On June 16, the U.S. Supreme Court issued its opinion in U.S. ex rel. Polansky v. Executive Health Resources, a closely watched case about the government’s power to dismiss a False Claims Act (FCA) qui tam lawsuit over a relator’s objection.
In an 8-1 decision delivered by Justice Kagan, the Court held that:
- The government retains its statutory power to dismiss a qui tam action even after initially declining to intervene.
- The government must move to intervene before seeking dismissal.
- Once the government has intervened, a court should evaluate the government’s request to dismiss using the framework of Federal Rule of Civil Procedure 41(a).
The Court emphasized that, under that framework, government requests to dismiss qui tam actions should be granted “in all but the most extraordinary cases.”
Polansky confirms that the government’s authority to dismiss FCA actions is far-reaching, and that government motions to dismiss should be denied only in exceptional circumstances—even when a relator objects. By preserving the government’s broad authority to dismiss meritless and burdensome qui tam lawsuits, Polansky represents an important—and positive—development for healthcare providers, government contractors, and other would-be FCA defendants.
The FCA has long provided the government the authority to dismiss a qui tam lawsuit over a relator’s objection. The statute specifically states that “[t]he 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).
Lower courts disagreed about what standard the government must meet to secure dismissal, an issue the statute does not address. Some courts, such as the D.C. Circuit, had held that the government possesses an “unfettered right” to dismiss FCA actions, which is not subject to any second-guessing by the court. Other courts, such as the Ninth Circuit, had held that government motions to dismiss were subject to a form of rational basis review, which required the government to show a “rational relation” between the dismissal of the FCA action and a “valid government purpose.”
Polansky, the case the Supreme Court took up, involved allegations that the defendant had defrauded Medicare by assisting hospitals with charging inpatient rates for what should have been outpatient services. The government originally declined to intervene, but then moved to dismiss many months later, citing burdensome discovery obligations and its skepticism about the merits of the relator’s claims. The district court granted the motion, reasoning that the government’s rationale met even the nominally more stringent “rational relation” test applied by the Ninth Circuit.
The Third Circuit then affirmed, but on slightly different reasoning. It first held that the government must intervene in the action for “good cause” before exercising its dismissal power. But the court deemed the government’s motion to dismiss to include a request to intervene and determined that the government’s desire to dismiss the action was itself good cause for intervention. The Third Circuit then held that the government’s motion to dismiss was governed by Rule 41(a), the federal rule that ordinarily applies to voluntary motions to dismiss, and which requires a justification that “the court considers proper” when a dismissal request comes after an answer has been filed. The Third Circuit found that the government’s reasons for requesting dismissal in Polansky were properly based on the litigation costs the government would have faced had the case continued, potential misconduct by the relator, and the action’s “doubtful” prospects for success.
The Supreme Court’s Holding
The Supreme Court’s 8-1 decision in Polansky affirmed the Third Circuit “across the board.”
The Court first confirmed that the government must intervene in an FCA action before it may move to dismiss over a relator’s objection. Relying on the statutory structure and language, the Court held that the statutory provision authorizing the government to move to dismiss “presuppose[s] that the Government has in fact intervened.” So the government cannot move to dismiss, the Court reasoned, if it has not first intervened.
At the same time, Justice Kagan’s opinion for the Court also rejected the relator’s argument—not previously endorsed by any court—that the government can move to dismiss only if it intervenes at the first available opportunity, when the case remains under seal.
The Court reasoned that later intervention, which the FCA makes available when the government establishes “good cause,” provides the government the same rights as when it intervenes earlier, including the right to move to dismiss. As Justice Kagan explained, the government’s interests in dismissing a case do not necessarily “diminish in importance because the Government waited to intervene,” and thus the government need not “take a back seat” to the relator in directing the litigation in that scenario. Although the Court did not directly address what the government must show to establish “good cause” for later intervention, it observed in a footnote that the Third Circuit had found that the government’s desire to dismiss itself amounted to good cause and that the relator had not challenged that conclusion in the Supreme Court.
Finally, the Court concluded that government motions to dismiss FCA actions are governed by the ordinary operation of Rule 41(a), subject to the FCA’s requirement that the relator receive notice of the motion and an opportunity for a hearing.
