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Justices to Clarify DOJ Power to End Whistleblower Suits (1)

June 21, 2022, 1:39 PMUpdated: June 21, 2022, 5:01 PM

The US Supreme Court said Tuesday that it will review whether a False Claims Act whistleblower’s suit alleging that Executive Health Resources Inc. defrauded Medicare by falsely designating patient admissions should have proceeded despite the Justice Department’s opposition.

Jesse Polansky asserted that the US Court of Appeals for the Third Circuit erred by backing the dismissal even though the government didn’t intervene in his case before moving to dismiss it.

The government lacks any FCA dismissal authority after initially declining to intervene in a whistleblower’s case, Polansky said in his petition.

The FCA says the DOJ may move to end a whistleblower’s action that it doesn’t support, over the whistleblower’s objection, by giving notice of a motion to dismiss and an opportunity for a hearing on the motion.

The Third Circuit joined the Seventh Circuit in treating the government’s motion to dismiss as a combined motion to intervene and dismiss, the petition said. This further cemented a deeply entrenched circuit split over the the government’s FCA dismissal authority, the petition said.

‘Devestating Effects’

“If the Supreme Court permits the government to shut down cases without any due process, fraudsters with inside ties to the government will become even richer than they are today,” said Stephen M. Kohn of Kohn, Kohn & Colapinto LLP in Washington, which represents whistleblowers in FCA suits.

The US in 2021 received over $479 million in whistleblowers cases where the DOJ refused to participate, he said. “Don’t shoot the goose that lays the golden eggs,” he said.

Arguments over the circuit split cause a “pointless waste of legal and judicial resources,” said Eric Havian, who represents whistleblowers with Constantine Cannon LLP in San Francisco.

The Supreme Court ruling is unlikely to have a major impact on the number of dismissals, he said.

“Nonetheless, in cases where the government does exercise that power, it can have devastating effects on whistleblowers,” he said.

“It is profoundly disheartening for whistleblowers to have the government undermine years of effort through belated dismissals. Such actions have a broader impact than the case in which the dismissal occurs. It sends a signal to whistleblowers and their attorneys that moving ahead with a declined case is even riskier than previously imagined,” he said.

The Supreme Court hopefully will require the government to justify a decision to seek dismissals as well as any undue delay, he said.

Academic

The circuit split is more of an academic issue than one with much practical import, said Bob Rhoad of Nichols Liu LLP in Washington, which represents defendants in FCA cases.

“While the circuits are not in alignment as to issues of procedure and rights of the parties when it comes to the government’s efforts to voluntarily dismiss qui tam cases, the resulting dismissals are largely consistent,” he said.

“It appears that the court views Polansky as a welcomed vehicle to clarify this, and to provide sufficient guidance to put this issue to rest once and for all,” he said.

Adam Tarosky, who represents FCA defendants with Nixon Peabody LLP in Washington, said the Supreme Court is unlikely to significantly limit the government’s broad discretion to dismiss an FCA suit.

“The Supreme Court may be concerned about the length of time between the government’s decision to decline to intervene, and its decision to move to dismiss the case,” he said.

At most, the Supreme Court may attempt to limit the period during which the government must exercise its power to seek a dismissal, he said.

But the government’s authority to end a whistleblower suit shouldn’t end with its intervention decision because discovery often reveals weaknesses in whistleblower cases, he said.

4-Way Split

“The circuits are now divided a staggering four different ways, with other judges entertaining still alternative approaches,” Polansky’s petition said.

The split “is wasting judicial and party time and resources, forcing everyone to deal with the endless confusion the issue generates,” another filing from Polansky said.

The D.C. Circuit says the DOJ has an unfettered right to dismiss a whistleblower’s suit, while the Ninth Circuit requires the DOJ to show that dismissal serves a valid government purpose and that a rational relationship exists between the dismissal and that purpose, the petition said.

And the First Circuit ruled that the DOJ may secure a dismissal if it provides a court with its reasons for doing so and doesn’t transgress constitutional limits or perpetrate a fraud on the court, it said.

There is a fifth option, suggested by language in Sixth Circuit opinions, which says the government lacks the unilateral authority to dismiss a whistleblower suit after it declines to intervene, the petition said.

The government opposed the petition, asserting that the conflict Polansky identified “has had little practical significance across multiple cases over nearly two decades.”

The government also said the Third Circuit correctly determined that DOJ offered sufficient justification for seeking dismissal of Polansky’s suit that would satisfy any appeals court standard.

Executive Health’s opposition said courts have articulated slightly different standards regarding DOJ dismissal power, but “the differences are academic.”

Polansky alleged in 2012 that Executive Health violated the FCA by exploiting the difference in reimbursement rates for inpatient and outpatient services, erroneously causing hundreds of thousands of claims for medical services to be billed to Medicare as inpatient.

The U.S. District Court for the Eastern District of Pennsylvania granted the government’s motion to dismiss in November 2019. The Third Circuit affirmed in October 2021.

Susman Godfrey LLP, Haynes & Boone LLP, and Fish & Richardson PC represented Polansky. Covington & Burling LLP represented Executive Health.

The case is United States ex rel. Polansky v. Exec. Health Res. Inc., U.S., No. 21-1052, petition granted 6/21/22.

(Updated with attorney comments paragraphs 6 to 19)

To contact the reporter on this story: Daniel Seiden in Washington at dseiden@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Steven Patrick at spatrick@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com; Brian Flood at bflood@bloomberglaw.com