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Since 2018, we have blogged several times about the federal government’s crackdown on abusive False Claims Act (“FCA”) litigation via motions for dismissal, and how the abusive relators have tried to resist those efforts.  Last week the Supreme Court ruled that, yes, the government does have the power to shut down rogue litigation ostensibly being conducted in the name of the United States of America.

All the federal government has to do is intervene and give a coherent reason why.

The decision is United States ex rel. Polansky v. Executive Health Resources, Inc., ___ S. Ct. ___, 2023 WL 4034314 (U.S. June 16, 2023), affirming a Third Circuit decision we discussed here.

First, Polansky points out, the FCA is “a unique public-private scheme”:

[T]he injury [FCA relators] assert is exclusively to the Government. . . .  But in one important sense, a qui tam suit is, as the statute puts it, “for” both the relator and the Government.  The FCA, we have explained, effects a partial assignment of the Government’s own damages claim.  If the action leads to a recovery, the relator may receive up to 30% of the total.

Polansky, 2023 WL 4034314, at *4 (citations and quotation marks omitted).  For that reason, an FCA “relator” plaintiff “is no ordinary civil plaintiff,” but rather is “subject to special restrictions.”  Id.

One of those restrictions is the right of the government to assume prosecutorial control over the FCA at the outset, while the complaint is still under seal (another FCA restriction).  Id.  But even if the government doesn’t intervene then:

the relator is not home free.  The Government, after all, is a real party in interest in a qui tam action.  So Congress gave the Government continuing rights in the action − not least the right to the lion’s share of the recovery.  Most relevant here, the Government can intervene after the seal period ends, so long as it shows good cause.

Id. (citations and quotation marks omitted).

The Supreme Court in Polansky held that such post-seal-period governmental intervention can be for the sole purpose of dismissing the action over the relator’s objection.  In Polansky that happened because – after the government initially declined to intervene – the litigation was conducted in such a way as to be obnoxious to federal interests:

The case then spent years in discovery, with [defendant] demanding both documents and deposition testimony from the Government.  As its discovery obligations mounted and weighty privilege issues emerged, the Government assessed and reassessed whether the suit should go forward.  By 2019, it had decided that the varied burdens of the suit outweighed its potential value.

Polansky, 2023 WL 4034314, at *6.

The relator argued that, unless the government intervened at the outset, it was forever precluded from seeking dismissal of the suit thereafter, no matter how burdensome the litigation became.  The Polansky court went on safari – hacking through a jungle of statutory subsections (id. at *6-7, if you’re interested) that we’re not going to worry about – before reaching what seems to us to be the only logical conclusion:  a relator litigating in name of the United States is never immune from the government stepping in to say, “stop.”

[T]he way the statute works[, t]he Government . . . can “intervene at a later date upon a showing of good cause.”  The consequence of a successful motion to intervene . . . is to turn the movant into a party.  And once the Government becomes a party, it . . . does what parties do:  It “proceeds with the action”. . . .  [T]he Government becomes a party, proceeding with the action; . . . it acquires the right to dismiss.

Polansky, 2023 WL 4034314, at *7 (statutory citations omitted).  That makes logical sense, since at all times during FCA litigation, “the Government’s interest in the suit is the same − and is the predominant one.”  Id. at *8.  Further, “that interest does not diminish in importance because the Government waited to intervene . . . .  So Congress enabled the Government, in the protection of its own interests, to reassess qui tam actions and change its mind.”  Id.

Thus, in FCA actions, the government can intervene at any time to call a halt to litigation being brought in its name that has gotten out of hand.

The second question in Polansky was what kind of showing the government had to make to support its demand for voluntary dismissal of the action.  That was easier.  There’s no reason not to apply the Federal Rules of Civil Procedure in FCA actions:

The reason for alighting on Rule 41 is not complicated:  The Federal Rules are the default rules in civil litigation, and nothing warrants a departure from them here. . . .   Here, nothing in the FCA suggests that Congress meant to except qui tam actions from the usual voluntary dismissal rule.

Polansky, 2023 WL 4034314, at *8 (citations omitted).  Thus, while the FCA requires giving the relator “notice and an opportunity for a hearing” before an action is dismissed at the government’s request, “the district court must use that procedural framework to apply Rule 41’s standards.”  Id. at *9.

That’s not a tough standard.  A motion by the government for a voluntary dismissal “will satisfy Rule 41 in all but the most exceptional cases.”  Id. (citation omitted).  The rule conditions dismissal on “proper terms” that will, in the FCA context, be “more likely to involve the relator” than the defendant.  Id.

[I]n [the FCA] context, the Government’s views are entitled to substantial deference.  A qui tam suit . . . is on behalf of and in the name of the Government.  The suit alleges injury to the Government alone.  And the Government, once it has intervened, assumes primary responsibility for the action. . . .  If the Government offers a reasonable argument for why the burdens of continued litigation outweigh its benefits, the court should grant the motion.  And that is so even if the relator presents a credible assessment to the contrary.

Polansky, 2023 WL 4034314, at *9.

Thus ends the circuit split on this issue.  While not quite “unfettered discretion to dismiss,” id. at *8, it’s pretty darn close, and Polansky − for all the relator’s whining about “leaving billions of dollars of potential recovery on the table” – was “not a close call.”  Id. at *9.  Once the government determined that the discovery was too onerous, and thus would not “vindicate the Government’s interests,” that was it.  Id.  “Absent some extraordinary circumstance, that sort of showing is all that is needed for the Government to prevail on [an FCA] motion to dismiss.”  Id.

But there’s one more thing.

At least three justices, Justices Kavanaugh and Barrett concurring and Justice Thomas in dissent, apparently believe that entire FCA private-attorney-general setup might just be unconstitutional.  Id. at *11, 15.  The constitutional question arises from the fact that, under the Constitution’s separation of powers, statutory enforcement is the job of the Executive Branch under Article II.  Congress, however, has purported to seize this executive power, and turn it over to self-interested outsiders:

The Court has held that conducting civil litigation for vindicating public rights of the United States is an executive function that may be discharged only by persons who are “Officers of the United States” under the Appointments Clause, Art. II, § 2, cl. 2.  A private relator under the FCA, however, is not appointed as an officer of the United States under Article II.  It thus appears to follow that Congress cannot authorize a private relator to wield executive authority to represent the United States’ interests in civil litigation.

Polansky, 2023 WL 4034314, at *15 (non-constitutional citations and quotation marks omitted).

We don’t know how this constitutional argument will play out, but Polansky, having ended a major dispute on one front, appears to have opened up an entirely new constitutional front that can be pursued by any and all FCA defendants. Indeed, similar separation of powers arguments can be made under state law against similar schemes that purport to clothe private plaintiffs (and p-side lawyers) with governmental enforcement powers.