On June 16, 2023, the United States Supreme Court affirmed that the Department of Justice (DOJ) has the authority to dismiss qui tam whistleblower suits, “so long as it intervened sometime in the litigation, whether at the outset or afterward.”
Case Background
In United States, ex rel. Polansky v. Executive Health Resources, Inc., Jesse Polansky filed a claim as a qui tam whistleblower against Executive Health Resources, alleging they caused millions of dollars in false claims to the government by charging inpatient rates for what should have been outpatient services.
The DOJ initially opted not to intervene and allowed Polansky to pursue the claim on his own. However, after several years of litigation, the DOJ tried to have the case dismissed over Polansky’s objection. In its attempt to dismiss the suit, the DOJ pointed to the small chances of success in addition to concerns about the discovery burden being placed on the federal government and potential disclosure of privileged documents. A federal district court in Pennsylvania granted the DOJ’s motion to dismiss, finding that the Government had “thoroughly investigated the costs and benefits of allowing [Polansky’s] case to proceed and ha[d] come to a valid conclusion based on the results of its investigation.”
The United States Court of Appeals for the Third Circuit upheld that ruling, finding that the Government has the ability to dismiss an action even if it does not intervene during the seal period of a qui tam suit – so long as it intervened sometime later. The Appeals Court found that the Government did intervene in this case, because its motion to dismiss could be reasonably construed to include a motion to intervene.
Supreme Court Decision Affirming the Lower Level Decisions
Writing for the majority, Justice Elena Kagan noted that motions to dismiss are governed by the Federal Rules of Civil Procedure (Rule 41 to be specific) “and nothing warrants a departure from them here.” Kagan noted that Congress may “override that command,” but there is nothing in the False Claims Act that would suggest “that Congress meant to except qui tam actions from the usual voluntary dismissal rule.” She went on to continue her point, saying that “the FCA’s many cross-references to the Rules suggest that their application is the norm” and that “[a]s a practical matter, the Federal Rules apply in FCA litigation in courts across the country every day. There is no reason to make an exception for one about voluntary dismissals.”
However, she did state that the way Rule 41 applies to FCA cases may “differ in two ways from the norm.” The first such way is that the FCA requires notice and an opportunity for a hearing before a dismissal can take place. The second way it differs is in a typical motion to dismiss, the court’s analysis should focus on the defendant’s interests while in the FCA context, the “assessment is more likely to involve the relator,” and many relators will want to defeat a motion to dismiss given the likely investment they have made up until that point.
Therefore, when faced with a motion to dismiss in a False Claims Act case, the district court should consider the interests of the relator in addition to the defendant, and “ensure that substantial justice is accorded to all parties.” Kagan stated a “district court should think several times over before denying a motion to dismiss. If the Government offers a reasonable argument for why the burdens of continued litigation outweigh its benefits, the court should grant the motion. And that is so even if the relator presents a credible assessment to the contrary.”
Clarence Thomas Dissents
Justice Thomas was the sole dissent vote in the case, believing that the False Claims Act “afford[s] the Government no power to unilaterally dismiss a pending qui tam action after it has ‘decline[d] to take over the action’ from the relator at its outset [during the seal period].”
Thomas essentially stated his belief that the government has the ability to intervene during the seal period, but once that period expired, if the government did not intervene, it is permanently excluded from the suit and is entitled to no involvement.
Reactions
This case is discussed in greater detail in the July issue of Policy & Medicine Compliance Update.
Roger Lewis, Principal in Goldberg Kohn’s Litigation Group, said, “[t]he Polansky decision deals with the rare case where the government decides to dismiss a False Claims Act case after significant litigation by the relator and over the relator’s objection. That power to dismiss, which this decision affirms, still is an oddity in FCA litigation and likely will continue to be so. Even so, the Supreme Court reminds the government that its right to dismiss is somewhat fettered by the need to first intervene and make a limited showing.” Lewis went on to say, “[f]or relators and their counsel, the message from this decision is also clear: consider carefully before investing in litigation of a declined FCA case that the government actively does not want you to litigate. No one wants to be stuck with a big investment in a case that can be voluntarily dismissed at any time.”
“The Supreme Court’s decision will require Congress to fix the False Claims Act to protect whistleblower rights to pursue qui tam lawsuits when the government declines to intervene,” said whistleblower attorney David Colapinto, a founding partner of Kohn, Kohn & Colapinto. “Congress should create common sense standards for the government to meet when it wants to intervene late just to dismiss a whistleblower’s case. Under the Supreme Court’s ruling the government can intervene to dismiss the case years after the whistleblower has litigated the claims on behalf of the government.”