Supreme Court Declines to Hear Dispute Over Proper Review Standard in Government FCA Dismissals

On April 6, 2020, the Supreme Court denied the certiorari petition in United States ex rel. Schneider v. JPMorgan Chase Bank, N.A. (No. 19-678). As discussed in our prior article on Schneider, the central question raised by the petition was whether the United States—pursuant to its authority to dismiss FCA actions under 31 U.S.C. § 3730(c)(2)(A)—is entitled to "absolute deference" when it moves to dismiss a suit over the relator's objections. Cert. Pet. at i.

At the heart of the petition was an alleged circuit split. The Ninth and Tenth Circuits have adopted a standard under which the United States, to invoke its authority under § 3730(c)(2)(A), must (1) identify a valid governmental purpose for the dismissal and (2) establish a rational relation between the dismissal and accomplishment of that purpose. United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1339, 1145 (9th Cir. 1998); see Ridenour v. KaiserHill Co., L.L.C., 397 F.3d 925, 936 (10th Cir. 2005). By contrast, in the DC Circuit, where Schneider arose, the United States has an "unfettered right" to dismiss an FCA suit against the relator's wishes. Swift v. United States, 318 F.3d 250, 252 (DC Cir. 2003).

In its response to the Schneider cert petition, the central argument of the United States was that the "slight difference" between the Sequoia Orange and Swift standards did not merit the Supreme Court's review, given that:

[A]ll the courts of appeals that have considered the issue agree that the court should give substantial deference to the government's dismissal decision; the only difference concerns the degree of that deference. When the standards are properly applied, the slight difference between the courts' approaches will very rarely if ever be outcome-determinative; and the government's motion to dismiss in this case was properly granted under either standard.

U.S. Br. in Opp. at 15–16. The FCA defendants in the suit filed a brief advancing similar arguments. Resps. Br. in Opp. at 8–10, 20–22.

As per its usual practice, the Supreme Court offered no explanation for rejecting the request for review. But its order denying the petition provides a potential clue: It states that Justice Kavanaugh, who sat on the DC Circuit panel that ruled on a prior stage of the Schneider suit, "took no part in the consideration or decision of [the] petition." Justice Kavanaugh would almost certainly also recuse himself from any decision on the merits, and the Supreme Court typically shies away from taking cases with less than a full bench, believing instead that an issue of genuine importance will recur in another case—one in which all nine Justices can participate.

The Court may also have agreed that—as the brief filed by the United States pointed out—at this point, the difference in the standard for dismissals under § 3730(c)(2)(A) has not proven outcome-determinative in the courts of appeals. Even the circuits that apply relatively rigorous review to governmental dismissal motions have so far found that standard satisfied; no circuit has yet overturned a district court's grant of such a motion, nor upheld a denial. Until that happens, the Court may be content to sit on the sidelines. For that reason, we will be watching with particular interest two cases in which the government has appealed from decisions denying motions under § 3730(c)(2)(A): United States ex rel. Thrower v. Academy Mortgage Corp., No. 18-16408 (9th Cir.), and United States v. CIMZNHCA, LLC, No. 19-2273 (7th Cir.). Should either circuit affirm, the likelihood of Supreme Court intervention could increase substantially. [Disclosure: Allon Kedem worked on Thrower while he was at the Department of Justice.]

© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.