In January 2018, the Department of Justice (DOJ) issued a new policy about False Claims Act (FCA) dismissals. The policy instructs federal prosecutors to consider whether declined qui tam actions should be dismissed to better advance the government’s interest, under Section 3730(c)(2)(A) of the FCA. The policy specifically references the (1) use of government resources in monitoring, and (2) adverse decisions that result from non-intervened cases as considerations in determining whether the government should dismiss a FCA case.
The policy lists the following list of non-exhaustive factors that the DOJ can use as a basis for dismissal and provides case law supporting each factor.
- Curbing meritless Qui Tams where the legal theory is inherently defective or the relator’s factual allegations are frivolous;
- Preventing parasitic or opportunistic Qui Tam Actions where the relator would receive an unwarranted windfall at the expense of the public fisc when the relator provided duplicative information already known to the government;
- Preventing interference with agency policies and programs;
- Controlling litigation brought on behalf of the United States;
- Safeguarding classified information and national security interests;
- Preserving government resources when the government’s expected costs are likely to exceed any expected gain; and
- Addressing egregious procedural errors based on problems with the relator’s action that frustrate the government’s efforts to conduct a proper investigation.
The False Claims Act (31 USC 3729-3733) imposes liability on persons and companies who defraud the government. It is the federal government’s primary tool in combating fraud against the government. There are also similar provisions under most states’ laws. It is a powerful tool in the government’s arsenal based upon its steep penalties and long statute of limitations. A defendant is liable for treble damages and penalties of several thousand dollars per false claim. The statute of limitations can be as long as ten years. Persons filing under the FCA receive a portion of any recovered damages and the defendant also pays the whistleblower’s attorney’s fees.
Because recent changes in the law make it easier to file FCA actions, there has been a significant increase in these cases. The DOJ obtained more than $3.7 billion in settlements and judgments from FCA cases in fiscal year 2017. Of the $3.7 billion in settlements and judgments, $2.4 billion involved the health care industry. In addition to health care fraud, there are many FCA actions in various areas such as defense and national security, food safety and inspection, federally insured loans and mortgages, highway funds, small business contracts, agricultural subsidies, disaster assistance, and import tariffs.
It will be interesting to see if DOJ prosecutors exercise their authority under section 3730(c)(2)(A) and move to dismiss non-intervened FCA actions. Defense attorneys will certainly cite the policy in moving for dismissal of these FCA cases.