The Seventh Circuit Court of Appeals recently addressed the ever-shifting landscape regarding the ability of a whistleblower lawsuit to proceed, if the government wants a dismissal under the False Claims Act.. The False Claims Act was enacted to prevent and penalize fraudulent activities committed against the federal government, which in turn hurts the taxpayers. The Act has proven to be extremely successful, particularly over the last decade, through the diverse fraud recoveries and settlements arrived at through various judgments and cases that have averaged several billion dollars a year per year over the last decade. The cases can be quite lucrative for whistleblowers as well who can receive up to 30% of what the government recovers, which can be in the millions of dollars as a whistleblower award. The False Claims Act, through its whistleblower or qui tam provision empowers private individuals and entities to report companies that seek to enrich themselves by causing a loss to public funds by committing Medicare Fraud, Medicaid Fraud, Defense Contractor Fraud, PPP Fraud and other economic frauds against the government. A qui tam complaint through the False Claims Act must be filed with the help of a whistleblower law firm.
Government’s Right to Dismiss
The right to dismiss claims is conferred upon the government via Section 3730(c)(2)(A) of False Claims Act, notwithstanding an objection by the relator, having been served a notice and an opportunity for hearing. Since the release of the Granston Memo in January 2018, and its subsequent implementation in the justice manual, the Department of Justice has been increasingly moving to dismiss qui tam suits under the False Claims Act. The reasons for dismissal of such suits is based on federal interests, including preservation of limited governmental resources, curbing meritless claims and not wanting to set adverse precedents. With the proliferation of whistleblower actions, to date the most successful cases tend to be brought by a cabal of firms who focus a portions of their practice to whistleblower litigation (like Brown, LLC). In recent years, other firms trying to replicate the success of the past, but failing to fathom the intricacies of the False Claims Statute have created some bad laws and the DOJ wants to avoid bad binding precedents. Bad cases make bad law, along with bad lawyers.
The Prevailing Tests to Dismiss
In the past, the Department of Justice’s decision regarding dismissing a case were generally analysed through the application of two standard tests:
- The Swift Standard: This standard gave the government an “unfettered right” to dismiss qui tam cases.
- The Sequoia Orange Standard: Laid down by the Ninth Circuit, and adopted by the Tenth Circuit and the Eastern District of Pennsylvania, this standard applied a “rational relation”, requiring the government to show “a valid government purpose” and a “rational relation between dismissal and accomplishment of the purpose” before the court can grant dismissal.
Seventh Circuit’s Decision in UCB Inc.’s Case
In some instances, courts have applied standards that granted the Department of Justice the permission to dismiss the case. However, with the Seventh Circuit’s decision, over a dozen applications filed through the qui tam provisions of the False Claims Act by the National Healthcare Analysis Group (“NHAG”) alleging that the defendant, UCB Inc. had illegally paid physicians to prescribe Cimzia, a drug used to treat Crohn’s disease, to patients who received the benefits of federal healthcare programs were dismissed. Reversing the decision of the Southern District Court of Illinois which had applied the Sequoia Orange standard and denied the right to the Department of Justice to dismiss this case, the Seventh Circuit observed that it did not have jurisdiction to determine the matter. The Seventh Circuit interpreted that §3730(c)(2)(A) of False Claims Act required “the government to intervene as a party before exercising its right to dismiss.” Since the government cannot become a party to a qui tam proceeding unless it decides to intervene, the circuit construed the motion to dismiss of the Department of Justice to be a motion to intervene and the Department of Justice could intervene where it had “good cause” to do so. The Court then decided the matter on the merits of the case rather than the jurisdiction. The Court rejected both established tests which have been applied so far.
The Circuit instead established a new formulation based on the standard for a voluntary dismissal by a plaintiff under FRCP 41. This confers the plaintiff the absolute right to dismiss an action without prejudice, any time “before the opposing party serves either an answer or a motion for summary judgment.” This otherwise absolute right is qualified by “any applicable federal statute” such as §3730(c)(2)(A) as it provides that the government may dismiss over the relator’s objection only after the relator is afforded notice and an opportunity to be heard. Therefore, the Court held that before an answer or motion for summary judgment is served, “the Government may dismiss the action without the relator’s consent if the relator receives notice and opportunity to be heard.” Additionally, where the defendants have answered the complaint, then a court order would be required for the government to obtain a dismissal under the Federal Rule of Civil Procedure, §41(a)(2), where relator could argue what terms, if any, should be imposed by the court in allowing dismissal.
Therefore, this standard set by the Seventh Circuit imposes a considerably higher bar in comparison to the Swift Standard, with the government having an almost unfettered power to intervene and dismiss a qui tam complaint, especially before the defendants are called upon to answer the same. However, with the help of leading whistleblower law firms such as Brown LLC, your whistleblower lawsuit will be evaluated and the whistleblower lawyers will determine the best route to proceed with the litigation and interface with the Department of Justice. As a former member of the Department of Justice, Jason T. Brown the head of Brown, LLC worked for the Federal Bureau of Investigation (“FBI”) as a special agent and legal advisor and help guide you through the whistleblower process from start to finish.
It is critical for individuals aware of frauds of any kind against the government to speak with a whistleblower law firm that focuses on litigating qui tam claims. If you seek the best whistleblower law firm look to one that has a track record of success and dedicates a portion of their practice to litigating whistleblower claims, like Brown, LLC.
U.S. ex rel. CIMZNHCA LLC v. UCB Inc. et al., No. 19-2273 (7th Cir. 2020). Memorandum from Michael D. Granston, Director, Commercial Litigation Branch, Fraud Section, U.S. Dep’t
of Justice, Factors for Evaluating Dismissal Pursuant to 31 U.S.C. 3730(c)(2)(A) (Jan. 10, 2018), available at: