18 February 2019

Court Affirms Government’s Unfettered Right to Dismiss a Qui Tam Action

When the government moves to dismiss a qui tam action, it must satisfy two procedural requirements: it must first notify the relator that the government has filed a motion to dismiss, and second, it must provide the relator an opportunity for a hearing on the motion.  31 U.S.C. § 3730(c)(2)(A).  In the year since the issuance of the Granston Memo, which we have written about, here, here, here, and here, both relators and courts have grappled with the breadth of the government’s discretion to dismiss qui tam actions.

Not surprisingly, some relators have challenged the government’s ability to unilaterally dismiss their qui tam complaint.  And, in one recent case, United States ex rel. Kammarayil v. Sterling Operations, Inc., No. 15-1699 (BAH), 2019 U.S. Dist. LEXIS 18849 (D.D.C. Feb. 6, 2019), the relator challenged the appropriate way to effectuate such a dismissal.  Specifically, the relator argued that the government should have filed a voluntary dismissal, pursuant to Fed. R. Civ. P. 41(a)(1)(A)(i), rather than a motion dismiss on the grounds that by granting the motion to dismiss, the court would effectively signal its approval of the “government’s justifications for dismissing the action.”  Kammarayil, 2019 U.S. Dist. LEXIS 18849 at *2.

The Court summarily rejected the relator’s position.  First, the court noted that the text of the FCA “unambiguously prescribes the government’s ‘filing of the motion’ to dismiss the action,” id. (quoting 31 U.S.C. § 3730(c)(2)(A)), and granted the government’s motion to dismiss, recognizing that the government has “‘what amounts to an unfettered right to dismiss a qui tam action.’”  Id. at *2-3 (quoting United States ex rel. Hoyte v. Am. Nat’l Red Cross, 518 F.3d 61, 65 (D.C. Cir. 2008)).  Importantly, in discussing the two statutory requirements the government must satisfy before moving to dismiss a qui tam action, the Court explained that the relator’s opportunity for a hearing on the motion is merely a “formal opportunity to convince the government not to end the case,” and not “an opportunity to persuade the Court to deny the motion.” Kammarayil, 2019 U.S. Dist. LEXIS 18849 at *3 (internal quotation and citations omitted).  The Court went on to note that although, in this case, the relator had an opportunity to make its case opposing dismissal to the Court, a court hearing is by no means a statutory requirement.  That is to say, a relator’s right to be heard on the government’s motion to dismiss may be satisfied by a meeting between the relator and the government; no judicial oversight is required.

By recognizing that the government’s discretion to dismiss qui tam actions is an “unfettered right,” and not subject to judicial review, id. at *2-3, this case strengthens the value of making a Granston argument to the government in the first instance.  However, Kammarayil itself does not resolve the ongoing circuit split over the appropriate standard for dismissal under § 3730(c)(2)(A). The Granston Memo explicitly endorsed the D.C. Circuit’s “unfettered” discretion test, which the district court applied in this case.  See Granston Memo at 7.  But at least in cases where a defendant has already been served —a scenario the court did not consider in Kammarayil—both the 9th and 10th Circuits have adopted a rational basis standard, which requires the government to demonstrate a rational relation between dismissal and the accomplishment of a legitimate or “valid” government purpose.  See United States ex rel. Ridenour v. Kaiser-Hill Comp., L.L.C., 397 F.3d 925, 936 (10th Cir. 2005); United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139, 1145 (9th Cir. 1998).  The rational basis test also continues to hold sway with some district courts, see, e.g., United States ex rel. Toomer v. TerraPower, LLC, 2018 WL 4934070, at *4 (D. Idaho Oct. 10, 2018); United States ex rel. Nasuti v. Savage Farms, Inc., 2014 WL 1327015, at *10 (D. Mass. Mar. 27, 2014), aff’d, 2015 WL 9598315 (1st Cir. 2015) (“The court is persuaded that the Sequoia Orange Co. standard adopted by the Ninth and Tenth Circuits is the better of the two.”); U.S. ex rel. Fay v. Northrop Grumman Corp., 2008 WL 877180, at *5 (D. Colo. Mar. 27, 2008).  In jurisdictions that follow the D.C. Circuit’s unfettered discretion test, it appears that when a FCA defendant convinces the government to dismiss the action, it is game over for the relator.

Stay tuned, as we will continue to watch this important issue.

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