New Development: Government Authority to Dismiss Qui Tam Actions

The False Claims Act grants the government the authority to dismiss qui tam actions over the objections of the relator if “the court has provided the person with an opportunity for a hearing on the motion.”  31 USCS § 3730. However, what constitutes a “hearing” under the Act and the extent of the government’s authority to unilaterally dismiss qui tam actions has been the subject of dispute amongst the Courts of Appeals.

Recently, in United States ex rel. CIMZNHCA, LLC v. UCB, Inc., No. 17-CV-765-SMY-MAB, 2019 U.S. Dist. LEXIS 64267 (S.D. Ill. Apr. 15, 2019), the Southern District of Illinois rejected the government’s efforts to dismiss a qui tam action pursuant to 31 USCS § 3730. Applying the standard set forth by the Ninth Circuit Court of Appeals in United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., the Court denied the government’s motion to dismiss citing the government’s failure to conduct a “minimally adequate investigation to support the claimed governmental purpose.” United States v. UCB, Inc., No. 17-CV-765-SMY-MAB, 2019 U.S. Dist. LEXIS 64267, at *10. The reasoning applied by the District Court in United States v. UCB, Inc., comports with the standards applied by the Ninth and Tenth Circuit Courts of Appeals.  See United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139 (9th Cir. 1998); Ridenour v. Kaiser-Hill Co., Ltd. liability Co., 397 F.3d 925 (10th Cir. 2005). 

The approach taken by the Southern District of Illinois differs from the deferential approach taken by the D.C. Circuit Court of Appeals. The interpretation adopted by the D.C. Circuit Court of Appeals is that section 3730(c)(2)(A) “give[s] the government an unfettered right to dismiss an action” and renders the government’s decision to dismiss “unreviewable.” Swift v. United States, 355 U.S. App. D.C. 59, 318 F.3d 250, 252 (2003).  Under the standard set forth in Swift v. United States, “the function of a hearing when the relator requests one is simply to give the relator a formal opportunity to convince the government not to end the case.”  Id. at 253. The Fifth Circuit Court of Appeals and the Eighth Circuit Court of Appeals have made similar holdings regarding the government’s unlimited discretion to dismiss qui tam actions. See Riley v. St. Luke's Episcopal Hospital, 252 F.3d 749 (5th Cir. 2001); United States ex rel. Rodgers v. Arkansas, 154 F.3d 865 (8th Cir. 1998).

The government has appealed the decision made by the Court in the Southern District of Illinois in United States ex rel. CIMZNHCA, LLC v. UCB, Inc. and continues to pursue its efforts to dismiss qui tam actions. The government’s efforts in United States ex rel. CIMZNHCA, LLC v. UCB, Inc. are a continuation of the objectives expressed by the government in the Granston Memo. If the Seventh Circuit Court of Appeals affirms the decision of the Southern District of Illinois, the government will be required to conduct investigations of each qui tam action it intends to dismiss in order to achieve those objectives.