Legal Standards for Government Dismissal of Qui Tam Cases Under the False Claims Act

Legal Standards for Government Dismissal of Qui Tam Cases Under the False Claims Act

Legal Sidebari

Legal Standards for Government Dismissal of
Qui Tam Cases Under the False Claims Act
September 27, 2023
The False Claims Act (FCA) subjects a person to civil penalties and triple damages if he or she submits “a
false or fraudulent claim” seeking payment from the federal government. The Attorney General may
pursue these remedies by bringing a civil action in federal court against the person alleged to have
violated the act (the defendant). To encourage whistleblowers to report fraud on the government, the act
also authorizes qui tam actions, in which private individuals called relators sue FCA defendants on behalf
of themselves and the government.
While the government and the relator are nominally on the same side of a qui tam case (as plaintiffs), they
are not always aligned on litigation strategy, including whether to voluntarily dismiss or settle a particular
action. As explained in a previous Legal Sidebar, lower courts had reached different conclusions about
when and under what circumstances the government could dismiss a qui tam action over the relator’s
objection, prompting the Supreme Court to take up the issue. On June 16, 2023, the Supreme Court
decided United States ex rel. Polansky v. Executive Health Resources, Inc., holding that (1) the
government must intervene in an FCA qui tam action before moving to dismiss that action; and (2) the
government’s motion to dismiss is subject to Federal Rule of Civil Procedure 41(a), which governs
voluntary dismissal of civil actions. Although Polansky places some limits on the government’s ability to
dismiss FCA qui tam actions, the Court also affirmed the government’s broad discretion to seek dismissal
and instructed courts to largely defer to the government’s dismissal decisions. Thus, going forward, it will
likely be difficult for relators to overcome a government motion to dismiss. This Legal Sidebar discusses
the Polansky decision and some of the legal options for Congress in light of the Court’s ruling.
Background on Dismissal of FCA Qui Tam Actions
While private relators may file qui tam actions under the FCA, they act only as “assignees” of part of the
government’s damages claim. In a successful action or settlement, the relator is awarded a portion of the
government’s proceeds and can recover his or her reasonable expenses, attorneys’ fees, and costs from the
defendant. If, however, the case is dismissed or the defendant prevails at summary judgment or trial, the
relator bears, at a minimum, his or her own litigation expenses, attorneys’ fees, and costs.
That the government is a “real party in interest” in an FCA qui tam action is reflected in various
provisions of the statute. For instance, the complaint in an FCA action remains under seal (i.e., not
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publicly available) for a period of at least 60 days to give the government time to investigate the
allegations and decide whether to intervene in the case. If the government chooses to intervene, it bears
“primary responsibility for prosecuting the action,” though the relator may “continue as a party to the
action” subject to certain limitations. Even if the government does not intervene during the seal period, it
may still intervene “at a later date upon a showing of good cause.”
Section 3730(c)(2) of the FCA also authorizes the government to settle or dismiss an FCA qui tam action
over the relator’s objection if certain conditions are met. Specifically, Subparagraph (2)(A)—the dismissal
provision at issue in Polansky—authorizes dismissal if the government notifies the relator that it has filed
a motion to dismiss and the court provides the relator “with an opportunity for a hearing on the motion.”
According to the Department of Justice (DOJ), the dismissal provision provides “an important tool to
advance the government’s interests, preserve limited resources, and avoid adverse precedent.” DOJ has
identified a “non-exhaustive list” of seven factors that can serve as grounds for seeking dismissal:
1. Curbing meritless qui tams that facially lack merit (either because the relator’s legal theory is
inherently defective, or the relator’s factual allegations are frivolous)
2. Preventing parasitic or opportunistic qui tam actions that duplicate a pre-existing government
investigation and add no useful information to the investigation
3. Preventing interference with an agency’s policies or the administration of its programs
4. Controlling litigation brought on behalf of the United States, in order to protect the Department’s
litigation prerogatives
5. Safeguarding classified information and national security interests
6. Preserving government resources, particularly where the government’s costs (including the
opportunity costs of expending resources on other matters) are likely to exceed any expected gain
7. Addressing egregious procedural errors that could frustrate the government’s efforts to conduct a
proper investigation
In Polansky, the Supreme Court confronted two questions related to the dismissal provision that had
divided the lower courts. First, if the government initially declines to intervene in a qui tam action, must it
later intervene before seeking to dismiss that action under Section 3730(c)(2)(A)? Second, what legal
standards, if any, must a court apply in deciding the government’s motion to dismiss?
Summary of the Polansky Decision
The Supreme Court’s decision in Polansky was nearly unanimous, with eight Members of the Court
signing on to the majority opinion written by Justice Kagan. The Court affirmed the Third Circuit’s
decision on both of the issues under consideration.
On the question of intervention, the Supreme Court held that the government must intervene before
seeking to dismiss a qui tam action over the relator’s objection but is not limited to intervening during the
seal period. In other words, the government may seek to intervene at a later time upon a showing of good
cause—a statutory requirement for interventions after the seal period—and then move to dismiss the
action. Accordingly, the Court declined to adopt the relator’s argument that the government has no
authority to dismiss a qui tam action after initially declining to intervene in the case. In the Court’s words,
“Congress decided not to make seal-period intervention an on-off switch,” allowing the government to
seek dismissal at a later time if its interests in the lawsuit change. At the same time, the Court rejected the
government’s and the defendant’s position that no intervention is required so long as the relator receives
notice of the government’s motion to dismiss and an opportunity for a hearing. The dismissal provision,
the Court reasoned, is “explicitly hooked” as a textual matter to the preceding paragraph, “which applies
only when ‘the Government proceeds’” with the qui tam action by becoming a party to that action.

