavily.
The memo recognizes that even when DOJ decides not to intervene in a case, the Department nonetheless expends significant resources in monitoring the case or responding to discovery or other issues. Given that non-intervened cases are not cost or risk-free for the Government, the memo lists seven factors DOJ attorneys should consider when evaluating a case. These factors have served as bases for obtaining dismissals in the past and are not exclusive:
- Meritless Qui Tam Case. Are the complaint’s allegations factually frivolous; is the legal theory defective or did DOJ conclude that there was no merit after an investigation?
- Duplicative of Ongoing Investigation. Conversely, does the qui tam duplicate an existing DOJ investigation without adding anything useful?
- Conflicts with Agency Policy. Is the agency relevant to the qui tam so concerned that it will interfere with its policies or programs so that the agency has recommended dismissal?
- Interferes with Litigation Prerogatives. For example, will non-intervened claims interfere with the Government’s ability to pursue intervened claims or will they lead to unfavorable precedent?
- Endangers Classified Information.
- Inefficient Use of Government Resources. Is the case likely to cost the Government more than the Government will recover?
- Egregious Procedural Errors. Has plaintiff’s counsel violated the seal or refused to cooperate with an investigation?
In some jurisdictions, dismissal under § 3730(c)(2)(A) is virtually automatic. In others, courts employ a “rational basis” review of the motion that is generally deferential. The memo points out that the Government can move to dismiss on any number of legal grounds apart from or in addition to § 3730(c)(2)(A).
The memo also advises on appropriate process in handling a proposed dismissal. The Assistant Attorney General for the Civil Division must approve dismissal for all cases being handled jointly by a U.S. Attorney’s office and the Fraud Section. If the case has been delegated to a U.S. Attorney’s office, the U.S. Attorney’s office must give the Fraud Section at least 10 days’ notice before filing a motion. The memo notes that making these determinations early in a case is best practice, but there may be reasons that dismissal factors arise during the course of discovery. Finally, the memo advises that when possible, DOJ attorneys should notify plaintiff’s counsel of the problems with the complaint and the intent to file the dismissal motion.
The true impact of the policy set forth in the memo and whether the number of qui tam dismissals will increase appreciably cannot be known for some time. However, it is immediately useful to the FCA bar because it provides a roadmap of the factors that DOJ lawyers are considering as they review cases. Defense counsel can strengthen their case-specific arguments in favor of declination or dismissal by connecting them to the factors and policy considerations described in the memo.