Supreme Court to review DOJ’s power to dismiss whistleblower lawsuits under False Claims Act | Kohn, Kohn & Colapinto LLP

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On June 21, the United States Supreme Court granted certiorari in United States, ex rel. Polansky v Executive Health Resources, Inc.. The Court has agreed to hear the case which concerns whether or not the U.S. government can reject False Claims Act whistleblowers who tam proceedings after initially refusing to intervene. The case also concerns the standard applicable to such a dismissal if the DOJ has such authority. There is currently a clear and intractable conflict in the circuitry over this important statutory question.

Under the False Claims Act, individual whistleblowers can sue who tam prosecution of fraudsters on behalf of the US government. The Department of Justice (DOJ) has the ability to intervene in who tam proceedings and resume proceedings. However, when the DOJ refuses to step in and prosecute the who tam cases, the law allows the whistleblower to pursue the case on behalf of the United States and bring the case against the defendant in federal court.

In cases where the DOJ initially intervenes, it has the authority to dismiss the lawsuit by giving the whistleblower notice of motion to dismiss and the opportunity for a hearing on the motion. The Supreme Court will decide whether the DOJ’s power to dismiss extends to cases in which the DOJ initially refused to intervene but then seeks to intervene to dismiss the whistleblower’s lawsuit.

False Claims Act whistleblowers have been an invaluable asset to the US government’s efforts to combat government contract fraud. Since the modernization of the False Claims Act in 1986, who tam the lawsuits enabled the government to recover more than $7 billion from the fraudsters. Hundreds of millions of these recoveries have occurred in cases where the DOJ has refused to intervene.

If the Supreme Court grants the DOJ broad power to dismiss cases in which it has not intervened, it threatens the effectiveness of the False Claims Act. In recent years, recoveries of who tam combinations are down sharply largely because of the DOJ’s tendency to dismiss strong whistleblower lawsuits without just cause. However, who tam recoveries in whistleblower cases denied by the DOJ have increased. For example, in 2021 alone, taxpayers recovered more than $479 million in whistleblower cases where the DOJ refused to participate and the whistleblower sued the who tam cases without government involvement.

The Polansky This case offers the Supreme Court the opportunity to limit the DOJ’s power to dismiss in whistleblower cases where the government initially refused to intervene. It’s unclear whether the court will set specific standards the government must meet before a court can grant the DOJ’s request to dismiss a whistleblower’s case, but the stakes are high. If the Supreme Court allows the DOJ to close whistleblower cases denied by the DOJ without due process, it risks influence peddling by contractors with internal government ties and opens the door to pressure on the government to dismiss whistleblower cases. When President Abraham Lincoln signed into law the original False Claims Act, combating corruption within government contracting agencies was one of the main purposes of the law.

In many cases denied by the DOJ, whistleblowers and their attorneys are prepared to assume the risks and expense of litigation, as is their right under the False Claims Act. While it should not be difficult or burdensome for the government to demonstrate why an otherwise meritorious whistleblower case alleging fraud by a government contractor should not be allowed to proceed without the government, the government has vigorously resisted judicial review of its dismissal authority and the DOJ opposed setting standards to govern such dismissals.

The DOJ’s ability to fire who tam Sen. Charles Grassley (R-IA), the chief architect of the 1986 amendments that modernized the False Claims Act, has expressed concern that the DOJ is abusing its power of removal in cases of whistleblowers denied by the DOJ. Grassley’s Misrepresentation Amendment Act 2021which is co-sponsored by Senators Richard Durban (D-IL), John Kennedy (R-LA), Patrick Leahy (D-VT) and Roger Wicker (R-MS), would require, among other reforms, that the government take charge of prove sufficient motivation for the dismissal of a who tam suit. This bill was approved by the Senate Judiciary Committee.

United States, ex rel. Polansky v Executive Health Resources, Inc.

The Polansky the case stems from a who tam lawsuit filed by Jesse Polansky, a former employee of Executive Health Resources, in 2012. Polansky alleged that Executive Health improperly certified inpatient hospitalizations as medically necessary, resulting in Medicare overbilling.

The DOJ chose not to intervene in the case, but in 2019 decided to dismiss it. The U.S. District Court for the Eastern District of Pennsylvania granted the DOJ’s motion to dismiss. Polansky appealed the dismissal. In October 2021, the US Court of Appeals for the Third Circuit ruled against Polansky. He determined that the DOJ’s motion to dismiss could be considered a motion to intervene and dismiss and that the DOJ need only prove that its dismissal would cause no prejudice to any party.

Polansky appealed that decision to the Supreme Court, which granted certiorari for the case on June 21.

Division of the circuit

The decision of the Third Circuit in Polansky added to a multi-way split between circuit courts over the DOJ’s power to dismiss who tam combinations. In Swift v. United States, the DC Circuit held that the government had absolute discretion to dismiss a whistleblower suit under the False Claims Act. On the other hand, in United States ex rel. Sequoia Orange Co. c. Baird-Neece Packing Corp., the Ninth Circuit ruled that the DOJ must prove that the termination serves a valid governmental purpose. Finally, in United States ex rel. Borzilleri v Bayer Healthcare Pharmaceuticals, Inc.the First Circuit held that the DOJ could dismiss a case if it provided a reason for doing so and allowed the whistleblower to persuade the government to reverse the dismissal.

Other FCA issues

Polansky is not the only False Claims Act case that may be heard by the Supreme Court in the near future. There is currently a request for a writ of certiorari before the Supreme Court for the case United States ex rel. Schutte v. SuperValu Inc. In that case, the Seventh Circuit ruled that while the company had submitted false statements, it had not done so “knowingly” because it had acted on the basis of a reasonable, albeit incorrect, interpretation of the law. .

In May, Senator Grassley filed a friend Short urging the Supreme Court to hear the case and overturn the Seventh Circuit’s decision. “SuperValu’s sweeping departure from the law continues a dismal tradition that some courts interpret the FCA in an unduly restrictive manner, which Congress and this Court have repeatedly intervened to correct. The Court should grant certiorari to remedy this tear in the FCA. If not repaired, it won’t be long before the centerpiece of the government’s anti-fraud arsenal becomes unusable,” Grassley says in the brief.

There are also writs of certiorari that have been filed in two other whistleblower cases, Owsley vs. Fazzi Associates and Johnson vs. Bethany Hospice, each asking the Court to consider an alleged split in the circuits as to the standard that should apply when pleading fraud with particularity under the False Claims Act. The Supreme Court asked the United States to file briefs in response to the motions in both cases.

The next term on the Supreme Court has the potential to be very active in deciding cases under the False Claims Act. The outcome of these cases could determine whether the False Claims Act will continue to be an effective tool to combat government fraud or whether the law will be tightened or weakened substantially.

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