See(2)(A) You Later: Supreme Court Holds that DOJ Has Broad Dismissal Authority Even After Unsealing

On June 16, 2023, the U.S. Supreme Court, in United States ex rel. Polansky v. Executive Health Resources Inc., held that the Government may seek dismissal of a False Claims Act (“FCA”) qui tam suit over a relator’s objection so long as it intervenes in the litigation, either during the initial seal period or afterward.  The Court also held that, when handling such a motion, district courts should apply Federal Rule of Civil Procedure (“FRCP”) 41(a), the rule generally governing voluntary dismissal of suits.  And in a dissent that—in the long run—may end up being more impactful than the Court’s holding, Justice Thomas (joined in a concurring opinion by Justices Kavanaugh and Barrett) questioned the constitutionality of the qui tam provisions themselves.  

Background

In 2012, relator Jesse Polansky filed a qui tam action alleging that his employer, Executive Health Resources, enabled its hospital clients to over-admit patients by certifying inpatient services that should have been provided on an outpatient basis and then billed those services to Medicare.  The Government declined to intervene during the seal period, but Polansky proceeded with the suit on his own.  Then, in 2019, years after its declination and well into discovery, the Government decided that the burdens of the suit outweighed its potential value, so the Government moved to dismiss the action under its dismissal authority pursuant to 31 U.S.C. § 3730(c)(2)(A) (“§ 3730(c)(2)(A)”).  The district court granted the motion, noting 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.”  422 F. Supp. 3d 916, 927 (E.D. Pa. 2019).

The U.S. Court of Appeals for the Third Circuit affirmed, finding that the Government had effectively intervened in the suit when it filed its motion to dismiss, and the Government had satisfied the burden articulated in FRCP 41(a) in making its motion.  The Supreme Court then granted certiorari to resolve two circuit splits: (1) Whether the Government has the authority to dismiss a qui tam action under § 3730(c)(2)(A) if it declined to intervene in the suit during the seal period; and (2) What standard should apply to a § 3730(c)(2)(A) motion to dismiss.

Government’s Dismissal Authority

The Court first assessed whether the Government has the authority to dismiss a qui tam action under § 3730(c)(2)(A) if it declined to intervene during the seal period.  Analyzing the plain language of the statute, the Court affirmed the Third Circuit’s conclusion that the Government’s dismissal power endures after the initial seal period, so long as it has intervened in the litigation.

When a qui tam action is filed, the Government has sixty days (which may be extended) before the seal is lifted to elect whether to intervene and proceed with the action.  Even after the end of the seal period, though, the Government may intervene, so long as it shows good cause to do so.  But whether, and at what point, the Government must intervene in the suit before it can file for a § 3730(c)(2)(A) dismissal has been a subject of debate.  Under the Third Circuit’s approach in Polansky, the Government retains its rights to control and dismiss a qui tam action even if it fails to intervene during the seal period, so long as it intervenes at some point.

The Court began by noting that none of the parties agreed with the Third Circuit’s ruling: on one side, the Government contended that a § 3730(c)(2)(A) motion is always permissible, even if the Government has never intervened; on the other side, relator Polansky argued that the Government may move to dismiss under § 3730(c)(2)(A) only if it intervened during the initial seal period; after that, the Government’s dismissal power was extinguished, irrespective of a later intervention.  The Court sided instead with the Third Circuit, finding its middle ground approach to be the most reasonable and consistent with the plain text of the statute.

The Court explained that, because of the unique nature of a qui tam action, the Government is always considered an interested party, even where it declines to intervene.  However, the language of § 3730(c)(2)(A) and surrounding provisions presuppose that the Government has intervened where moving to dismiss a qui tam suit.  For example, § 3730(c)(1) immediately preceding § 3730(c)(2)(A) begins with the language “[i]f the Government proceeds with the action,” implying that the government has intervened, while § 3730(c)(3) applies where the Government elects “not to proceed with the action.”  And §§ 3730(c)(2)(C) and (c)(2)(D), each within paragraph (c)(2), both reference the Government’s “prosecution of the case” or the restriction of the relator’s role.  The Court reasoned that these surrounding clauses or paragraphs become devoid of meaning if the presumption that the Government has intervened is stripped away, which would violate rules of statutory interpretation.  The Court therefore concluded that a motion to dismiss under § 3730(c)(2)(A) is appropriate only where the Government has intervened in the suit.

The Court also rejected Polansky’s position that intervention can come only during the seal period.  According to the language of the statute, the Government may intervene during the seal period or at “a later date upon a showing of good cause.”  Id. § 3730(c)(3).  Once the Government intervenes, the Court held, § 3730(c)(2)(A) provides it the authority to move to dismiss.  The Court explained that the Government’s role in qui tam actions, consistent with the statute’s Government-centered purpose, is “seal-agnostic,” because the Government’s interest in the suit remains the same regardless of when it intervenes.  This is also consistent with Congressional intent, the Court noted, which is to allow the Government to reassess qui tam actions and change its mind if and when new information comes to light. 

Here, the Third Circuit found that the Government had effectively intervened in the suit when it moved to dismiss the action under § 3730(c)(2)(A).  Having intervened, the Government maintained its dismissal authority, and its motion was proper.

