Enforcement Trends

Federal Courts Split on Government Dismissals of Qui Tam Claims

In 2018, the Justice Department (DOJ) ordered US Attorneys to aggressively seek dismissal of False Claims Act (FCA) whistleblower qui tam lawsuits that lack merit or don’t serve the government’s interests. However, actual attempts to implement the controversial policy have proven tougher than expected with the courts split over how much discretion the government has to toss qui tam cases it doesn’t like.

The Granston Memo

Under the FCA, lawsuits by whistleblowers (aka, “relators”) must be filed under seal to give the DOJ time to decide whether to intervene in the case. Although the case doesn’t end if the DOJ declines, the decision reduces the relator’s leverage significantly. The FCA also includes what had been a rarely used provision, Section 3170(c)(2)(A), allowing the government to actively seek to have cases that it doesn’t believe serve its interests dismissed.

In January 2018, then DOJ Civil Fraud Section Director Michael Granston issued an internal memorandum instructing US Attorneys to exercise their Section 3170(c)(2)(A) powers more aggressively. The Granston memo calls on federal prosecutors to act as “gatekeepers” to preserve enforcement resources, protect government interests and prevent weak cases from resulting in adverse judgments that weaken government enforcement powers.

The DOJ’s 7 Grounds for Seeking Dismissal of Qui Tam Claims
The Granston memo instructing US attorneys to use their Section Section 3170(c)(2)(A) dismissal powers more aggressively lists seven kinds of problematic qui tam claims that they should target for dismissal:

  1. Meritless Claims, i.e., where a qui tam complaint appears to be lacking in merit because the relator’s legal theory is “inherently defective,” or because his/her “factual allegations are frivolous.”
  2. Parasitic or Opportunistic Claims, i.e., qui tam actions that duplicate pre-existing government investigations and add no useful information to the investigation and bestow the relator with an unwarranted windfall in taxpayer dollars for providing merely duplicative information.
  3. Threats to Policies or Programs, i.e., qui tam actions that threaten to interfere with a government agency’s policies or programs.
  4. Actions Interfering with Other FCA Cases, e.g., a separate qui tam case in which the government has already chosen to intervene.
  5. Cases Threatening Harm to National Security, e.g., qui tam actions that may compromise classified information, involve intelligence agency operations or military contracts.
  6. Cases Where Costs Will Exceed Gain, the calculation of which should include the “opportunity cost” of utilizing resources on other matters of higher priority with a surer probability of recovery.
  7. Claims that May Frustrate an Investigation, i.e., whether there are issues, such as procedural errors, with the relator’s action that frustrate the government’s effort to conduct a proper investigation.

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