/>iAs the new year started, two Department of Justice memoranda began circulating that may bring a change in the way the United States focuses its efforts in the FCA arena. The first, entitled, “Factors for Evaluating Dismissal Pursuant to 31 U.S.C. 3730(c)(2)(a),” contains internal guidance to attorneys in the Fraud Section of the Commercial Litigation Branch of the Department of Justice (DOJ) and Assistant United States Attorneys handling FCA cases regarding when to seek dismissal of qui tam actions under the False Claims Act.[1] The second, entitled “Limiting Use of Agency Documents in Affirmative Civil Enforcement Cases,” concerns the impact DOJ guidance documents should have, if any, when it comes to establishing legal liability for regulatory violations.[2]
Factors for Evaluating FCA Dismissals
While opinions diverge as to whether this memo will have any impact on the rate of FCA dismissals, it has generated much discussion in FCA litigation and enforcement circles.[3] On one hand, this memo may signal a willingness on the part of the United States to more frequently and aggressively seek dismissals in this era in which the filing rate for qui tam actions has increased exponentially but the rate of government intervention has remained stagnant.[4]
By utilizing the infrequently used power the United States government possesses to affirmatively seek dismissal of relators’ FCA claims under 31 U.S.C. § 3730(c)(2)(a), the memo lays out seven factors to be considered by government attorneys when deciding whether to seek dismissal of a qui tam action, either in whole or in part. Under § 3730(c)(2)(a), by motion the government can dismiss an action over the objections of the relator so long as the relator has been notified by the Government of the filing of the motion and the court has provided the relator with an opportunity for a hearing on the motion. Interestingly, the DOJ states it will begin to track how many FCA actions are dismissed under this section.[5]
Primarily, the factors—which are largely derived from the handful of cases when the government has exercised this power—focus on preserving DOJ resources, as the statement notes even when the government does not intervene it often spends significant time and resources monitoring these cases and responding to discovery requests. Other factors to be evaluated include whether these actions are meritless,[6] opportunistic and parasitic,[7] or procedurally defective;[8] may result in unfavorable precedent;[9] present a risk to national security and classified information;[10] or interfere with an agency’s policies or programs.[11]
Yet, it is difficult, if not impossible, to predict how the government will use this dismissal power going forward. Many of the cited examples reflect the reality that dismissal has most often been reserved for extreme cases. For example, cases cited by the government for being “meritless” include two that allege former President Barack Obama is not an American citizen, and is therefore ineligible to be holding office;[12] one that alleges the Dallas-Fort Worth airport sits on land that was unconstitutionally taken and subsequent airport contracts contribute to terrorist activities by Iran and China;[13] and another in which the judge called a 207-page complaint “unintelligible.”[14]
Of note, the DOJ memorandum makes reference to five health care FCA cases. United States ex rel. Piacentile v. Amgen Inc., , a case concerning alleged fraudulent marketing, promotion of off-label use and kickbacks by a pharmaceutical company, is used both to illustrate the government hopes to prevent parasitic claims ( the relator had filed one of the 10 qui tam actions against the same defendant for the same wrongdoing and maintained a website entitled “whistleblowersagainstsfraud.com”) and also to show that government intends to control litigation brought on its behalf (it had come to a settlement agreement with the defendant that the relator refused to accept).[15]
Another case—used to illustrate that the government intends to preserve resources— involved a physician, health care entity, and pharmacy that the relators alleged submitted claims for five prescriptions for off-label use to Medicare for reimbursement.[16] As the total amount reimbursed to the defendants was $320, the government had the action dismissed because the costs associated with litigating the case far outweighed the government’s potential recovery.
The other health care cases include: one alleging false billing applications were submitted to Medicare, but the relator only made a claim for damages with regard to retaliatory discharge and also failed to serve the United States Attorney for a period of five years;[17] a whistleblower action where one count was dismissed outright under the D.C. Circuit’s “unfettered right” standard (discussed below) and a retaliation charge dismissed after the firing was deemed lawful;[18] and a Medicare and Medicaid overbilling claim in which partial dismissal was sought.[19]
In the memo, the DOJ also recognizes a consistent standard of review has not been developed, nor is one provided in the FCA statute itself. Currently, divergent approaches to dismissal have been taken by the courts. In the 9th Circuit, the standard is whether the government has identified a “valid government purpose” and whether there is a “rational relation between dismissal and accomplishment of this purpose.”[20] The D.C. Circuit has developed the significantly more deferential standard, holding the government has an “unfettered right” to dismiss.[21]
Lastly, the Department acknowledges it may also be appropriate to seek partial dismissal of these actions, and that its dismissal can be warranted at any stage in the litigation.
DOJ Guidance Document Prohibition
Written to supplement guidance released by Attorney General Jeff Sessions that prohibits the issuance of guidance documents that bind the public without undergoing the appropriate notice-and-comment rule making process,[22] the memorandum prohibits the Department from “effectively convert[ing] agency guidance documents into binding rules,” as well from using noncompliance with guidance documents to show the law was violated.[23] In the health care context, this would include guidance such as that published by the Centers for Medicare and Medicaid Services (CMS), the U.S. Food and Drug Administration (FDA) and the Officer of the Inspector General of the Department of Health and Human Services (HHS OIG), as well as those released by Medicare billing contractors. However, the memo stops short of prohibiting all use of guidance documents, as it notes “some . . . simply explain or paraphrase legal mandates from existing statutes or regulations, and the Department may use evidence that a party read such a guidance document to help prove that the party had the requisite knowledge of the mandate.”[24]
Moreover, the memo would appear only to apply to affirmative civil enforcement (ACE) actions, which are “the Department’s filing of civil lawsuits on behalf of the United States to recover government money lost to fraud or other misconduct or to impose penalties for violation of the Federal health . . . laws.”[25] The DOJ states this includes “enforcing the False Claims Act.”[26]
The significance of the memorandum and how it will impact the health care industry is still being debated, with many opining it signals a seismic shift in the way the DOJ will approach FCA claims and just as many others taking the position the impact will ultimately be minimal. Regardless of how significantly either memo changes the DOJ’s actions, it remains essential to have an active corporate compliance program that proactively monitors all fraud and abuse issues.