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On the question of the appropriate dismissal standard, the Court agreed with the Third Circuit that Federal
Rule of Civil Procedure 41(a) governs FCA motions to dismiss, by default, as it does in other civil cases.
Rule 41, the Court explained, allows a plaintiff to file a notice of voluntary dismissal (which does not
require court approval) before the defendant serves an answer or summary judgment motion. Once the
defendant has served one of those filings, the plaintiff may seek a court order dismissing the action “on
terms that the court considers proper.” Because the parties in Polansky had reached the latter stage in the
litigation, Rule 41 required the government to file a motion to dismiss the case and obtain the court’s
approval.
Application of Rule 41, the Court held, is modified in two respects in FCA qui tam cases. First, because
the FCA requires “notice and an opportunity for a hearing” to invoke the dismissal provision, the
government and the court must adhere to those procedural requirements. Second, in considering what
“terms” are “proper” for entry of an order of dismissal under Rule 41, a court must consider the interests
of both the government and the relator, who might have “by then committed substantial resources” to the
litigation. While instructing lower courts to consider the relator’s interests, the Court also advised that
“the Government’s views are entitled to substantial deference,” observing that a government dismissal
motion “will satisfy Rule 41 in all but the most exceptional cases.” In the Court’s estimation, if the
government “offers a reasonable argument for why the burdens of continuing litigation outweigh its
benefits, the court should grant the motion” to dismiss, “even if the relator presents a credible assessment
to the contrary.” The Court acknowledged that in Polansky, the government had “enumerated the
significant costs of future discovery in the suit, including the possible disclosure of privileged
documents,” and “explained in detail why it had come to believe that the suit had little chance of success
on the merits”—all of which, in the Court’s view, constituted “good grounds” for seeking dismissal.
In affirming the applicability of Rule 41, the Court declined to adopt the standard employed by the Ninth
and Tenth Circuits, which asked whether dismissal bore a “rational relation” to a “valid government
purpose” and allowed the relator to rebut the government’s evidence of rationality by showing that
dismissal would be “fraudulent, arbitrary and capricious, or illegal.” The Court also implicitly rejected the
D.C. Circuit’s position that the government has “an unfettered right to dismiss” an FCA qui tam action.
The Rule 41 standard previously adopted by the Third and Seventh Circuits constituted a middle ground
that, in the Court’s view, was the “legally right” approach.
Two Justices wrote separately—Justice Thomas in dissent and Justice Kavanaugh, joined by Justice
Barrett, concurring—to express broader concerns that FCA qui tam actions may violate constitutional
separation-of-powers principles by authorizing unappointed private relators to represent the interests of
the federal government in litigation.
Considerations for Congress
The Polansky opinion will likely give the government greater flexibility to seek dismissal of FCA qui tam
actions in some circuits, such as the Ninth and Tenth Circuits, that had adopted a “rational relation”
standard of review, while placing modest limits on dismissal authority in jurisdictions such as the D.C.
Circuit that had previously taken an “unfettered discretion” approach. The opinion suggests that the
government’s choice to dismiss the case following intervention is subject to minimal judicial oversight
and that the government may seek dismissal due to its assessment of the merits of the allegations or other
factors such as resource constraints. In July 2023, an appellate court applying Polansky granted a
government motion to dismiss based on evidence that the relator “failed to meaningfully prosecute the qui
tam action and obtain a judgment in favor of the government” despite “controlling the civil litigation” for
six years.
Congress has the option to amend the FCA if it would like to “override” the presumption that Rule 41
applies to voluntary dismissal by the government in FCA qui tam actions. Congress could also prescribe,

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through statutory amendments, more or fewer constraints on the government’s dismissal authority.
Constitutional separation-of-powers and due process principles could, however, place external limits on
Congress’s options for limiting or expanding the government’s dismissal authority. On the one hand,
further limiting the government’s dismissal authority could implicate the executive branch’s Article II
enforcement power. The Supreme Court has stated in another context that “the choice of how to prioritize
and how aggressively to pursue legal actions against defendants who violate the law falls within the
discretion of the Executive Branch, not within the purview of private plaintiffs (and their attorneys).” On
the other hand, curtailing the relator’s rights could trigger other constitutional protections. The Polansky
Court did not establish parameters for the pre-dismissal “hearing” that a court must offer to an objecting
relator. The Court suggested that the hearing “might inquire into allegations that a dismissal ‘violate[s] the
relator’s rights to due process or equal protection’” but declined to decide when and under what
circumstances such constitutional constraints might prevent dismissal because the relator had not raised
such objections in Polansky. One appellate court applying Polansky considered and rejected a relator’s
due process argument in a nonprecedential order, finding the hearing requirement satisfied where the
district court considered the parties’ arguments in their written submissions.
In addition to its consequences for dismissals under Section 3730(c)(2)(A), the Polansky opinion could
provide guidance to lower courts interpreting other provisions of the FCA, such as the settlement
provision in Section 3730(c)(2)(B). The settlement provision, which has a “similar” structure to the
dismissal provision and immediately follows it, allows the government to settle a qui tam action with the
defendant over the relator’s objection “if the court determines, after a hearing, that the proposed
settlement is fair, adequate, and reasonable under all the circumstances.” In discussing the relationship
among the paragraphs in subsection (c), the Polanksy Court stated that “[o]nly when Paragraphs 3 and 4
are reached does the necessity of intervention drop away.” Thus, although the Court’s holding was limited
to the dismissal provision, its textual reading of the neighboring paragraphs could suggest that the
government must intervene in an FCA qui tam action in order to settle the case over the relator’s
objection. At least one U.S. Court of Appeals has interpreted Polansky this way, ruling that the decision
abrogated circuit precedent previously holding that the government could settle an action under
§ 3730(c)(2) without first intervening.

Author Information

Victoria L. Killion

Legislative Attorney

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