US Lacks Power to Kill Fraud Suit, Whistleblower Tells Justices

A whistleblower’s False Claims Act suit alleging that Executive Health Resources Inc. defrauded Medicare should be revived because the government failed to properly intervene in the case before it moved for dismissal, according to a brief filed with the US Supreme Court.

The FCA says the Justice Department 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 US Court of Appeals for the Third Circuit erred by concluding that the government could intervene and file a motion to dismiss after initially declining to join his case, whistleblower Jesse Polansky said in his opening brief filed Aug. 26. The Supreme Court granted Polansky’s petition to hear the case June 21.

The government may control an FCA action at its outset, but it has no right to displace a whistleblower’s exclusive control after “taking a pass,” Polansky said.

Once the government passes, the whistleblower has a “unitary right” to conduct the action that can’t be limited by the government, he said.

“The Third Circuit’s error permitted the government’s belated dismissal to wipe out a $20 million investment of time and resources in an action with billion-dollar stakes,” the brief said.

Polansky also said that when the government uses its FCA power to seek dismissal, the government doesn’t have unfettered discretion. The government must show that its basis for dismissal is reasonable and supported by the record, he said.

Such a “boundless right” is at odds with the FCA’s hearing requirement and settlement provision which require judicial oversight, Polansky said.

The Third Circuit said the government may win dismissal of a whistleblower’s suit if it satisfies the standards for voluntary dismissal provided in Rule 41(a) of the Federal Rules of Civil Procedure.

But Rule 41 is designed for a plaintiff looking to end a lawsuit without judicial review, Polansky said. The FCA, by contrast, requires a judicial hearing to review the dismissal request, which implies a review of evidence, he said.

Polansky said the Ninth Circuit’s standard for reviewing a government motion to dismiss should be applied. The Ninth Circuit requires the DOJ to show that dismissal serves a valid government purpose.

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 US 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 represent Polansky. Covington & Burling LLP represents Executive Health.

The case is United States ex rel. Polansky v. Exec. Health Res. Inc., U.S., No. 21-1052, brief 8/26/22.