On July 26, 2021, Senator Chuck Grassley announced that he and a bipartisan group of senators have introduced legislation that would amend the False Claims Act (FCA) in several important ways. Titled the False Claims Amendments Act of 2021, the proposed changes, if enacted, would ultimately make FCA cases harder to defeat, more costly to litigate, and more difficult to secure DOJ-initiated dismissals. The bill contains three significant amendments to the FCA:  

1. Shifting the Proof Burden for Materiality to Defendants. In the wake of the Supreme Court’s landmark decision in Universal Health Services, Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989 (2016), courts have somewhat inconsistently applied the standard for proving materiality under the FCA. Based on the perception that some courts have raised the bar too high for whistleblowers (aka relators) to prove materiality, especially in circumstances when the government continues to pay claims despite its knowledge of the alleged legal violation, the False Claims Amendments Act of 2021 seeks to add an unusual burden-shifting mechanism whereby once the relator or government proves materiality by a preponderance of the evidence, defendants may then “rebut” this initial materiality showing by proving with “clear and convincing evidence” that the violation was not in fact material to the government’s payment of the claims. If enacted, this amendment would make it much more difficult for defendants to defeat FCA claims by attacking the element of materiality.  

2. Shifting the Costs of Government Discovery to Defendants. The False Claims Amendments Act of 2021 also would make it more costly for defendants to obtain discovery from the government in FCA cases where it has elected not to intervene. Specifically, the proposed legislation would require courts to order defendants to pay the government’s costs and attorneys’ fees for responding to discovery requests unless the defendant proves that the information sought is “relevant, proportionate to the needs of the case, and not unduly burdensome.” This change would effectively require defendants to pay for the costs of government discovery in nearly every case because of the practical impossibility of proving a negative – the absence of an undue burden on the government.  

3. Changing the Standard for Approving Granston Dismissals. In January 2018, Michael Granston, the former director of the DOJ’s Commercial Litigation Branch, issued a memo instructing DOJ lawyers to consider more seriously and thoroughly whether to seek affirmative dismissals of potentially meritless FCA cases (the “Granston Memo”). Since the issuance of the Granston Memo – which identifies seven non-exhaustive considerations that tend to support dismissal – DOJ has dismissed at least 50 meritless qui tam actions pursuant to 31 U.S.C. § 3730(c)(2)(A). Prior to the Granston Memo, DOJ exercised its dismissal authority just 45 times in approximately 30 years. The False Claims Amendments Act of 2021 seeks to amend the FCA by requiring an evidentiary hearing to approve DOJ’s dismissal motion, imposing an affirmative burden on DOJ to demonstrate the “reasons for dismissal,” and providing the relator with an “opportunity to show that the reasons are fraudulent, arbitrary and capricious, or contrary to law.” The proposed change is an unclear substantive departure from the “arbitrary and capricious” standard that most courts currently apply in evaluating Grantson dismissals. Nevertheless, the clear intent of the proposed amendment is to restrict DOJ’s authority to dismiss FCA cases.  

Finally, the changes to the FCA proposed under the False Claims Amendments Act of 2021 would not only apply prospectively but also retroactively to any FCA case that is pending on the date of enactment.  

Given the significance of these potential amendments to the FCA, we will be closely following this legislation and will report further on any developments.