By Jason C. Lynch
DOJ’s prerogative to dismiss qui tam complaints is center stage after the much-discussed “Granston Memo.” On April 3, 2019, the Eastern District of Pennsylvania granted DOJ’s motion to dismiss a qui tam complaint brought by two relators, one of which was a shell company formed for the purposes of bringing the suit.
The company, SMSPF, LLC, was part of a group of entity-relators that had brought 12 qui tam actions in eight districts, alleging substantially the same kickback scheme to induce doctors to prescribe Rebif, a multiple sclerosis medication. The government investigated the case for 18 months—relatively quick in the FCA world—and concluded that the case lacked merit. The government moved to dismiss the case because “continuing to monitor, investigate, and prosecute the case will be too costly and contrary to the public interest.” Op. at 3.[1]
The court first observed a split in authority over the government’s prerogative to dismiss qui tam complaints under 31 U.S.C. § 3730(c)(2)(A). The Ninth and Tenth Circuits require the government to justify its decision by showing that dismissal is related to a valid governmental purpose, whereas the D.C. Circuit gives the government unfettered discretion. The Third Circuit, which includes E.D. Pa., has not weighed in
The district court adopted the “rational relationship” test from the Ninth and Tenth Circuits. The statutory requirement for a hearing would be meaningless, the court reasoned, if the government had unfettered discretion. And in this case, the court found that DOJ had articulated legitimate government interests: “litigation costs” and “conflict with important policy and enforcement prerogatives of the federal government’s healthcare programs.” Op. at 8, 9. The court rejected the relators’ argument that DOJ was merely hostile to the corporate relator as a “professional relator.”
This issue may go to the Third Circuit and, if the split deepens, eventually to the Supreme Court. We shall see.
[1] DOJ rejected anticipatorily the relators’ attempt to amend: “Having had the opportunity to review substantially similar amendments in numerous other cases filed by [SMSPF’s parent company], [DOJ] d[id] not believe the newly-added details w[ould] change its analysis or request for dismissal.” Op. at 3 n.11 (quoting motion to dismiss).
