DOJ Memorandum Sets Out FCA Dismissal Factors

A January 10 internal memorandum from the director of the fraud section of the DOJ’s civil division commercial litigation branch, which has recently become public, sets out the factors the government should consider in dismissing False Claims Act (FCA) cases in which it has declined to intervene, and may suggest a greater possibility that the DOJ will seek to dismiss such cases. The memo also provides defense counsel reacting to a government investigation related to a qui tam complaint with a roadmap for arguing for non-intervention and dismissal.The FCA gives the government authority to dismiss an action brought by a qui tam relator over the objection of the relator, as long as the court provides the relator an opportunity to be heard. 42 U.S.C. § 3730(c)(2)(A). The memo notes that the DOJ has rarely used this provision when it has declined to intervene in qui tam cases and instead allowed relators to proceed with lawsuits. Going forward, the memo instructs government attorneys, when they make a decision not to intervene, to also consider whether dismissal is appropriate.The memo describes several reasons the government may want to dismiss qui tam actions, including that monitoring of cases requires government resources and that weak cases can result in law that harms the government’s own enforcement. Accordingly, the memo sets out several factors for government attorneys to consider when evaluating whether to dismiss a qui tam action:

Whether the complaint is facially lacking in merit for either legal or factual reasons.
Whether the qui tam complaint duplicates a preexisting government investigation and adds no new information to the investigation.
Whether the action interferes with agency policies or programs. The government specifically notes that dismissal may be appropriate when “an action is both lacking in merit and raises the risk of significant economic harm that could cause a critical supplier to exit the government program or industry.”
Whether the action interferes with the government’s efforts to control its own litigation.
Whether the action implicates classified information or national security interests.
Whether the expected gain from allowing the litigation exceeds the expected cost to the government.
Whether the relator has made “egregious procedural errors” that frustrate the ability of the government to litigate the case.

The memorandum should be of great interest to any company or in-house counsel involved in areas, such as healthcare and government contracting, where the risk of FCA claims is high. The memo provides guidelines for the types of arguments that the government attorney must consider in deciding whether to dismiss, and also presumably in determining whether to intervene in the first instance. The memo also suggests that the initial stages of a government investigation, before the intervention decision, will be of even more importance to defendants who have the opportunity not only to avoid government intervention but also to have the government affirmatively aid the defendant by dismissing the action and saving the defendant the costs and burdens of litigating the claim against the relator. Defendants facing FCA claims and their counsel should take into account the factors set out in the memo as they strategize a response to government inquiries connected to qui tam complaints.