District of Minnesota Decision Sides With Swift’s Interpretation of DOJ’s “Unfettered Right” To Dismiss A Declined Qui Tam Action

Since last year’s Granston Memo (discussed recently here and here), DOJ has actively sought dismissal of FCA cases that it believes do not serve the interests of the federal government.  DOJ’s power to do so derives from Section 3730(c)(2)(A) of the FCA, which provides that the Government “may dismiss” a relator’s action if the realtor “has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.”  In United States ex rel. Davis v. Hennepin County, the court considered two questions about the scope of that statutory power:  (1) whether the government must first intervene in a case before moving to dismiss the action, and (2) whether the government must show a valid purpose and a rational relationship between dismissal and the accomplishment of its stated purpose.  The district court answered “no” to both questions and dismissed the relator’s suit.  In so doing, the court signaled its view that the Eighth Circuit would side with the D.C. Circuit in the split over the standard that applies when the government seeks dismissal under Section 3730(c)(2)(A) (the circuit split is discussed here and here).

The relator in Davis alleged that the defendants conspired to cover up the “true causes of the Minnesota Interstate 35 West bridge collapse so that Hennepin County could make false claims” and obtain federal funding for reconstructing the bridge.  The government declined to intervene and also filed a motion to dismiss the case.  According to the government, dismissal was warranted because the “factual sequence of events” that the relators alleged was unlikely, and the case could lead to “burden and expense” for the federal government with little chance of recovery.

The relator opposed the government’s motion on two grounds.  First, the relator argued that the government waived its right to dismiss the case when it declined to intervene.  Second, it argued that the government failed to show a valid purpose for dismissal or a rational relationship between dismissal and accomplishment of that purpose.

The court had little difficulty with the first issue.   It rejected the relator’s argument based on the plain language of the statute, which does not expressly require intervention before dismissal.  The court also observed that the Ninth, Tenth, and D.C. Circuits have all reached similar conclusions in other circumstances.

The court devoted more attention to the second issue.  It noted the split between the Ninth Circuit and the D.C. Circuit on the question of what (if any) standard applies when the government seeks dismissal of a relator’s suit under Section 3730(c)(2)(A).  According to the Ninth Circuit in Sequoia Orange, the government must show a valid purpose for dismissal and a rational relationship between dismissal and that purpose.  In contrast, the D.C. Circuit held in Swift that the government has an “unfettered right to dismiss” an FCA case, and no standard of review applies. The Eighth Circuit (which includes the District of Minnesota) is still undecided.

After reviewing both Sequoia Orange and Swift, the district court agreed with the D.C. Circuit.  It explained that the plain language of the statute requires only that the government provide notice to the relator and that the court provide a hearing.  Beyond those procedures, there is nothing more the statute requires for the government to obtain dismissal of a relator’s suit.

The district court added that the constitutional considerations articulated in Swift counseled in favor of its interpretation.  In its view, if courts imposed any “additional constraints on dismissal, they would effectively be policing the Government’s right to dismiss interfering with prosecutorial discretion in violation of an important separation-of-powers principle.”  The court also noted that although the Eighth Circuit has not squarely addressed the question, its FCA jurisprudence has emphasized the government’s control over FCA litigation, including the government’s power to dismiss and settle cases.  In the district court’s view, dicta suggests that the Eighth Circuit would side with the D.C. Circuit in Swift.

The district court did not end its analysis there.  Like Swift itself, the court went on to explain why the Government was entitled to dismissal under the Sequoia Orange test.  It found that the Government’s cost-benefit analysis constituted a valid purpose and showed a rational relationship between dismissal of relator’s suit and that purpose.  Because the relator had no evidence that dismissal would be “fraudulent, arbitrary and capricious, or illegal,” dismissal was warranted even under Sequoia Orange.

As a final point, the court denied the relator’s request for an evidentiary hearing.  Returning to the text of the statute, the court explained that Section 3730(c)(2)(A) provides for a hearing on the government’s motion to dismiss but says nothing about an “evidentiary” hearing.  Finding no statutory authority for such a hearing, it denied the relator request.

The Government’s win in Davis may help pave the way for more Granston dismissals in circuits that have yet to decide between the Sequoia Orange and the Swift standard of review. Although the district court ultimately held that the government was entitled to dismissal under either standard, the reasoning in the decision shows strong support for Swift over Sequoia Orange.  If the district court is right, the Eighth Circuit may well side with the D.C. Circuit when it has an opportunity to decide the issue.  In all events, Davis adds one more decision to the Swift side of the split and provides additional authority for the government as it urges courts in undecided circuits to adopt the “unfettered right” standard of review.