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 authorize
s 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 previou
s 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
decid
ed 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 i
s 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
Congressional Research Service
https://crsreports.congress.gov
LSB11047
CRS Legal Sidebar
Prepared for Members and
Committees of Congress
Congressional Research Service
2
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 t
o 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 al
so 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 t
he 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 t
he 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.
Congressional Research Service
3
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 Cour
t held, is modified in two respects in FCA
qui tam cases. First, because
the FC
A 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 als
o 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 th
e Ninth
an
d 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 implicitl
y 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 th
e “legally right” approach.
Two Justices wrote separately—Justice Thomas i
n 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 i
n 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 t
o 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,
Congressional Research Service
4
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. O
ne 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 t
he 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 t
o 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
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However,
as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the
permission of the copyright holder if you wish to copy or otherwise use copyrighted material.
Congressional Research Service
5
LSB11047 · VERSION 1 · NEW