The Supreme Court Rolls Out Another FCA Decision…
On June 16, 2023, the Supreme Court ruled on United States ex rel. Polansky v. Executive Health Resources, Inc. et al., 599 U.S. ____ (2023).
The Court questioned whether the Government has the ability to dismiss a False Claims Act (“FCA”) suit over a relator’s objection if the Government initially declined to intervene in the case. The Court also questioned what standard applies if the Government is able to request a dismissal.
The crux of the Court’s analysis relies on the language in 31 U.S.C. § 3730.
The Court held that “the Government may seek dismissal of an FCA action over a relator’s objection so long as it intervened sometime in the litigation, whether at the outset or afterward.”¹ The Court further ruled that the appropriate standard for handing the dismissal is Federal Rule of Civil Procedure (“FRCP”) 41(a), generally used for voluntary dismissal of suits.² Under FRCP 41(a), a case can be dismissed (1) without a court order if the opposing party has yet to serve an answer or a motion for summary judgment, or if all parties agree to the dismissal; or (2) on plaintiff’s request and by court order “on terms that the court considers proper.”
In Polansky, a doctor who worked for Executive Health Resources (“EHR”) filed a qui tam action against EHR stating EHR was charging the government more money than it was actually expending (i.e., charging inpatient rates for outpatient services).³ The Government initially declined to intervene in the case, but later determined that a motion to dismiss would be appropriate as “the varied burdens of the suit outweighed its potential value.”⁴ The Government then filed a motion to dismiss, which the District Court granted. Because the Government never filed a “motion to intervene,” the relator argued that the Government is not able to move to dismiss the case.
The Court of Appeals for the Third Circuit affirmed the lower court’s decision holding that the Government has the power to request a motion to dismiss so long as it intervened at some point.⁵ The Third Circuit also found that the lower court reasonably determined the Government’s motion to dismiss implicitly included a motion to intervene. The Third Circuit found the proper standard to apply in this situation (ruling on the motion to dismiss) is FRCP 41(a).
Given a thorough reading of 31 U.S.C. § 3730, the Court found that, “nothing about the statute’s objectives suggests that the Government should have to take a back seat to its co-party relator [and] [t]he suit remains, as it was in the seal period, one to vindicate the Government’s interests.”⁶
Let’s break it down.
According to §3730(c)(3), the Government can “intervene at a later date upon a showing of good cause.” Once the Government intervenes, it becomes a party.⁷ It follows that once the Government is a “party,” it is “proceeding with the action” and assumes “primary responsibility” for the case.⁸ The Court determined that, taken together, the subparagraphs of § 3730, collectively mean that so long as the Government intervenes at some point in the case (as the Government did here implicitly in its motion to dismiss) it becomes a party, proceeds with the action, and can move to dismiss the case.⁹
The Court further affirmed the Third Circuit’s ruling that Federal Rule of Civil Procedure 41(a) is the correct standard for analyzing a motion to dismiss in the FCA context over a relator’s objection.¹⁰ This means that the relator wishes to continue prosecuting the case on the Government’s behalf, but the Government thinks the case should be dismissed. Because the Government (who is now assuming primarily responsibility for the case by filing a motion to dismiss) wishes to dismiss the case, a court will review the dismissal request as a “voluntary dismissal” under FRCP 41(a).
Overall, the Government can request a dismissal of a qui tam action so long as it has intervened in the case at some point. The court will then decide the motion to dismiss according to FRCP 41(a).
You may be asking why this matters. This ruling essentially safeguards the Government’s interests and, at the same time, gives the Government immense power over whistleblowers. Even if the Government initially chose to not intervene, the Government can now jump in at a later date and “kill” the case with a motion to dismiss if the Government thinks the case may make bad law (or law that the Government simply does not agree with).
On the other hand, this ruling can also give defense attorneys a tool to keep in their back pocket – encouraging the Government to jump in and dismiss the case for reasons set forth in the January 10, 2018 Granston memorandum.¹¹
Ward & Berry continues to track FCA issues. If you have any questions about potential FCA-related issues, please contact Ward & Berry.