Seventh Circuit Weighs in on Government’s Right to Dismiss Qui Tam Lawsuits

In United States ex rel. Cimznhca, LLC v. UCB, Inc., the 7th Circuit Court of Appeals weighed in on a Circuit Court of Appeals dispute over the correct standard to apply to the government’s decision to dismiss a qui tam lawsuit under the False Claims Act (FCA). The authority of the government to dismiss an action, over the objections of a qui tam Relator, is granted in 31 U.S.C. § 3730(c)(2)(A). That provision states: “The 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.” There is a split of authority, however, concerning whether the government’s decision to dismiss is subject to any limitations or constraints.

In Swift v. United States, the D.C. Circuit Court of Appeals held that the government had “unfettered” discretion to dismiss; in United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., the 9th Circuit Court of Appeals held that the government must identify a “valid government purpose” and then show “a rational relation between dismissal and accomplishment of the purpose.” The 7th Circuit, in UCB, Inc., rejected both standards, but adopted a rule closer to Swift than to Sequoia Orange. The court held that pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(i), the government had the “absolute” right to dismiss a qui tam lawsuit before the opposing party has served an answer or motion for summary judgment and that while this right is made “subject to” the requirements in other federal statutes, § 3730(c)(2)(A) merely requires that the qui tam Relator be given notice and an opportunity to be heard. 2020 WL 4743033 at *10-11. At the same time, however, the 7th Circuit rejected the notion that this “hearing” is always perfunctory and limited to an opportunity for the Relator to try to convince the government not to dismiss the case. Instead, the 7th Circuit pointed out that in “exceptional cases” involving fraud on the court or a violation of the equal protection clause, a more searching inquiry at a hearing may be required. Id. Further, the court noted that if the time for the government’s filing of a notice of voluntary dismissal has passed, because an answer or motion for summary judgment has already been served, “an action may be dismissed at the plaintiff’s request only by court order, on terms that the court considers proper.” Fed. R. Civ. P. 41(a)(2). Id. In that event, assuming the Relator does not consent, “a hearing under § 3730(c)(2)(A) could serve to air what terms of dismissal are “’proper.’” So as of now, there are at least three standards for dismissal of qui tam lawsuits under the FCA.

However, these varying judicial interpretations may soon be mooted by legislative action. Specifically, Senator Chuck Grassley, who is the “patron saint” of the FCA in the Senate and a strong defender of whistleblower prerogatives under the statute, has expressed his displeasure with the view of some courts and the Department of Justice that the government has absolute discretion to dismiss. Sen. Grassley is working on legislation that would constrain that discretion by requiring the government to state its reasons for not pursuing a qui tam case under the FCA and providing the Relator with a genuine hearing on the issue. In a May 4, 2020 letter to Attorney General William Barr, Senator Grassley objected that DOJ’s view of the statutory requirement as permitting only an “opportunity to be heard” was inconsistent with Congressional intent. Senator Grassley stated that “the statutory canons of construction support the notion that hearing implies an adjudicative procedure where the court acts as an arbiter” and that “Congress intended a substantive process in which a judge hears arguments and decides whether a case should proceed or not.”

This bears close scrutiny moving forward. Given that all current judicial interpretations of 31 U.S.C. § 3730(c)(2)(A) are, to varying degrees, deferential to the government’s right to dismiss a qui tam case, such legislation would mark a sea change in current FCA law and likely result in far fewer dismissal motions by the government.