Supreme Court Mulls Scope of DOJ Dismissal Authority

On December 6, 2022, the Supreme Court heard oral argument in United States ex rel. Polansky v. Executive Health Resources, which presents the question of whether the government has the authority to dismiss a qui tam suit after initially declining to intervene, and if so, what standard of review applies to the government’s motion to dismiss.  Overall, the lines of questioning suggest that the Court will conclude that the government may dismiss qui tam suits after initially declining to intervene.  However, there was no clear consensus around how to define a judicially enforceable standard for evaluating the government’s dismissal authority.

As discussed here, over the past few years DOJ has more actively exercised its statutory authority under 31 U.S.C. § 3730(c)(2)(A) to dismiss qui tam cases over a relator’s objection, resulting in a building circuit split, as summarized here.  Lower courts have adopted varying standards of review when assessing DOJ motions to dismiss, with some courts concluding that DOJ has a broad, “unfettered” right to dismiss FCA cases—stemming from the government’s right to exercise prosecutorial discretion—while other courts have required the government to identify a “valid government purpose” and a “rational relation between dismissal and accomplishment of that purpose,” or to satisfy the standard for voluntary dismissals contained in Federal Rule of Civil Procedure 41(a).

As we reported here, in the underlying qui tam case, the relator alleged that the defendant was inaccurately billing for inpatient hospital services when those services should have been billed on an outpatient basis.  After the government declined to intervene, the relator proceeded to litigate the case.  The government subsequently moved to dismiss the action in the middle of litigation; the district court granted the motion to dismiss, and the Third Circuit affirmed.

Before the Supreme Court, the relator contended that the text, structure, history, and purpose of the FCA all establish that the government lacks the authority to dismiss an FCA action after declining to intervene.  The Justices were skeptical and raised potential separation-of-powers concerns if the judiciary were to limit the executive branch’s ability to dismiss qui tam actions following an initial declination decision. Sidley filed an amicus brief on behalf of the Washington Legal Foundation (available here) that focused on the constitutional difficulties that would arise under the relator’s proposed rule.

Most of the argument focused on the standard of review a court should apply to a government motion to dismiss after declining to intervene.  As an alternative argument, the relator urged the Court to adopt what he characterized as the “constitutional rationality standard” applied in the Ninth and Tenth Circuits, which he said would require the government to present a “rational, non-arbitrary basis” for dismissing the case.  Justice Gorsuch and Justice Barrett suggested that such a “rationality standard” presents a low bar to clear—a position consistent with many lower court decisions.

The government argued that § 3730(c)(2)(A) conspicuously lacks any standard of review, indicating that the government need only meet a bare minimum constitutional “baseline” for its action.  According to the government, the proper standard is found in cases like County of Sacramento v. Lewis, which concluded that government action is invalid only if it was so “egregious” that it “shocks the conscience.”  However, unlike the defendant-appellee, the government stopped short of taking the position that the FCA would be unconstitutional unless DOJ had unfettered discretion to dismiss a qui tam action over a relator’s objections.

The Justices had a mixed response.  Justice Sotomayor questioned whether the government’s suggested Lewis standard would allow the government to act for an “arbitrary and capricious” reason.  In contrast, Justice Kavanaugh appeared more comfortable with the standard because § 3730(c)(2)(A) does not, on its face, include a standard that would impose a more rigid restriction on the government’s exercise of its enforcement discretion.  In response to a hypothetical from Justice Alito asking whether a dismissal decision based on an astrologer’s advice would be invalid, the government agreed that it would be.  But in response to a hypothetical from Justice Sotomayor asking whether dismissal based on political pressure would be categorically impermissible, the government declined to concede that such a dismissal decision would be unlawful.

The government has exercised its dismissal authority less frequently in the past two years, but as discussed recently here, DOJ continues to invoke this authority in at least some cases.  The Court’s decision may further affect the frequency at which DOJ moves to dismiss qui tam cases.  A decision is expected by June 2023.