Leaked DOJ Memo Suggests More Dismissals of Qui Tam False Claims Act Cases

A recent memorandum written by Michael Granston, the Director of the Department of Justice’s (DOJ) Civil Fraud Section (the “Granston Memo” or “Memo”) indicates that the DOJ will act more aggressively in dismissing False Claims Act (FCA) qui tam actions which the DOJ views as lacking merit and in which the DOJ declines to intervene. The Granston Memo was intended to be a confidential internal DOJ document and was directed to DOJ attorneys and AUSAs handling FCA cases to provide guidance on factors to be considered in deciding whether to seek dismissal of such an action but has subsequently been posted publicly by other sources. The Memo amplifies comments Granston made at a conference in October of last year stating that the DOJ will seek to have qui tam actions dismissed once it declines to intervene in the cases.

The FCA allows qui tam relators to bring civil claims alleging fraudulent conduct relating to federal healthcare reimbursement (and federal government contractual arrangements in general). When filing such a claim, the relator must serve the DOJ, which has a period of time to evaluate the merit of the claims and to decide whether to intervene (and essentially take over the case). If the DOJ declines to intervene in the case - which is usually viewed as a sign that the DOJ does not believe the case to be particularly strong or meritorious - the FCA, at 31 U.S.C. 3730(c)(2)(a), allows the DOJ to file a motion to dismiss the action "notwithstanding the objections of the person initiating the action,” i.e. the relator. Historically, though, if the DOJ declined to intervene, it often did not exercise its authority to move for dismissal; rather, the case continued forward while the DOJ continued to monitor it and participate as required.

Concerned about the resources expended by the government after declination in continuing to monitor actions and occasionally producing discovery (and the possibility that a case could generate precedent adverse to the government), the Granston Memo is now directing federal government attorneys, at the time of deciding whether to decline to intervene in a qui tam action, to weigh whether dismissal of the case would “advance the government's interests.” The Memo also states that the government attorney seeking declination or dismissal should consider advising the relator’s counsel of the deficiencies that the government sees in the case so that the relator may also elect to dismiss their case.

The Memo sets out a list of factors that may serve as the basis for dismissal:

• Curbing meritless qui tam actions;
• Preventing qui tams that are duplicative of existing government investigations;
• Preventing interference with federal governmental agency policies and programs;
• Controlling litigation brought on behalf of the government and protecting the DOJ’s litigation prerogatives;
• Preserving government resources and avoiding situations in which the government's expected costs will exceed the expected gain; and
• Addressing egregious relator procedural errors that interfere with the government's efforts to conduct an investigation.

Take Away: The Granston Memo suggests that the DOJ will work to aggressively dismiss qui tam claims that it views to lack merit. This may lead to a decrease in the number of FCA cases pursued by relators as weaker cases will be less likely to continue forward following the government's declination to intervene. Civil enforcement actions brought by the government will likely continue apace, however, especially in the post-acute care segment of the market. Lastly, the factors for dismissal laid out in the Granston Memo will also provide guidance for defense counsel in qui tam actions seeking to persuade the DOJ to dismiss claims.