Yesterday, February 17, 2021, Senator Chuck Grassley (R-IA) and Acting Assistant Attorney General of the Civil Division, Brian Boynton, highlighted the central role that the False Claims Act (FCA) has held and will continue to play in the government’s civil fraud enforcement toolkit for years to come. In prepared remarks at the Federal Bar Association’s 2021 Qui Tam Conference, Grassley confirmed that he is drafting legislation intended to curb what he called the government’s incorrect interpretation that the Department of Justice (DOJ) has unfettered authority to dismiss qui tam lawsuits brought by relators. In an apparent reference to the Supreme Court’s landmark decision in Universal Health Services v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016), Senator Grassley also asserted that the courts have weakened the statute by dismissing cases based on a misapplication of the FCA’s materiality requirement, another area that he suggested was ripe for Congressional intervention. In separate remarks, Boynton highlighted DOJ’s top priority areas for FCA enforcement in the coming years as well as tools the government is developing to increase its ability to uncover complex fraudulent schemes.
The limitations of the government’s authority to dismiss qui tam actions pursuant to 31 U.S.C. § 3730(c)(2)(A) has been a source of interest for Congress, the Judiciary, and DOJ for many years and has only increased since the release in early 2018 of the Granston Memo, which provides guidance and factors that DOJ should analyze when considering whether to move to dismiss an FCA suit brought by a relator. While DOJ’s use of its dismissal authority has increased in the past few years, it is still a rare occurrence. Nevertheless, Senator Grassley has previously voiced his disagreement with DOJ’s position that it holds unfettered authority to dismiss qui tam actions that the government believes will interfere with other policies, lack merit, or strain DOJ’s limited resources, among other factors. In his remarks yesterday, Senator Grassley asserted that the government should be required to present evidence in court to support its stated reasons for seeking a dismissal in order to provide transparency to the public and reassurance to other would-be relators that the government will not arbitrarily dismiss their claims. Several Courts of Appeals have enumerated different standards of review requiring various levels of justification for a government dismissal action of a qui tam lawsuit over a relator’s objections, including, most recently the Seventh Circuit holding that the government has an absolute right to dismiss a qui tam action under Rule 41 of the Federal Rules of Civil Procedure as a plaintiff in the litigation. See U.S. ex rel. CIMZNHCA v. UCB, Inc., 970 F.3d 835 (7th Cir. 2020). The most stringent, albeit still very deferential, is the Ninth Circuit’s “valid purpose” test. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139 (9th Cir. 1998).While Senator Grassley’s remarks could be interpreted as consistent with that standard, time will tell whether he may push for Congress to further limit DOJ’s authority.
Turning to an issue that has applicability to all manner of FCA cases, Senator Grassley also discussed the importance of the materiality analysis in determining whether an FCA claim should be permitted to proceed. While he agrees that the FCA is not a vehicle to bring parasitic lawsuits, he stated that courts have weakened the statute with holdings related to continued payment by the government even after the fraudulent conduct is known to it. Senator Grassley disparaged the notion that a qui tam case could be stopped in its tracks simply because someone in the government knew about the improper conduct but did not “take it seriously.” Senator Grassley’s comments seem to implicitly contradict the Supreme Court’s unanimous holding in Escobar in 2016, in which the Court held that the materiality analysis is “demanding,” and that it is “very strong evidence” that a requirement is not material when the government knows about the allegedly fraudulent conduct but pays a particular claim anyway.
Finally, with respect to the FCA’s ever-increasing statutory penalties, which can be imposed irrespective of the government suffering any actual damages, Senator Grassley scoffed at the idea that in some cases, penalties might represent an excessive or even unconstitutional fine. Insisting that the FCA’s penalty provisions are meant to be strong, Senator Grassley remarked that when it came to fraud against the government, “You have to come down with a sledgehammer, not a toothpick.”
Brian Boynton also delivered prepared remarks in which he summarized the government’s enforcement priorities for 2021 and beyond. Boynton listed six separate areas that the Civil Division is focused on, beginning with fraud related to the COVID-19 pandemic, for which he noted the FCA would play a “very significant role in the coming years.” Fraudulent claims and certifications related to or involving the opioid epidemic, elder care in skilled nursing facilities, electronic health records, telehealth, and cybersecurity protections rounded out the list, many of which Boynton noted were not new priority areas but are seeing increased activity due to the pandemic. Boynton stressed that qui tam whistleblowers will continue to be vital in enforcing the FCA but noted that cases brought directly by the government will continue to rise as they did in 2020, due in part to data analytics tools that are enhancing DOJ’s ability to uncover complex fraud, including COVID-19 related schemes.
Yesterday’s remarks offer a view from the top with respect to the government’s enforcement priorities under the FCA as it exists today as well as a confirmation that Congress’ next move with respect to the statute, if any, will likely be to strengthen its provisions to the benefit of relators and the government, not to create a more equitable playing field for defendants.