Supreme Court upholds government authority to dismiss False Claims Act cases

False Claims Act
United States, ex rel. Polansky v. Executive Health Resources Inc.
Date: June 16, 2023

Issue: Whether the federal government has authority to dismiss whistleblower False Claims Act (FCA) cases regardless of when it intervenes.

Case Summary: In an 8-1 decision written by Justice Elena Kagan, the U.S. Supreme Court ruled the federal government retains authority to dismiss whistleblower FCA cases at any time once it intervenes.

In 2012, Jesse Polansky filed a qui tam action suing Executive Health Resources (EHR). A qui tam action allows a private person, known as a relator, to prosecute a lawsuit for the government and receive a reward. Polansky alleged EHR helped hospitals overbill Medicare. Polansky accused EHR of routinely certifying inpatient care for services charged to government healthcare programs, which should have been processed as less expensive outpatient care. Under the FCA, relators such as Polansky must file complaints under seal and serve a copy with supporting evidence on the government. The government then has 60 days (which could extend for good cause) to decide whether to intervene and proceed with the action. The government declined to intervene during the seal period of the case, and the case spent years in discovery.

In 2019, the government moved to dismiss after it determined the varied burdens of the suit outweighed its potential value. Under FCA § 3730(c)(2)(A), the government may dismiss a qui tam action despite the relator’s objections. The district court granted the dismissal, finding the government thoroughly investigated the costs and benefits and derived a valid conclusion. On appeal, the Third Circuit affirmed. The Third Circuit considered whether the government had authority to dismiss an action if it declined to intervene during the seal period. The Third Circuit ruled the government retains the authority to dismiss the case at any time once it intervenes.

The U.S. Supreme Court affirmed the Third Circuit’s decision. Writing for the majority, Justice Kagan declared: “The government may seek dismissal of an FCA action over a relator’s objection so long as it intervened sometime in the litigation, whether at the outset or afterward.” In the majority’s view, a “straightforward reading” of the FCA refutes Polansky’s argument that the government forfeited its right to seek dismissal after initially declining to intervene. The majority explained the FCA allows the government to intervene early on and also “at a later date upon showing of good cause.” At that point, the government assumes primary responsibility for the case, including the right to dismiss it. The majority emphasized the government’s interest in a qui tam action is “the predominant one,” and this interest does not diminish in importance because the government waited to intervene.

Additionally, the majority agreed with the Third Circuit that Federal Rule 41(a) provides the standard of review for a motion to dismiss. The majority explained under Rule 41(a), “If the government offers a reasonable argument for why the burdens of contin­ued litigation outweigh its benefits, the court should grant the motion. And that is so even if the relator presents a credible assessment to the contrary.” The majority rejected the government’s position that it had “essentially unfettered discretion to dismiss.” The majority also rejected Polansky’s proposal of a “complicated form of arbitrary-and-capricious review.” Polansky proposed for the government to have primary control of the action if it intervenes in the seal period, while the relator would have primary control if the intervention occurs later. According to the majority, “the Third Circuit’s Goldilocks position is the legally right one,” and a district court should assess a FCA Section (2)(A) motion to dismiss using Rule 41’s standards.

In dissent, Justice Clarence Thomas stated the FCA’s text and structure “afford the government no power to unilaterally dismiss a pending qui tam action after it has declined to take over the action from the relator at its outset.” Thomas also argued qui tam suits violate Article II. Justice Brett Kavanaugh, in a one-paragraph concurrence joined by Justice Amy Coney Barrett, expressed agreement with Thomas’ view. Justice Kavanaugh concluded there are substantial arguments that the qui tam device is inconsistent with Article II, and that private relators may not represent the interests of the United States in litigation.

Bottom Line: The Court’s decision confirms the government has wide latitude to dismiss an FCA suit when litigation is not in the government’s interest.

Documents: Opinion