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Whistleblower Hopes Supreme Court Will Curb DOJ Dismissal Power

Dec. 5, 2022, 10:00 AM

The US Supreme Court on Tuesday will hear a whistleblower argue that his False Claims Act suit should be revived because the Justice Department—which sought and won dismissal—didn’t intervene in the case in time.

Jesse Polansky, who sued Executive Health Resources Inc. alleging Medicare fraud, says the government lost the right to seek dismissal of his case when it initially declined to get involved.

If the Supreme Court agrees with Polansky that the DOJ can miss its chance to seek dismissal, that will have significant implications for the government, said Debra Schreck, who represents FCA defendants with Arnold & Porter Kaye Scholer LLP in New York.

“For example, the government may spend much more time and resources early on investigating relators’ claims before it loses the ability to rein in unmeritorious cases— brought on its behalf—that could undermine important government interests and drain resources,” she said.

If the Supreme Court sides with Polansky it “would undercut the government’s ability to manage FCA litigation, and could raise constitutional concerns,” said Shamis Beckley, who represents FCA defendants with Cooley LLP in Boston.

But there’s a lot at stake for whistleblowers too, said Stephen Hasegawa, who represents FCA plaintiffs with Phillips & Cohen LLP in San Francisco.

“The government says that they can dismiss your case at the last minute for any reason or for no reason at all, even after you’ve put years of time and effort into it, and even if you’re likely to succeed. That doesn’t make sense for anybody,” he said.

“A ruling giving the government what it wants in this case could ultimately dissuade whistleblowers from coming forward,” he said.

Separation of Powers

Under the FCA, the DOJ may move to end a whistleblower suit, even over the whistleblower’s objection, by giving notice of a motion to dismiss and after an opportunity for a hearing on the motion. Polansky’s suit was dismissed because the government showed that it had legitimate concerns about litigation costs and burdens on its resources. The US Court of Appeals for the Third Circuit upheld that dismissal.

Executive Health, a subsidiary of UnitedHealth Group Inc., argued that recognizing the government’s power to dismiss whistleblower suits at any time protects constitutional separation-of-powers principles. Depriving the government of that authority would make the qui tam provisions of the FCA unconstitutional, it said.

Congress has authorized whistleblowers under the FCA to exercise part of the executive power that belongs to the president, Executive Health said. Taking away the ability to control an FCA suit would therefore intrude on the executive branch’s prosecutorial discretion, it said.

The president’s constitutional obligation to ensure that the laws are faithfully executed would be frustrated if he or she lacked the ability to end a whistleblower suit, it said.

DOJ Burden

The Supreme Court could also decide that the DOJ has to make a case for its dismissal request beyond just satisfying the notice and hearing requirement.

“The current Supreme Court has sometimes taken a pretty broad view of executive power, but I hope it remembers that qui tam suits are a critical part of enforcing our laws for the benefit of taxpayers,” Hasegawa said.

Polansky contends that the Third Circuit deepened a circuit split when it ruled that the government can stop a whistleblower suit just by satisfying the standard for voluntary dismissal in Rule 41(a) of the Federal Rules of Civil Procedure.

He argues the proper standard is the one established by the Ninth Circuit, which requires the DOJ to show that dismissal serves a valid government purpose.

FCA defendants prefer the D.C. Circuit standard, which says the government has an unfettered right to dismiss an action.

And the First Circuit holds that dismissal is proper if the government provides a reasons for doing so and doesn’t transgress constitutional limits or perpetrate a fraud on the court, the petition said.

Under any standard, the DOJ doesn’t seek dismissal “much at all—I don’t think anyone would disagree that it’s rare,” said Frederick M. Morgan Jr., who represents whistleblowers with Morgan Verkamp LLC in Cincinnati.

Whatever standard the Supreme Court adopts, it may not have a major impact on FCA litigation.

No appeals court has ever held that any whistleblower suit should proceed over the government’s motion to dismiss, the DOJ told the high court in a May brief.

Multiple appeals courts have upheld dismissals—without deciding what standard applies—because “the choice among the competing standards typically makes no practical difference,” the government said.

But the high cost of defending FCA suits—even one dismissed by the government—has FCA targets hoping for the unfettered discretion standard, the US Chamber of Commerce said in a brief.

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, oral argument 12/6/22.

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; Nicholas Datlowe at ndatlowe@bloomberglaw.com; Brian Flood at bflood@bloomberglaw.com