DOJ Says Its Authority to Dismiss Qui Tam Suits Is Expansive Notwithstanding Circuit Split

In its May 4, 2020 Opposition to the Petition for Writ of Certiorari in United States ex rel. Schneider v. JPMorgan Chase NA, the Department of Justice (“DOJ”) advocated a reading of the FCA that preserves the Executive Branch’s unfettered discretion to dismiss a qui tam, absent “extraordinary circumstances.”  DOJ’s power to dismiss derives from FCA Section 3730(c)(2)(A), which provides that the Government “may dismiss” a relator’s action if the relator “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.”  Since the revealing of the Granston Memo, which we have addressed here and here, DOJ has more frequently sought to use this statutory power.  In hopes of doing so in an unrestricted manner, DOJ presented the Supreme Court with the following question in its Opposition: “Whether the United States’ decision to dismiss a relator’s FCA claim under Section 3730(c)(2) is subject to judicial review where the relator does not allege that the government’s dismissal decision was a fraud on the court.”

In March 2012, the United States, forty-nine states, and the District of Columbia filed a complaint that alleged misconduct in home mortgage practices by several mortgage servicers.  The district court entered a consent judgment after the parties settled.  The settlement agreement obliged the servicers to comply with certain “business-practice requirements.”  Further, the consent judgment mandated penalties where monitoring the servicers revealed noncompliance with the settlement agreement.  To avoid paying these penalties, the relator in Schneider alleged, the defendant had falsely claimed compliance with the settlement agreement.  The district court granted the defendant’s motion to dismiss the relator’s claims; the Circuit Court of Appeals for the District of Columbia affirmed; and on remand, the DOJ moved to dismiss.  In the motion to dismiss, DOJ argued that the relator’s claims lacked “substantial merit,” and that “litigation of them would require further unnecessary expenditures of scarce Government resources.”  Finding that the Government had an unfettered right to dismiss, the district court granted DOJ’s motion.  The Court of Appeals affirmed, and the relator petitioned for certiorari to the Supreme Court.

Urging the Court to deny the writ, the DOJ emphasized that all FCA cases are “brought in the name of the United States, and the Act does not limit the government’s traditional prerogative to decline to prosecute or pursue a claim alleging legal wrongs done to the government itself.”  The DOJ acknowledged that the Ninth and Tenth Circuits have instructed district courts to conduct a review before granting a Government motion to dismiss, but asserted that “slight differences between the standards applied by the various courts of appeals should very rarely if ever be outcome-determinative.”  As such, DOJ argued, the circuit split on the issue did not warrant Supreme Court review, contrary to Relator’s contention.

DOJ argued, in addition, that the statutory text of the FCA supports an extremely deferential standard.  Congress specified, after all, that it is “the Government”—meaning the Executive Branch, not the Judicial— that may dismiss, which suggests an absence of judicial constraint.  The defendant’s Petition countered by noting that the text mandates a hearing before dismissal, but DOJ’s Opposition responded that neither notice of nor a hearing on the Government’s dismissal “impose[s] any substantive limitations on the government’s dismissal authority.”

A copy of the DOJ’s Opposition can be found here.

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