Under Rule 41(a), if the defendant has already filed an answer and all parties have not stipulated to dismissal, the court may dismiss the action at the plaintiff’s request only by court order and “on terms that the court considers proper.” Although the “proper terms” analysis usually focuses on the defendant’s interests, the Supreme Court explained in Polansky that the analysis in an FCA case must also account for the relator’s interests—including the reality that most relators will “want their actions to go forward, and many have by then committed substantial resources.” Even so, however, the Court explained that government motions to dismiss FCA actions “will satisfy Rule 41 in all but the most exceptional cases.”
Indeed, the Court emphasized that “the Government’s views are entitled to substantial deference” because qui tam lawsuits are brought on the government’s behalf to vindicate injuries to the government. So, “[i]f the Government offers a reasonable argument for why the burdens of continued litigation outweigh its benefits, the court should grant the motion”—even if the relator “presents a credible assessment to the contrary.”
Applying those principles in Polansky, the Supreme Court concluded that the case before it was “not a close call.” The government had identified burdens and costs associated with future discovery and explained why the action was likely to fail on the merits, which were together more than “proper terms” for dismissal. In fact, the Court noted that the kinds of grounds the government offered in Polansky would almost always be sufficient to support dismissal “[a]bsent some extraordinary circumstance.”
Implications Going Forward
The Supreme Court’s decision in Polansky confirms what lower courts had almost universally already concluded: the government has broad power to dismiss qui tam actions over a relator’s objection and government requests for dismissal should be denied only in the most unusual cases.
The Court’s decision provides lower courts with a familiar framework—Rule 41(a)—for assessing government motions to dismiss in FCA cases, while being careful to emphasize that those motions should almost always be granted, provided the government can identify some “reasonable view” for why the case should not continue. Indeed, the Court made clear that such motions should be granted “absent some extraordinary circumstance” and in “all but the most exceptional cases.”
While the Court did hold that the government must intervene in the action first, that hurdle is not likely to constrain the government’s dismissal authority. Courts almost always grant government motions to intervene for good cause, and, like the Third Circuit concluded in Polansky, the government’s desire to dismiss an action may be all the “good cause” needed.
Polansky should come as a welcome development for would-be FCA defendants. It suggests that the government’s recent efforts to more aggressively exercise its FCA dismissal authority may continue unabated, and that courts should not readily second-guess that authority. Government requests for dismissal often greatly benefit defendants, who might otherwise face months or years of burdensome discovery on claims with little practical chance of success.
Justice Thomas’s Dissent: Qui Tam Actions in the Constitutional Crosshairs?
Perhaps even more noteworthy than Polansky’s core holding was one aspect of Justice Thomas’s lone dissent. After disagreeing with the majority about the government’s authority to dismiss FCA actions after it first declines to intervene, Justice Thomas went on to describe what he called “serious constitutional questions” about the FCA’s qui tam provisions. Justice Thomas noted that the “qui tam provisions have long inhabited something of a constitutional twilight zone,” while observing that “[t]here are substantial arguments that the qui tam device is inconsistent with Article II and that private relators may not represent the interests of the United States in litigation.” Justice Thomas’s dissent did not attempt to resolve those arguments, but did suggest that they may be appropriate for the Court to address in a later case.
Two other members of the Court expressed sympathy with that position. In a one-paragraph concurrence, Justice Kavanaugh, joined by Justice Barrett, wrote that he “agree[d] with Justice Thomas” that qui tam actions raise “substantial” Article II questions and suggested that “the Court should consider the competing arguments … in an appropriate case.”
Given the number of FCA recoveries stemming from qui tam lawsuits, those lawsuits being deemed unconstitutional would be a seismic development across the FCA landscape. But for now, at least, that outcome still appears unlikely. The Court has rejected challenges to the constitutionality of qui tam actions in the past, and even Polansky’s line-up would seem to suggest that only three of the nine justices are willing to reconsider the issue now. Still, Justice Thomas’s dissent is almost certain to attract future petitions presenting the constitutional question to the Court, and the Court’s treatment of those petitions will be well worth monitoring going forward.
For more information on this and other FCA issues, please subscribe to this blog or contact a member of the Bass, Berry & Sims Healthcare Fraud & Abuse Task Force. For additional analysis of Polansky and the Supreme Court’s other recent FCA decision in the Schutte case, please register for our upcoming webinar, The Supreme Court and the False Claims Act, on July 13, at 12:00 p.m. Central.