Supreme Court Rules United States Government May Dismiss False Claims Act Cases Even After the Government Declined to Intervene in the Case

June 21, 2023

By: Stephen B. Stern

     In United States v. Executive Health Resources, Inc., 599 U.S. ____, 143 S. Ct. 1720 (2023), the United States Supreme Court was asked to determine whether the United States Government has the ability to dismiss a lawsuit brought under the False Claims Act (“FCA”) when a relator objects to the dismissal.  The Court ruled that the Government does have the authority to dismiss a lawsuit under the FCA over a relator’s objection, even when the Government elected not to intervene in the case.

     The FCA allows a private party (known as a relator) to file a claim on behalf of the United States Government against a party that submits false claims to the Government.  The Court explained that, because the relator is not an ordinary civil plaintiff, the relator is “subject to special restrictions.”  For example, a relator must file a complaint under seal and serve “a copy” and supporting “material evidence” on the Government (and only the Government).  Upon being served with the complaint and supporting “material evidence,” the Government has 60 days (which often is extended for “good cause”) to decide whether it will “intervene and proceed with the action.”  If the Government elects to intervene, the relator “loses control” of the case and the Government takes the lead litigating it, although the relator may remain a party to the lawsuit in a secondary role.  On the other hand, if the Government elects not to intervene, the relator “ha[s] the right to conduct the action.”

     When the Government declines to intervene in a case, the Court explained that the qui tam action ultimately brought by the relator is “brought in the name of the Government” and “the injury the[ ] [relator] assert[s] is exclusively to the Government.”  At the same time, a qui tam suit is “for” “both the relator and the Government” in that the FCA effects a partial assignment of the Government’s damages to the relator.  

     Even if the Government declines to intervene and the relator takes the lead, the Government remains a “real party in interest” in the qui tam action.  As a result, the Government has certain continuing rights under the FCA.  For example, the Government receives the vast majority of the recovery in the event the relator prevails.  Also by way of example, the Government retains the right to intervene in the lawsuit even after the seal period ends, provided that it demonstrates good cause to intervene at the later date.

     In deciding whether the Government has the authority to dismiss a qui tam action, the Court noted the statute expressly provides that “[t]he Government may dismiss the action notwithstanding the objections of the [relator],” as long as the relator has received notice of the motion and an opportunity for a hearing.  The Court further noted that the FCA is silent as to whether or when the authority to dismiss a qui tam action continues after the seal period lapses and the Government has elected not to intervene. 

     To address this silence in the statute, the Court examined four paragraphs in the statute that surround the paragraph that gives the Government authority to dismiss a qui tam action.  The first paragraph states that the Government shall have primary authority to litigate the action if it elects to intervene, but the relator is allowed to remain a party to the action in a secondary role.  The second paragraph enumerates certain rights of the Government, including the right to dismiss an action over a relator’s objections, as long as notice is provided to the relator and the relator is given the opportunity for a hearing.  In addition, the second paragraph gives the Government the authority to settle a qui tam action over a relator’s objections, provided that the settlement is fair and reasonable.  It also authorizes the presiding court to limit a relator’s participation in a case to avoid interference with the Government’s prosecution of the claim and to avoid undue burden on the defendant.  The third paragraph provides that a relator “shall have the right to conduct the action” if the Government declines to intervene in the action, but, even when the Government declines to intervene, the Government retains the right to “intervene at a later date” (i.e., after the seal period expires) “upon a showing of good cause.”  If the court grants a motion to intervene at a later date, however, the FCA states that the court may not limit the status and rights of the relator.  The fourth paragraph states, whether or not the Government proceeds with the action, the Government has the right to obtain a stay of the relator’s discovery if it would interfere with the Government’s investigation or prosecution of a related legal matter.

     In analyzing these provisions, the Court ultimately concluded that the FCA does not limit the Government’s interest or ability to intervene after the seal period lapses.  In fact, the statute expressly provides that the Government can intervene at a later date and that interest may be due to the discovery of new evidence or for other reasons, according to the Court.  The Court found that, upon reassessing a qui tam case at a later date, there is nothing in the FCA that requires the Government “to take a back seat to its co-party relator.”  In other words, the lawsuit “remains, as it was in the seal period, one to vindicate the Government’s interests.”  Thus, the Government retains the right to dismiss a qui tam action over a relator’s objection, even when the Government declined to intervene during the seal period.

     The Court then proceeded to determine “what standard should a district court use to assess [the Government’s] motion” to dismiss the qui tam action after the Government has properly intervened in the action.  The Court concluded that Rule 41 of the Federal Rules of Civil Procedure applies.  In reaching this conclusion, the Court noted that the Federal Rules of Civil Procedure are the default rules in civil litigation and the FCA’s cross-references to the Federal Rules (e.g., § 3732(a), § 3730(b)(2), § 3730(b)(3)) suggest Congress intended them to apply.  Thus, the Court found there was no reason to exempt Rule 41 (regarding voluntary dismissals) from the FCA, but it also concluded that application of Rule 41 in FCA cases will differ from the normal application of the Rule in two respects.  First, Rule 41 must be applied in conjunction with the restrictions set forth in the FCA, and the FCA requires notice and an opportunity for a hearing before a case can be dismissed pursuant to the Government’s request over a relator’s objection.  Second, when ruling on a post-answer motion to dismiss a qui tam action, in most non-FCA cases, the court is to consider dismissal upon “proper terms,” which typically requires consideration of whether the defendant’s “commitment of time and money” mitigates against dismissal.  In FCA cases, however, the Court concluded that the “proper terms” analysis requires consideration of the relator’s commitment of time and money, as a relator is likely to have invested substantial resources by the time the Government seeks a post seal period dismissal.  Notwithstanding the consideration of the relator’s commitment, the Court also noted the analysis is contextual and the Government’s views on dismissal “are entitled to substantial deference” because a qui tam suit is “on behalf of and in the name of the Government” and it “alleges injury to the Government alone.”  Under these circumstances, the Court cautioned district courts to “think several times over before denying a motion to dismiss” by the Government and, “[i]f the Government offers a reasonable argument for why the burdens of continued litigation outweigh its benefits, the court should grant the motion” “even if the relator presents a credible assessment to the contrary.”  

     In this case, the Court found it was “not a close call” on whether the case should be dismissed.  In moving to dismiss, the Government articulated the substantial cost of future discovery, including the potential disclosure of privileged documents, and it explained why it believed the relator ultimately was unlikely to prevail.  For these reasons, the Supreme Court upheld the lower courts’ decisions to dismiss the action.

     The Supreme Court’s decision in Executive Health Resources is significant because it leaves substantial authority with the Government to dismiss qui tam actions even when the Government has declined to intervene and a relator has invested substantial time and resources to litigating a case.  Although the Court’s decision has the potential to discourage parties from filing qui tam actions, that seems to be an unlikely outcome unless the Government starts seeking dismissal of an excessive number of qui tam actions long after it has declined to intervene.