Investigations and White Collar Defense

DOJ Releases Guidance for Evaluating Dismissal of Qui Tams

By John F. Libby, Partner, Corporate Investigations and White Collar Defense | Jacqueline C. Wolff, Partner, Corporate Investigations and White Collar Defense

A recent memo issued by the U.S. Department of Justice (DOJ) sets forth the issues it considers in deciding whether to seek the dismissal of qui tam cases filed by relators, and, although written for internal government use, provides guidance to defendants in arguing for such dismissal motions to the government. Citing to past cases in which DOJ has moved to dismiss qui tams under the False Claims Act (FCA) pursuant to 31 USC 3730(c)(2)(A) following a decision not to intervene, Michael D. Granston, director of the Commercial Litigation Branch of the DOJ’s Fraud Section, distills the seven factors it has used when it has decided to proactively move to dismiss a relator’s complaint. Such motions are rare, and by providing an in-depth discussion of those factors and what DOJ is looking for, the memorandum creates a road map for companies under investigation for FCA violations to not only convince DOJ not to intervene but to also convince DOJ to move to dismiss before the company has to engage in costly motion practice against the relator.

The first of the seven factors are cases “without merit,” defined as those where the legal theory is “inherently defective” or the factual claims are “frivolous.” As to the latter, the memo recommends that the prosecutor advise the relator that he has until a set date to provide additional support, and that if he fails to do so, DOJ will move to dismiss. Since FCA cases are often dismissed for failure to state a claim, this direction may result in relators voluntarily moving to dismiss before any motion practice.

The second factor, preventing parasitic qui tam actions, tackles the situation where the relator may be the first to file and there may be no public disclosure bar argument available to the defendant, but where the government started its investigation before the relator’s complaint was filed. One such example would be where the relator, a witness in the government’s investigation, learned his facts from the government’s questions and is now looking to obtain a private windfall.

The third and fifth factors address complaints that, if played out, conflict with other government interests; that is, respectively, agency policies and programs and keeping classified information confidential. Therefore, should a company, such as a federal military contractor, determine that in order to defend itself against the relator’s allegations it would need to disclose classified information, that fact, if presented to DOJ, may encourage DOJ to move to dismiss the complaint once it decides not to intervene.

Other factors include “controlling litigation brought on behalf of the United States,” “preserving government resources” and “addressing egregious procedural errors.” As to controlling litigation, the memo notes that should a relator’s suit create a roadblock to resolving other more important cases brought by the United States, DOJ should consider moving to dismiss. As to preserving government resources, should the defendant be able to show that any recovery would be dwarfed by the costs to the taxpayer in having to monitor the relator’s case, that fact may support a motion to dismiss by DOJ. Finally, the last factor seeks to address the difficult and unreliable relator. The memo questions whether the Attorney General wants to find its name on a complaint where the relator’s actions interfere with those of the Attorney General.

Finally, the memo notes that DOJ can move to dismiss part of a relator’s complaint. And in those instances when the wronged agency opposes dismissal on the grounds of one of the seven factors, DOJ can request an agency declaration, such as one where it states that the falsity was immaterial, that can be used to dismiss on more traditional grounds.

Click here to access the full memo on the National Law Journal website.



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