DOJ Memoranda Encourage Dismissal of Declined False Claims Act Cases and Prohibit Government Reliance on Noncompliance with Agency Guidance Theory of Liability

February 27, 2018

The Department of Justice issued two memoranda at the start of 2018 that may have important effects on health care fraud investigations and prosecutions under the False Claims Act.

The first, Factors for Evaluating Dismissal Pursuant to 31 U.S.C. 3730(c)(2)(A), was issued by Michael Granston, Director of the DOJ Commercial Litigation Branch, Fraud Section, and encourages DOJ attorneys to seek dismissal of a relator’s complaint if the government is declining to intervene in the case.  The memorandum describes the statute authorizing dismissal as “an important tool to advance the government’s interests, preserve limited resources, and avoid adverse precedent”, and it provides a non-exhaustive list of factors that DOJ attorneys should use as a basis for dismissal:

• Does the qui tam complaint lack merit, whether based on an inherently defective legal theory or frivolous factual allegations?
• Does the qui tam action duplicate a pre-existing government investigation and add no useful information?
• Does the qui tam action threaten to interfere with an agency’s policies or the administration of its programs?
• Is dismissal necessary to protect the government’s litigation prerogatives?
• Is dismissal necessary to safeguard classified information?
• Are the government’s costs in monitoring or participating in a qui tam action continued by the relator likely to exceed any expected gain?
• Do the relator’s actions frustrate the government’s efforts to conduct a proper investigation?

The government has sought to dismiss declined qui tam complaints in the past, but more often has allowed the relator to go ahead with the case.  The Granston Memorandum emphasizes the advantages to the government in ending non-intervened qui tam cases early, particularly for saving government resources and avoiding adverse decisions from the Court.  If aggressively followed, this policy may result in less False Claims Act cases proceeding to litigation.

The second memorandum, Limiting Use of Agency Guidance Documents In Affirmative Civil Enforcement Cases, was issued by former Associate Attorney General Rachel Brand, and follows a November 2017 memorandum from Attorney General Sessions that prohibited DOJ components from issuing guidance documents that would effectively bind the public without undergoing the rulemaking process.  The Brand Memorandum extends this concept to government False Claims Act theories based on a failure to follow agency guidance documents.  “Department litigators may not use noncompliance with guidance documents as a basis for proving violations of applicable law” in affirmative civil enforcement cases.  The policy seeks to avoid allowing guidance documents to create binding requirements that do not exist by statute or regulation.  The government must prove noncompliance with the statute or regulation, and cannot use noncompliance with an agency guidance document as a substitute.  The Brand Memorandum will limit government theories of False Claims Act liability that are based on the violation of agency guidance documents as opposed to the relevant statute or regulation.