By Laura M. Kidd Cordova & Jennifer S. Freel

Does the federal government have the authority to dismiss a False Claims Act (FCA) suit after initially declining to intervene? And what standard should courts apply to a government motion to dismiss a whistleblower suit? On June 21, 2022, the Supreme Court granted certiorari in United States, ex rel. Polansky v. Executive Health Resources, Inc. (No. 21-1052), a case examining whether the U.S. Department of Justice – after declining to prosecute a qui tam action – has the authority to dismiss the action, and if so, what standard applies to the motion to dismiss.

As Polansky set forth in his petition, Circuits have adopted various standards for DOJ’s dismissal authority. For example, the Ninth Circuit has adopted a two-step, burden shifting test, while the DC Circuit has concluded that the government has an unfettered right to dismiss a qui tam case. In the Ninth Circuit, the government must first identify a valid government purpose and a rational relation between dismissal and accomplishment of that purpose. If the government meets that burden, the burden shifts to the relator to demonstrate that dismissal is fraudulent, arbitrary and capricious, or illegal. In contrast, the DC Circuit, noting the Executive Branch’s “historical prerogative to decide which cases should go forward in the name of the United States,” concluded that the FCA’s hearing requirement does not permit the courts to decide if “the Executive is acting rationally and in good faith.”

In Polansky, the case now before the Supreme Court, the Third Circuit rejected the approaches of the other circuits and concluded that the government’s dismissal authority is controlled by Federal Rule of Civil Procedure 41(a)(2), which provides that “once an action has passed the ‘point of no return,’ with the filing of the defendant’s responsive pleading, then ‘an action may be dismissed at the plaintiff’s request only by court order, on terms that the court considers proper.’” The Third Circuit affirmed the district court’s grant of the government’s motion to dismiss, which was filed several years after the government declined to intervene, noting “Rule 41(a)(2)’s ‘broad grant of discretion’ to shape the ‘proper’ terms of dismissal.”

By agreeing to review Polansky, the Supreme Court has signaled that it may be ready to provide a uniform standard by which courts can assess a government motion to dismiss a qui tam case. While government motions to dismiss are still relatively rare, they have become more prevalent and more often directly sought by defendants since the release of the Granston Memo in 2018. Having a clear understanding of the standard for such dismissals is important not just for DOJ, but for all parties involved in FCA cases.

The Supreme Court is still considering petitions on several other important FCA issues, including the standard for determining whether a defendant acted “knowingly” and the standard for pleading fraud with particularity.

For questions related to the False Claims Act, COVID-19 relief investigations, and healthcare fraud issues, please contact Laura Cordova, Jennifer Freel, or any member of the Healthcare Fraud & Abuse team. Stay tuned for updates from Jackson Walker by visiting the News page or signing up for JW eAlerts.

This update is not intended to provide legal advice, and no legal or business decision should be based on its contents. Please consult with your legal counsel for guidance.

Meet Laura

Laura M. Kidd Cordova is a partner in the Investigations & White Collar Defense practice of Jackson Walker’s Houston office. Her practice includes handling sensitive internal investigations, navigating high-stakes government investigations, and defending clients in complex criminal and civil litigation. She has broad experience representing clients across the healthcare industry in criminal and civil False Claims Act matters involving allegations of healthcare fraud, Anti-Kickback Statute violations, and procurement fraud. Since 2020, Laura has been recognized as a Washington DC Super Lawyer by Thomson Reuters’ Super Lawyers.

Meet Jennifer

Jennifer S. Freel is a partner in the Investigations & White Collar Defense practice of Jackson Walker’s Austin office. Jennifer advises businesses and individuals under investigation by the government and conducts internal investigations for companies. In her previous role as an Assistant U.S. Attorney in the Western District of Texas, Jennifer prosecuted cases involving child exploitation, narcotics conspiracies, gun smuggling, and white collar crimes. She has been ranked among the top Texas attorneys for Litigation: White-Collar Crime & Government Investigations by Chambers USA: America’s Leading Lawyers for Business since 2021, and was named among The Best Lawyers in America for Criminal Defense: White Collar (Austin) in 2022.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice.