Article Summary

In U.S. ex rel. Polansky v. Executive Health Resources Inc., a False Claims Act whistleblower seeks to strip U.S. prosecutors of the power to dismiss an FCA action if they initially decided against assuming control of the case. Based on oral arguments before the U.S. Supreme Court, the government seems likely to retain its broad dismissal prerogative — but it may need to formally intervene before exercising the power.

This expert analysis by TELG managing principal R. Scott Oswald was published by Law360 on December 7, 2022.

Reprinted from:

Justices Seem Unlikely to Shake Up FCA Dismissal Rules

By R. Scott Oswald

Most disputes under the False Claims Act (FCA) arise between opposing parties — so yesterday’s arguments before the U.S. Supreme Court in U.S. ex rel. Polansky v. Executive Health Resources, Inc. were notable for pitting government prosecutors against a whistleblower who wants to recover $1 billion or more for the government.

More unusual still: Both parties on the government’s side of the “v” pushed uncompromising legal positions that were diametrically opposed to each other, with the defendant left to root for U.S. prosecutors who say they’ll stop pursuing its alleged fraud.

Based on oral arguments, the justices seem likely to split the difference on the legal question — an outcome that would end the current case and avoid any major upheaval in the high-stakes FCA landscape.

The Legal Framework

The FCA, originally signed into law by President Abraham Lincoln in 1863, makes it illegal to defraud the federal government. The law includes a “qui tam” provision that allows whistleblowers to file a complaint on behalf of the government and — if they prevail — to receive a portion of any resulting settlement or judgment.

Originally such whistleblowers, known as relators, could pursue a qui tam case without any prospect of government involvement. Starting in 1943, however, an amendment allowed the government to intervene at the start of an FCA case. In 1986 a further amendment allowed the government to intervene for “good cause” in later stages, too, even if it had originally declined to get involved.

At issue in Polansky: After an initial declination, can the government later jump in solely to dismiss a case that the relator may have spent years pursuing — and if it can, under what conditions?

The parties staked out extreme positions on the scope of the government’s statutory dismissal power, which is laid out in the FCA at 31 U.S.C. § 3730(c)(2)(A) and can be exercised over a relator’s objections.

Arguing for the Justice Department, Frederick Liu, assistant to the solicitor general, said the U.S. can opt to dismiss an FCA relator’s case under (c)(2)(A) at any time for almost any reason, without needing first to intervene, subject only to guardrails provided by the U.S. Constitution.

Arguing for the relator, Daniel L. Geyser of Haynes and Boone said the government has just a single shot to dismiss a case, at the time of its initial decision to intervene — and that if the U.S. opts to intervene later, it has forfeited not only its (c)(2)(A) dismissal power but also its right to control the litigation.

Many FCA practitioners and appellate courts shy away from both absolutes, as did the U.S. Court of Appeals for the Third Circuit in this case: It held that the government must intervene in order to act after a declination, showing good cause, but that it then retains its right to (c)(2)(A) dismissal.

Based on their questioning today, the justices will likely end up in broadly similar territory.

Constitutional Considerations

Mr. Geyser went first, arguing on behalf of a doctor who claimed that Executive Health Resources (EHR), his former employer, had enabled hospitals to overcharge Medicare by hundreds of millions of dollars. About five years after prosecutors originally declined to intervene, the government changed its mind as Polansky neared summary judgment, claiming that the case had become onerous and seeking dismissal after the relator’s lawyers had already invested about $20 million in fees and costs.

Such a late hit, said Mr. Geyser, was not only unfair but disallowed by the text of the FCA.

Justice Clarence Thomas asked the first question, setting a tone by pursuing a theory offered by EHR, the defendant, that the FCA’s qui tam provisions would become unconstitutional under a separation-of-powers argument if the executive branch didn’t always retain the right to control, and to dismiss, an action brought in its name.

Several other conservative justices echoed the concern, which Mr. Geyser dismissed as unfounded — as did Mr. Liu after him, in a rare show of agreement — but which got enough traction to make the relator’s primary argument seem untenable.

Liberal justices meanwhile reached the same conclusion based on statutory history, not constitutional analysis: Justice Ketanji Brown Jackson, for instance, cited the 1943 and 1986 amendments to conclude that Congress was “pretty clear” in its wish to allow the government to re-insert itself into qui tam cases “if things had changed.”

And “what’s the purpose of a [late] intervention, then, if they can’t then take over the action?” she asked — drawing prompt agreement from Justice Amy Coney Barrett on the other side of the bench.

Whatever the legal logic, literally no justice seemed ready to deprive the government of its (c)(2)(A) dismissal power after an initial declination. The key issue then became, What procedure is required to exercise that power?

As argued, the question had two main components. First, must the government intervene before moving for dismissal? And second, under what circumstances — if any — can a court deny the government’s dismissal motion?

In Search of a Standard

The FCA says that the United States must show good cause to intervene after it has initially declined a primary role in the case. The text is murkier on whether intervention is required for a late-stage dismissal, which under (c)(2)(A) has no explicit standard for denial but requires notice and a “hearing” where the relator can be heard.

Mr. Geyser, evidently beaten on his primary argument, argued his backup position that the government must first intervene if it wants to kill a lawsuit — and that it must prove “something” before it can prevail on a motion to dismiss, although he conceded that the “something” wasn’t particularly clear.

“As the Seventh Circuit said” in a related case, he said, “courts don’t have hearings just to serve coffee and donuts while the parties gather together.”

Led by Justice Sonia Sotomayor, however, several justices seemed to endorse the idea that just requiring the U.S. to intervene could do the lifting here.

The government can move to intervene for the purpose of a (c)(2)(A) dismissal, she suggested, and the FCA’s text provides a good-cause standard for such a motion — a legal scaffolding similar to that offered in an amicus brief by the relator-friendly Taxpayers Against Fraud Education Fund.

“Isn’t … the question that simple?” she asked. “The government [comes] in and [says] we want to intervene because we think we have to dismiss now?”

A combined motion for intervention and dismissal might work, Mr. Geyser allowed, as long as the government were obliged to explain “why it didn’t intervene earlier.”

Justice Jackson agreed, especially in light of the relator’s interest in a share of any prospective settlement or jury award, which would be extinguished by a dismissal.

“It would seem to me that ‘good cause’ does the work of ensuring that the [relator’s] property interest … is taken into account … and the government can’t just come back in willy-nilly,” she said.

Mr. Liu, meanwhile, countered that the government shouldn’t need to intervene at all, and that the only check on its dismissal is constitutional.

“If the whole point of our motion is to end the case,” he said, “then there simply is no reason to put us through the hurdle of intervening beforehand.”

Justice Brett Kavanaugh, at least, seemed sympathetic to an unchecked right of dismissal. To Mr. Geyser, for instance, he expressed doubt about any requirement for the United States “to prove to a court that it has some basis for dismissing [its] own case. … I think the court’s interfering with the … executive’s ability to control the suit. That’s an Article II concern, it seems to me.”

Even Justice Thomas, however, appeared to believe that a court needs to require some showing to overcome a relator’s potential loss.

“If [the government] can unilaterally dismiss,” he asked Mr. Liu, “how can you square that” with protecting the relator’s property interest? Mr. Liu’s answer, as before, was that the Constitution provides some protection — though he conceded that it’s “not a very rigorous baseline.”

Arguing for EHR, Mark W. Mosier of Covington & Burling took the lectern toward the end of the session to elaborate on his constitutional concerns with Mr. Geyser’s primary argument, which was mostly a dead letter by the time he spoke. He didn’t draw many questions.

On balance, it seemed clear that the justices would allow the government to pursue (c)(2)(A) dismissals even after an initial decision not to intervene — but that they’d also articulate some standard to protect the property interests of relators. Requiring intervention seemed like the simplest path to a unanimous, or near-unanimous opinion.

Regardless of the details, such an outcome is unlikely to disturb the status quo in FCA litigation: The government will remain the power broker when it comes to dismissal of qui tam suits — and its (c)(2)(A) determination is unlikely to fail scrutiny except in the most unusual circumstances.

And what of the relator who, as here, has “spent a ton of money” litigating an FCA case that is belatedly dismissed, asked Justice Samuel Alito.

“It’s just too bad for the relator?” he asked Mr. Liu.

“It is too bad,” replied Mr. Liu. “Every relator brings these suits knowing that’s a possibility.”

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R. Scott Oswald is an FCA litigator and managing principal of The Employment Law Group, P.C.

Disclosure: The author is a member of the Taxpayers Against Fraud Education Fund, which submitted an amicus brief in the Polansky case. He was not involved in the production of the brief.

(Note: This article has been edited slightly from the version published by Law360, and carries a different headline.)