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By Cheryl Bolen
The government will find it difficult to bring false claims cases against businesses under a new memorandum from the Department of Justice, which is just the latest move to diminish agency guidance documents by the Trump administration.
Agency guidance or sub-regulatory guidance, which broadly includes memorandums, letters, manuals, and other types of documents, is supposed to clarify or interpret a statute or regulation and is not legally binding. In practice, however, guidance is used in enforcement actions.
The Trump administration has made it a priority to limit agency guidance documents as part of its broader deregulatory agenda, according to Neomi Rao, administrator of the Office of Information and Regulatory Affairs, an agency within the Office of Management and Budget.
Rachel Brand, the associate attorney general, directed the Justice Department on Jan. 25 not to rely on agency guidance documents to establish a violation in affirmative civil enforcement cases. That has resulted in a complete change in the way False Claims Act cases will be litigated, according to a former Justice Department trial attorney now in private practice.
“This is, I think, the first administration that has really brought in a particular regulatory viewpoint that differs from prior administrations,” said Robert Salcido, partner at Akin Gump Strass Hauer & Feld LLP. “And I think the Brand memo is a manifestation of that.”
Those who do business with the government have an affirmative obligation to ensure the accuracy of their claims, which traditionally has meant reading the statute, regulation, and all sub-regulatory guidance, Salcido said.
At times, the affected company isn’t aware of the sub-regulatory guidance, which could be a bulletin or a manual that the governing agency publishes periodically, he said.
Still, the government’s response has been that the company had “constructive knowledge” of that sub-regulatory guidance, or that it should have known about the guidance before it submitted a claim, Salcido said.
Under the Brand memo, it appears that affected entities—largely health care companies—are no longer responsible for understanding agency pronouncements and policy statements that haven’t been subjected to notice-and-comment rulemaking, Salcido said.
“And that could have dramatic consequences,” he said.
Now, instead of being held accountable for all of the sub-regulatory guidance out there, a company may choose to come up with its own reasonable interpretation of what the statute or regulation means, Salcido said.
“If that’s the existing paradigm we live under, then that’s going to dramatically transform the way the False Claims Act is applied going forward,” he said.
This policy is saying that if a governmental agency wants to define the obligations and duties of the affected public, then it needs to do so through binding rules, which require a notice-and-comment rulemaking process, Salcido said.
If an agency doesn’t want to define public obligations and duties, then it shouldn’t try to apply unpublished rules and regulations, Salcido said.
The “subtext” of the Brand memo is that agency guidance documents are exempt from the Administrative Procedure Act, said Paul Noe, vice president for public policy at the American Forest & Paper Association. Noe served as counselor to the OIRA administrator during the George W. Bush administration.
“They’re designed to be helpful, and the agency can give some clarity to the public about its tentative policy position, but neither of those can create independent, legally binding requirements on the public, because that would violate due process,” Noe said.
In 2007, OMB issued a bulletin to agencies on good guidance practices, which was “modest” in asking for pre-adoption notice and comment for only the most consequential guidance, the kind that could have a potentially significant economic impact, Noe said.
Some agencies, such as the Food and Drug Administration, regularly take public comment on the vast majority of its guidance, Noe said.
“And it’s working perfectly fine,” he said.
The Senate Homeland Security and Governmental Affairs Committee on Feb. 14 adopted by voice vote a bill (S. 2296) called the Guidance Out of Darkness (GOOD) Act to require each agency to post all of its guidance documents on one public site.
The bill would only improve agency guidance practices, Noe said. Indeed, OMB’s 2007 bulletin calls for public access to significant guidance, but the agencies’ track record in complying with those basic, good-government provisions is poor, he said.
“Who would be against public access to all the guidance that’s relevant to them on any particular issue?” Noe said.
At the same time, there’s no doubt that there’s a lot of guidance out there that could be clarified, streamlined, and improved, Noe said.
“We certainly support making guidance documents more transparent and agree [the bill] should receive bipartisan support,” said Amit Narang, regulatory policy advocate at Public Citizen.
Yet, the organization is concerned about ulterior motives in the legislation. If the goal of the bill is to use transparency to then attack and eliminate guidance using the Congressional Review Act, for example, then the bill will face strong opposition, Narang said.
“Likewise, if this transparency then leads to non-enforcement under the Brand memo, that is equally troubling,” Narang said. “Using transparency to undo guidance in a backdoor way should not, and will not, receive bipartisan support.”
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