[1] U.S. Dep’t of Justice, Factors for Evaluating Dismissal Pursuant to 31 U.S.C. 3730(c)(2)(a) (Jan. 10, 2018), https://assets.documentcloud.org/documents/4358602/Memo-for-Evaluating-Dismissal-Pursuant-to-31-U-S.pdf.
[2] U.S. Dep’t of Justice, Limiting Use of Agency Documents in Affirmative Civil Enforcement Cases (Jan. 25, 2018), https://www.justice.gov/file/1028756/download.
[3] Upcoming webinars on the topic include “The Future of False Claims Act and Qui Tam Litigation: Emerging Trends and Issues for Health Plans and Providers,” presented by the American Health Lawyers Association. AHLA Distance Learning, AHLA Distance Learning: The Future of False Claims Act and Qui Tam Litigation: Emerging Trends and Issues for Health Plans and Providers, https://distancelearning.healthlawyers.org/p/W-FOF18#tab-product_tab_overview (last visited Feb 13, 2018).
[4] The memorandum notes that “[a]lthough the numbers of filings has increased substantially over time, the rate of intervention has remained relatively static.” U.S. Dep’t of Justice, supranote 1, at 1.
[5] U.S. Dep’t of Justice, supra note 1, at 2 n.1.
[6] See e.g. United States ex. rel. Roach v. Obama, 2014 U.S. Dist. LEXIS 175564, No. 1:14-CV-00406, (D.D.C. Dec. 18, 2014).
[7] See e.g. United States ex rel. Amico, et al. v. Citi Group, Inc., et al., No. 14-cv-4370 (CS) (S.D.N.Y. Aug. 7, 2015).
[8] See e.g. United States ex rel. Surdovel v. Digirad Imaging Solutions, 2013 U.S. Dist. LEXIS 167751, No. 07-0458 (E.D. Pa. Nov. 25, 2013).
[9] See e.g. United States ex rel. Wright v. Agip Petroleum Co., No. 5:03-264 (E.D. Tex. Feb. 3, 2005).
[10] See e.g. United States ex rel. Fay v. Northrup Grumman Corp., 2008 U.S. Dist. LEXIS 24481, No. 06-cv-00581-EWN-MJW (D. Colo. March 27, 2008).
[11] See e.g. United State ex rel. Ridenour v. Kaiser-Hill Co., LLC, 397 F.3d 925 (10th Cir. 2005).
[12] United States ex. rel. Roach v. Obama, 2014 U.S. Dist. LEXIS 175564, No. 1:14-CV-00406, (D.D.C. Dec. 18, 2014), United States ex. rel. Berg v. Obama, 383 F. App’x 7 (D.C. Cir. 2010).
[13] United States ex rel. May v. City of Dallas, 2014 U.S. Dist. LEXIS 152322, No. 3:13-cv-4194-N-BN (N.D. Tex. Sept. 25, 2014).
[14] United States ex. rel. Lachkovich v. Ashcroft et al., No. 08-cv-00066-WYD-BNB (D. Colo. March 13, 2008). See also United States ex. rel. Lachkovich v. Ashcroft et al., 2010 U.S. Dist. LEXIS, No. 08-cv-00066-PAB-BNB (D. Colo. May 6, 2010) (discussing merits and posture of the case).
[15] United States ex rel. Piacentile v. Amgen Inc., 2013 U.S. Dist. LEXIS 141073, No. 04 CV 3983 (E.D.N.Y. Sept. 30, 2013).
[16] United States ex rel. Nicholson v. Spigelman, 2011 U.S. Dist. LEXIS 74258, No. 10 C 3361 (N.D. Ill. July 8, 2011).
[17] United States ex rel. Surdovel v. Digirad Imaging Solutions, 2013 U.S. Dist. LEXIS 167751, No. 07-0458 (E.D. Pa. Nov. 25, 2013).
[18] United States ex rel. Hoyte v. American National Red Cross, 518 F.3d 61 (D.C. Cir. 2008)
[19] United States ex rel. Grober v. Summit Medical Group, Inc., No. 02-177-C (W.D. Ky. July 9, 2004).
[20] United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139, 1145 (9th Cir. 1998).
[21] Swift v. United States, 318 F.3d 250, 252 (D.C. Cir. 2003).
[22] Press Release, U.S. Dep’t of Justice, Attorney General Jeff Sessions Ends the Department’s Practice of Regulation by Guidance (November 17, 2017), https://www.justice.gov/opa/pr/attorney-general-jeff-sessions-ends-department-s-practice-regulation-guidance.
[23] U.S. Dep’t of Justice, supra note 2.
[24] Id. at 2.
[25] Id. at 1-2 n.1.
[26] Id.
