The U.S. Justice Department has signaled a greater willingness in recent months to seek to short-circuit lawsuits filed by private plaintiffs seeking to collect money from companies, supposedly on behalf of the federal government.
But courts are divided over how much power the federal government has to force the dismissal of the so-called whistleblower lawsuits.
Following rulings in various parts of the country, including a federal court in Illinois, judges appear to be leaning toward questioning the ability of the government to order a dismissal of a complaint brought under the False Claims Act (FCA).
The government, through the Department of Justice, appears likely to be told to deliver a reasonable explanation following adequate investigation, according to a lawyer with expertise in complex business litigation and government investigations.
Scott Gallisdorfer Bass Berry & Sims
"I think there is an increasing consensus cases are not going to be dismissed just because the DOJ says so," Nashville-based attorney Scott Gallisdorfer of Bass, Berry and Sims told the Cook County Record.
He added that the department likely is going to have show it has fulfilled its responsibilities by properly investigating whistleblower claims,
All the cases under discussion relate to government patient assistance programs that offer free or low cost medications to individuals. In those actions, pharmaceutical companies are accused of wrongdoing, including offering kickbacks.
Under the FCA, a private individual, called a relator, can bring a whistleblower suit on behalf of the U.S. government. When filing such lawsuits, legally known as qui tam actions, against a company, the plaintiffs must wait on a decision from the DOJ on whether to intervene or sit on the sidelines.
Under the FCA, whistleblowers arguing wrongdoing by companies receive a percentage of any penalty.
But a change was signaled in early 2018 with the publication of the so-called Granston Memo, authored by a senior DOJ official who indicated the government would be more aggressive in seeking preemptive dismissals of whistleblower cases.
The government should pursue dismissal if the claims lack merit and that litigation would waste “scarce government resources," wrote Michael Granston, director of the department's Civil Fraud Section.
Before the memo, motions by the government for dismissal were rare. But they are now increasing, according to Gallisdorfer.
The memo highlighted concerns that more and more relators are professional "shell companies," not concerned whistleblowers, and their cases have little merit, Gallisdorfer said.
Under the statute, the government is required to carry out some type of investigation prior to to making a decision, including whether to file a motion for dismissal, Gallisdorfer said.
Discussion at the judicial level began with the U.S. Court of Appeals for the District of Columbia Circuit, which ruled that the DOJ has an “unfettered right” to dismiss FCA actions, one that cannot be interfered by the court.
However, the U.S. Ninth Circuit Court of Appeals in California then weighed in, finding that while the department's powers were broad, they were not "unfettered." Dismissal is subject to testing – essentially the government has to show a valid purpose for the dismissal.
More recently, a judge in the U.S. District Court for the Eastern District of Pennsylvania, while ruling in favor of the DOJ and ordering dismissal, nevertheless decided the government has no "unfettered" power and must show a "rational relationship to a government interest."
A U.S. District Court for the Southern District of Illinois had a similar ruling, but refused to dismiss the case, arguing the government did not carry out an adequate investigation of the claims of patient-assistance kickback fraud.
"I would be surprised if there are many courts that will be as aggressive as to say the government cannot dismiss a case," Gallisdorfer said.
But many courts will be deferential and say the government does not have "unfettered power" and has to give a reason, he added.