DOJ Memo Could Facilitate False Claim Lawsuit Dismissals

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By Eric Topor

An internal DOJ memo outlining seven principles for deciding when prosecutors should derail whistleblower-driven False Claims Act lawsuits could help defense attorneys get cases dismissed sooner.

The Jan. 10 memo, written to the agency’s civil fraud prosecutors by Michael D. Granston, the Department of Justice’s director of commercial litigation branch, fraud section, says the internal guidance is intended to give DOJ attorneys a framework to evaluate when whistleblower lawsuits should be dismissed proactively by the DOJ, an authority granted to the agency under the law but rarely used.

Eric W. Sitarchuk, a partner with Morgan, Lewis & Bockius LLP in Philadelphia who frequently represents FCA defendants, told Bloomberg Law Jan. 26 that the memo could provide them with an opening to make their own case to the DOJ as to why a particular whistleblower lawsuit lacks merit and should be dismissed by the government upon an initial meeting with the DOJ while the case remains under seal.

Granston didn’t explicitly direct assistant U.S. attorneys to take action to dismiss FCA lawsuits, or announce a definitive policy change or shift, but he did ask them to “consider” dismissing whistleblower FCA cases when the allegations are legally or factually meritless. Granston said the guidance will allow consistency across U.S. attorney’s offices, and help the DOJ avoid “adverse decisions” affecting the agency’s FCA case prosecutions.

Of the seven principles described in the memo, the dismissal of meritless whistleblower lawsuits affects health-care providers and whistleblowers the most. The other six principles include dismissals when a whistleblower lawsuit duplicates an existing government investigation, interferes with federal agency policies or programs, could adversely affect DOJ litigation priorities, raises national security considerations, risks wasting government resources, and when dismissal is necessary to address “egregious procedural errors.”

Rumored Policy Shift Remains Murky

The DOJ denied that any policy shift on dismissing whistleblower FCAs was in the works in November 2017 after a published report on public remarks Granston made during a Washington conference suggested that the agency would dismiss meritless FCA actions. A DOJ press officer reportedly clarified Granston’s conference remarks and said the director was articulating a continuation of current DOJ policy.

Granston’s memo on its face doesn’t announce a change in FCA dismissal policy either, and he uses historical examples of past dismissals to explain the DOJ’s statutory authority and policy considerations relevant to seeking a dismissal. Nevertheless, Sitarchuk said the memo represents a “shift in thinking” at the DOJ. Asked whether the memo would lead to an increase in cases dismissed for lack of perceived merit, Sitarchuk said he didn’t think “the memo is enlightening in that respect.”

Brian Roark, a partner at Bass, Berry & Sims PLC in Nashville, Tenn., told Bloomberg Law Jan. 25 that the memo “does not appear to break new ground but merely catalogs past examples of the government moving to dismiss qui tams.” Roark said the memo was “disappointing in not pushing government lawyers to more aggressively seek dismissal of declined qui tam lawsuits.” Roark is a Bloomberg Law advisory board member whose practice focuses on representing health-care providers and defending clients against FCA allegations.

Granston’s discussion also contained an important qualifier, noting that the DOJ typically only investigates a whistleblower lawsuit to the point needed to decide to decline intervention. Granston said that level of investigation “many not equate to a conclusion that no fraud occurred.”

Sitarchuk, though, said the memo to him suggested that DOJ prosecutors will take “a more holistic approach” to determining whether a case is meritless and should be dismissed. The memo did cite the increasing number of FCA whistleblower lawsuits that are pursued without DOJ intervention as a resource burden on the DOJ. Sitarchuk said a key question concerns the degree to which the DOJ will consider FCA defendants’ submissions during discussions about whether a whistleblower lawsuit is meritless and warrants dismissal.

Actual dismissals of whistleblower FCA lawsuits by the DOJ have been rare, as Granston mentions in the memo. Adam P. Schwartz with Carlton Fields Jorden Burt PA in Tampa, Fla., told Bloomberg Law Jan. 25 that he’s seen the level of DOJ involvement in declined cases increasing in recent years, primarily through more frequent statement of interest filings by the agency.

Granston does remark in a final footnote that whistleblowers’ voluntary dismissals of their own cases after the DOJ declined to intervene have “significantly reduced the number of cases where the government might otherwise have considered seeking dismissal.”

Political Motivations?

Brian J. Markovitz, with Joseph Greenwald & Laake PA in Greenbelt, Md., who frequently represents whistleblowers in FCA litigation, told Bloomberg BNA Jan. 26 that his major concern with the memo was on how these guidelines would be implemented. Granston, Markovitz said, “is saying that [the DOJ] can dismiss any case we want.”

Markovitz said the guidelines leave whistleblower lawsuits open to dismissal by the DOJ because of personal political considerations, either from federal prosecutors assigned to a particular case within a U.S. attorney’s office, or from higher up in the DOJ and presidential administration. The DOJ’s authority to dismiss whistleblower lawsuits “shouldn’t be implemented in different ways depending on who’s running the Justice Department,” Markovitz said.

Markovitz was concerned that whistleblowers lack an avenue to press their own case to the DOJ under the memo if a DOJ decision to dismiss the whistleblower’s action is based on arbitrary factors. Markovitz said the standard for the DOJ actively seeking dismissal in a whistleblower’s lawsuit should be “for good cause.”

Granston acknowledges that the U.S. Court of Appeals for the Ninth Circuit applies a “rational basis” test to DOJ motions to dismiss whistleblower lawsuits, which contradicts precedent from the D.C. Circuit and the DOJ’s own interpretation of the law. Granston instructed DOJ attorneys to identify a basis for dismissal in federal appeals court circuits without clear precedent on the issue.

Unfavorable Escobar Rulings

An additional consideration in the memo is the DOJ’s interest in controlling legal precedent and preventing adverse legal decisions. Gejaa Gobena, a health-care partner with Hogan Lovells in Washington, told Bloomberg Law Jan. 25 that concern over developing precedent from the U.S. Supreme Court’s Escobar decision could have been a factor in the memo’s production.

Under Escobar, an alleged false certification or statement must be material to a federal agency’s decision to pay the claim for the claim to become an FCA violation. Sitarchuk said the DOJ “has started to take some bad hits on Escobar” with regard to some court decisions that have interpreted Escobar more broadly than the DOJ prefers.

Gobena said that Escobar‘s emphasis on discerning an agency’s actual considerations in paying claims could lead to increasingly burdensome discovery requests from whistleblowers on agencies, and may have been one consideration in the memo’s drafting. Sitarchuk said discovery burdens might have been one factor, but “probably didn’t drive this [memo] alone.”

The DOJ didn’t respond to a request for comment on the memo.

To contact the reporter on this story: Eric Topor in Washington at etopor@bloomberglaw.com

To contact the editor responsible for this story: Peyton Sturges at psturges@bloomberglaw.com

For More Information

The memo is at http://src.bna.com/vYL.

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