DOJ tells SCOTUS it plans to seek to dismiss a major qui tam action because burdensome FCA discovery would not be in the public interest

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Litigation Alert

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The Department of Justice (DOJ) has just sent a strong signal that it intends to follow through on a promise set out in the Granston Memo: to seek the dismissal of qui tam actions under the False Claims Act (FCA) with increasing frequency. On November 30, 2018, in Gilead Sciences, Inc. v. United States ex rel. Campie, a closely watched FCA case, the DOJ informed the Supreme Court that, on remand, it would move to dismiss the case on the ground that "continued prosecution of the suit is not in the public interest." Amicus Br. of United States at 15, Gilead Scis., Inc., No. 17-936.

The DOJ's filing is a significant development for FCA defendants and may portend more dismissals to come.

DOJ's authority to dismiss qui tam actions and the Granston Memo. The FCA vests the Attorney General with discretionary authority to dismiss a qui tam action over a relator's objection. 31 U.S.C. § 3730(c)(2)(A). Until recently, the DOJ has seldom exercised this authority. But on January 10, 2018, Michael Granston – Director of the DOJ's Commercial Litigation Branch, Fraud Section – issued an internal agency memorandum (the Granston Memo) clarifying the seven circumstances under which prosecutors should consider dismissing FCA claims under Section 3730(c)(2)(A):

  1. Curbing meritless qui tam actions – ie, "where a qui tam complaint is facially lacking merit."
  2. Preventing parasitic or opportunistic qui tam actions – ie, where a qui tam action "duplicates a pre-existing government investigation and adds no useful information to the investigation."
  3. Preventing interference with agency policies and programs – ie, "where an agency has determined that a qui tam action threatens to interfere with an agency's policies or the administration of its programs."
  4. Controlling litigation brought on behalf of the United States – ie, where dismissal is "necessary to protect" the DOJ's "litigation prerogatives."
  5. Safeguarding classified information and national security interests – ie, where an FCA action, "particularly those involving intelligence agencies or military procurement contracts," could require disclosure of classified information
  6. Preserving government resources – ie, where "the government's expected costs are likely to exceed any expected gain."
  7. Addressing egregious procedural errors – ie, where there are "problems with the relator's action that frustrate the government's efforts to conduct a proper investigation."

See Granston Memo at 2-8 (available here). At the time it was issued, the Granston Memo – which further describes Section 3730(c)(2)(A) as "an important tool to advance the government's interests, preserve limited resources, and avoid adverse precedent" – appeared to mark a significant shift in DOJ policy regarding the exercise of its authority to dismiss qui tam actions after declining to intervene.

The DOJ's intention to seek dismissal of the FCA action against Gilead Sciences. The government's recently filed amicus brief in Gilead Sciences, Inc. v. United States ex rel. Campie, lays to rest any uncertainty as to whether the DOJ is willing to aggressively exercise its authority to dismiss FCA actions under Section 3730(c)(2)(A).

Back in April 2018, the Supreme Court asked for the government's views on the Ninth Circuit's post-Escobar decision in Gilead Sciences. As the FCA defense bar knows well, in Escobar, the Supreme Court admonished that the FCA's "materiality standard is demanding" and that evidence the government has paid an allegedly false claim in full despite knowing that regulatory requirements were violated constitutes "strong evidence that those requirements are not material." Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 189, 2002-03 (2016). Despite this direction, the Ninth Circuit in Gilead Sciences reinstated the relator's previously dismissed qui tam action, which premised liability on alleged violations of various FDA regulations, on the ground that materiality had been adequately pleaded. See Campie v. Gilead Scis., Inc., 862 F.3d 890 (9th Cir. 2017). Even though the government had approved and paid for the products at issue in Gilead Sciences after learning of the alleged regulatory violations, the Ninth Circuit explained that it was unclear from the face of the complaint when the government had "actual knowledge" that those violations had in fact occurred. Id.

Last week, more than seven months after the Supreme Court's call for the government's views on the case, the DOJ urged the Supreme Court to deny certiorari in the case. See Amicus Br. of United States at 7, Gilead Scis., Inc., No. 17-936.

Although the government's position that the Ninth Circuit properly analyzed the FCA's materiality requirement is a significant development in its own right, it pales in comparison to the DOJ's major announcement that followed:

[I]f this case is remanded to the district court, the government will move to dismiss respondents' suit under Section 3730(c)(2)(A).

Id. at 15 (emphasis added). As the government explained, it had investigated the underlying allegations and determined that allowing the case to proceed past the pleading stage would lead to "burdensome discovery" requests that "would distract from the [FDA's] public-health responsibilities." As a result, the government took the position that dismissal was warranted, since time-consuming FCA discovery "would impinge on agency decisionmaking and discretion and would disserve the interests of the United States." Id. at 16.

KEY TAKEAWAYS

The DOJ's position in Gilead Sciences sends a strong signal that now, by the principles set out in the Granston Memo, the DOJ is increasingly willing to exercise its statutory authority to dismiss qui tam actions after declining to intervene. Although the DOJ did not expressly mention the Granston Memo in last week's filing, its position is consistent with the Memo's instruction that dismissal of a qui tam action may be warranted "where an agency has determined that a qui tam action threatens to interfere with an agency's policies or the administration of its programs" or where "the government's expected costs are likely to exceed any expected gain." Granston Memo at 4-6.

This is a welcome development for FCA defendants. As the Chamber of Commerce has observed, FCA litigation – which "touch[es] on nearly every sector of the economy, including defense, education, banking, technology, and healthcare" – "is time-consuming and costly." Amicus Br. of Chamber of Commerce 16, Cochise Consultancy Inc., No. 18-315. It is significant that the government, too, recognizes the significant burdens that FCA discovery can impose.

FCA defendants should consider their discovery strategy in light of this and may use it to urge the government to exercise its authority to dismiss FCA actions – even where those actions survive a motion to dismiss for failure to state a claim – on the ground that such actions impose significant discovery burdens on the government, with only minimal corresponding benefits.

Find out more about the implications of this development by contacting any of the authors.