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Supreme Court Will Decide When Government Can Dismiss False Claims Act Cases

June 29, 2022

The U.S. Supreme Court announced that it will decide when the government can choose to dismiss False Claims Act cases.  A key feature of the False Claims Act is the qui tam (or whistleblower) provision. This means that an individual or entity (known as a “relator”) with knowledge of fraud against the Government may file a lawsuit under seal on behalf of the United States. The government then investigates the relator’s allegations. It then then must decide whether to take over (intervene) in the lawsuit or let the relator handle the litigation.  However, sometimes the government wants the case dismissed and the relator disagrees.   The False Claims Act, 31 U.S.C. 3730(c)(2)(A) allows the government to dismiss a case over the objection of the relator in some circumstances.  Appellate courts are split on when the government can dismiss False Claims Act cases over relator’s objections.

Polansky v. Executive Health Resources

The Supreme Court will hear United States ex rel. Polansky v. Executive Health Resources Inc. during its October 2022 session.  Executive Health Resources, now known as Optum, provides billing services to hospitals.  Jesse Polansky, a former employee, filed his False Claims Act case in 2012. The case alleged that Executive Health Resources a hospital billing company, violated the False Claims Act, by causing hospitals to admit patients for stays that were not medically reasonable or necessary.

The government investigated Polansky’s claims and declined to intervene in the False Claims Act whistleblower case in 2014. In 2019 after many years of litigation between Polansky and Executive Health Resources, the government moved to dismiss the case citing the alleged expense to the government of continuing the litigation.  It also claimed the case had a low likelihood of success.

The False Claims Act, allows the government to dismiss a case over the objection of the relator in some circumstances.  That provision states that:

The Government may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.

31 U.S.C. 3730(c)(2)(A)

Polansky objected to the dismissal and argued the government had given up its right to seek dismissal years earlier when declining to intervene.

Circuits Split On Standard For Government To Dismiss False Claims Act Cases

The district court granted the government’s dismissal in November 2019. The Third Circuit then affirmed the dismissal in November 2021.  In doing so, it disagreed with other Appellate Courts on when the government may dismiss a false claims act case over the relator’s objection.

First, the Third Circuit followed the Sixth and Seventh Circuits to hold that the Government must intervene in the case before it can dismiss it.  In contrast, the D.C., Ninth, and Tenth Circuits do not require intervention.  Second, the Third Circuit joined the Seventh Circuit in holding that the standard for dismissing a case in this situation is provided in Federal Rule of Civil Procedure 41(b).  Thus, before the defendant answers, government dismissal should be granted unless it is arbitrary.  In contrast, after a defendant answers, dismissal would be allowed unless there is prejudice to the defendant.  The D.C. circuit in contrast allows dismissal for any reason whatsoever, and the Ninth Circuit requires the government to have a “rational” basis for dismissal.

The Supreme Court will consider both of these questions when it hears the case this year.