A district court granted the Department of Justice’s motion to dismiss a qui tam action over the relator’s objections. The court agreed with a magistrate judge’s conclusion that the government has unfettered discretion dismiss FCA cases after a hearing without additional qualifications. The judge also held the government satisfied the test articulated in Sequoia Orange, as the need to conserve prosecutorial resources represented a valid government purpose and the request for dismissal related directly to that purpose. The district court also rejected the relator’s assertion that the request was arbitrary, as it resulted from a months-long government investigation into the claims. The court found no merit to the relator’s assertion that the government violated the separation of powers precept by reviewing its claims, explaining that the government logically has the authority to consider whether it can obtain a conviction and whether the expenditure of resources is worth the outcome, even in a qui tam case.
Health Choice Alliance LLC filed a False Claims Act complaint against Eli Lilly and Company Inc., Bayer Corporation, and multiple co-defendants on behalf of the United States and 31 state governments, alleging they knowingly induced the submission of false claims for reimbursement to government healthcare programs using unlawful remuneration. Specifically, Health Choice claimed the defendants violated the Anti-Kickback Statute and various state statutes through three alleged schemes: free nurse services, white coat marketing, and reimbursement support services.
The government moved to dismiss all FCA claims with prejudice as to Health Choice and without prejudice to the United States. The magistrate judge recommended the court dismiss the claims and Health Choice moved for clarification on its state claims. The magistrate judge clarified that it recommended dismissing the state claims without prejudice. However, the judge found the government has unfettered discretion to dismiss an FCA claim and alternatively, had satisfied the more rigorous Sequoia Orange review standard.
The magistrate judge acknowledged a circuit split over the dismissal standard. On the one hand, the U.S. Court of Appeals for the D.C. Circuit held that the government has unfettered discretion to dismiss FCA claims. The circuit court found that the text of the statute provided the government may dismiss a qui tam action after a hearing without additional qualifications, and that the executive branch has a well-established prosecutorial discretion that precludes judicial review. In contrast, in U.S. ex rel. Sequoia Orange Co. v. Baird-Neece Packing Co., the Ninth and Tenth Circuits held that the government must identify a valid government purpose and a rational relation between dismissal and accomplishment of the purpose. The burden shifts to the relator to show that the motion to dismiss is arbitrary, capricious, or illegal. The magistrate judge found additional conflict among district court opinions.
Ultimately, the magistrate judge concluded that the Fifth Circuit would likely follow the D.C. Circuit and hold that the government has unfettered discretion to dismiss FCA claims. The judge agreed that the statute’s text supported the D.C. Circuit’s holding, as it provides for the government’s authority to dismiss a qui tam 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. Other than the requirement for a hearing, the judge found no other standard for dismissal. The judge concluded that the standard of unfettered discretion did not render the required hearing superfluous, as the relator would have the opportunity to show that the government’s motion was unreasonable. The judge also found related Fifth Circuit precedent supporting her holding. The district court agreed this satisfied the statutory test.
Alternatively, the magistrate judge also concluded the government made a showing sufficient to satisfy Sequoia Orange’s more searching judicial review. Under that precept, the government must identify a valid government purpose for the request and show a rational relationship between dismissal and accomplishment of that purpose. Then the burden shifts to the relator to show that the request is arbitrary or illegal.
The magistrate judge found the government identified a legitimate purpose when it argued that the cost of the litigation did not justify the expenditure of scarce government resources. Even where the claims may have merit, the government’s dismissal can be relationally related to preserving governmental resources. In other words, the merit of the qui tam action does not make the government’s decision irrational. The judge also found the relator failed to show the government’s request was arbitrary or capricious. The judge rejected Health Choice’s allegations that the government misled the court by misrepresenting the nature and scope of its investigation into Health Choice’s claims. Similarly, the judge rejecsummaryted Health Choice’s assertion that the government was required to provide evidence of its cost-benefit analysis. Id.
Health Choice argued the magistrate judge should have interpreted the statute using a presumption in favor of judicial review. In response, the government argued that the hearing was not superfluous and that Health Choice’s requested judicial review would run afoul of separation of powers, allowing the judiciary to review the executive branch’s prosecutorial discretion.
Health Choice argued the concept of prosecutorial discretion does not transfer to qui tam actions because a relator is empowered to bring an action on behalf of the government without intervention. Further, in qui tam actions, the government’s dismissal harms the relator, which triggers the presumption of judicial review. In response, the government argued that judicial review of its dismissal decision is inconsistent with prosecutorial discretion, and that Health Choice’s alleged injury—resulting from dismissal—is not cognizable.
Health Choice also disagreed with the magistrate judge’s conclusion that the government’s request met the Sequoia Orange standard. The relator argued the government does not have a valid interest in allowing a plausible kickback scheme to continue unabated. Alternatively, the relator argued the decision to dismiss is arbitrary because: (1) the government arbitrarily violated separation of powers, (2) the government arbitrarily changed its justifications for dismissal and (3) animus motivated the government’s dismissal decision.
Specifically, Health Choice argued that, by evaluating the merits of the qui tam action, the government invaded the purview of the court. Further, the dismissal request had the effect of rewriting the Anti-Kickback statute. According to the relator, because its claims survived summary judgment, they are legally sufficient. Health Choice also claimed the government arbitrarily changed its justification for dismissal. Health Choice claimed the government initially claimed it was dismissing the case to preserve judicial resources, then changed its approach, arguing about the merits of Health Choice’s claims. In response, the government declined to respond individually to the relator’s arguments, but merely reiterated that its request was within its prosecutorial discretion.
The district court sided with the government, finding the magistrate judge’s recommendation sound. The court found the government had a legitimate interest in dismissing the case and that there was no evidence its request was fraudulent or arbitrary. The court found no dispute that the government would have to expend resources related to the litigation. Further, the court noted the government’s decision came after an extensive months-long investigation. Even if the government erred in its conclusion, the decision was hardly arbitrary. Health Choice’s disagreement, on its own, was insufficient to disturb this reasoning.
The court also found no merit to the relator’s assertion that the government’s evaluation of its claims violated the separation of powers doctrine. The court found it rational for the government to consider the merits of a case before deciding to expend resources and that it was beyond question that the government can evaluate whether or not it can secure a conviction. The court found no reason the government should be precluded from making the same type of decision in a qui tam case. The court therefore adopted the magistrate judge’s recommendation.