Applicable Standard to Assess Dismissal

The Court then turned to the standard to be applied by district courts when the Government moves to dismiss a qui tam action once it has intervened.  Explaining that the application of the Federal Rules of Civil Procedure to federal civil litigations is standard, the Court affirmed the Third Circuit’s application of FRCP 41(a) to § 3730(c)(2)(A) motions to dismiss.

Under FRCP 41(a), which the Third Circuit had applied, the standard varies with the case’s procedural posture.  If the defendant has not yet served an answer or summary-judgment motion, the plaintiff need only file a notice of dismissal.  But once that threshold has been crossed, dismissal requires a court order on “proper” terms.

The Court noted that both parties (again) disagreed with the Third Circuit’s approach in Polansky.  The Government argued that its dismissal authority is essentially unfettered; whereas the relator proposed a complicated form of arbitrary-and-capricious review, with a burden-shifting component.  The Court found the Third Circuit’s middle ground “Goldilocks position” applying FRCP 41 to be the legally correct one, noting that the Federal Rules are the default rules in civil litigation and nothing warrants a departure from them in qui tam actions.  Procedurally, however, the application of FRCP 41 in the FCA context requires notice and an opportunity for a hearing before dismissal pursuant to the statute’s stated requirement.  Moreover, FRCP 41’s “proper terms” standard analysis will involve considerations of the relator’s interests, including the potentially substantial resources they may have committed by the time the government seeks dismissal.

Nevertheless, the Court agreed with the Third Circuit that § 3730(c)(2)(A) motions will generally satisfy FRCP 41 “in all but the most exceptional cases” because the Government’s views are entitled to “substantial deference.”  Qui tam actions are brought on behalf of the Government, in the name of the Government, and alleging injury to the Government alone; thus, “[i]f 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.”  In short, “in most FCA cases, as the Court of Appeals suggested, [FRCP 41’s] standards will be readily satisfied.”

Dissent and Concurrence

In recent years, Justice Thomas has authored the majority opinion in several of the FCA cases that have come before the Court.  But in Polansky, he was the sole dissenter, opining that the FCA’s “text and structure” do not provide the Government the power to dismiss a qui tam action after declining to intervene during the seal period, and stating that he would have instead vacated the judgment below and remanded for further consideration.  That seemingly relator-friendly view did not, however, continue through the remainder of his dissent, in which Justice Thomas took up constitutional questions that may generate vigorous debate and future litigation over the FCA’s qui tam provisions.  Indeed, Justice Thomas questioned the constitutionality of a relator’s right to bring a case in which the relator stands in the shoes of the Government.  He noted first that the FCA’s qui tam provisions inhabit a “constitutional twilight zone,” as Article II provides that only the President and those acting below him can exercise executive power, and, as a relator is not appointed by Congress as an officer of the United States, a relator cannot “wield executive authority” to be able to represent the interests of the United States.  

Justice Thomas anticipated the responsive argument from the relators’ bar—that historical practice and precedent settled long ago that a relator may bring a suit under the FCA on the Government’s behalf—and cautioned that history alone cannot justify “contemporary violations of constitutional guarantees.”  Justice Thomas also noted, however, that merely determining that a relator likely does not have standing under Article II does not necessarily end the analysis of standing in a qui tam suit because, under Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 801 (2000), a relator is entitled to a “partial assignment” of the Government’s “damages claim” in a qui tam action, and therefore “it is not immediately clear that the Government may dismiss the relator’s interest in a qui tam suit. . . .” (emphasis in original).  To address that tension, Justice Thomas identified what he called a question that Stevens left unaddressed: “What is the source of Congress’ power to effect partial assignments of the United States’ damages claims?”  He posits that the authority may be under the Necessary and Proper or Property Clauses of the Constitution, but he acknowledges that those are “complex” questions that he would have left to the parties and court below on remand.  

Justice Kavanaugh—joined by Justice Barrett—issued a concurrence in which he joined the Court’s majority opinion but noted that he agreed with Justice Thomas’ point in dissent that there are “substantial arguments that the qui tam device is inconsistent with Article II and that private relators may not represent the interests of the United States in litigation.”  In a statement that will surely invite future constitutional challenges to the qui tam provisions, Justice Kavanaugh expressed his view that “the Court should consider the competing arguments on the Article II issue in an appropriate case.”   

Conclusion

The Polansky decision confirms what the majority of the Courts of Appeals have concluded (albeit along different paths):  the Government has wide latitude to dismiss under § 3730(c)(2)(A).  While the Supreme Court did not go so far as to adopt an “unfettered discretion” standard, the application of FCRP 41(a) to § 3730(c)(2)(A) motions will provide the Government broad authority to dismiss qui tam actions over a relator’s objection.  

As a practical matter, the Court’s holding is not likely to have an overly significant impact on FCA litigation because the Government moves to dismiss qui tam actions in only a small percentage of cases, a practice that reflects the Government’s hesitation to disincentivize the filing of meritorious qui tam actions.  In addition, Polansky may ultimately be cited in the years ahead just as much with respect to its signal that at least three Justices are open to entertaining challenges to the constitutionality of the FCA’s qui tam provisions.