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FCA Qui Notes
December 29, 2023

DOJ Wants Out: District Court Grants Government’s First Post-Polansky (c)(2)(A) Motion to Dismiss Relator’s Case

Qui Notes: Unlocking the False Claims Act

Earlier this month, in U.S. ex rel. USN4U v. Wolf Creek Federal Services, the U.S. District Court for the Northern District of Ohio dismissed a qui tam case in what appears to be the first-reported post-Polansky dismissal of an FCA action based on the government’s motion to dismiss under 31 U.S.C. § 3730(c)(2)(a). As readers of this blog know, the Supreme Court’s June 2023 decision in U.S. ex rel. Polansky v. Executive Health Resources Inc. held that courts should show the government “substantial deference” when it files such “(c)(2)(A)” dismissal motions. In Wolf Creek, the district court did just that.

The Wolf Creek relator was a corporate entity created by one of the defendants’ former employees. It filed suit in 2017, alleging that the defendants used false price proposals in order to fraudulently secure a government contract to repair and maintain NASA’s Glen Research Center facility in Ohio. After the government declined intervention, the district court granted the defendant’s Rule 12(b)(6) motion to dismiss the qui tam complaint, but the Sixth Circuit reversed the dismissal. On remand, the parties commenced discovery, which ultimately led the defendants to file a sealed motion to dismiss and disqualify the relator for breaching the FCA’s statutory seal requirements. Unsealed filings reveal that the defendants alleged that the corporate relator’s sole member told other people about his then-sealed qui tam case, that he enlisted another one of the defendants’ employees to conduct a parallel investigation, and that he concealed these seal breaches from the government and the defendants (including through allegedly perjurious deposition testimony). The government conceded that the relator’s seal violation was “severe” but nonetheless opposed dismissal on the grounds that the breach was harmless. After holding an evidentiary hearing, the court denied dismissal but deferred ruling on the relator’s disqualification. Citing “serious concerns” about “whether the Relator should continue to act as a representative for the U.S. in this lawsuit,” the court “asked the Government to consider taking over the case.”

In response to the court’s invitation, the Department of Justice (DOJ) moved to intervene and to dismiss the case under (c)(2)(A). In addition to sharing the court's concerns about the relator’s lack of credibility, DOJ also cast doubt on the merits of the relator’s claims, citing how the only evidence of any inflated contract pricing came from the opinion of the relator’s expert, who was contradicted by multiple NASA employees’ deposition testimony. Given the government’s concerns about the relator’s ability to litigate the case, DOJ asserted that it would bear “considerable” burdens if it took over the litigation: “it would have to find its own expert to evaluate the allegations and the evidence produced during discovery and commit significant time and resources, at the expense of other important matters, to brief any dispositive motions and prepare for trial in this case.” And even absent intervention, DOJ invoked the burden of “spend[ing] significant time and resources continuing to monitor the proceedings, through trial, and submit briefs regarding the legal issues when requested by the Court.” The relator opposed the motion, arguing that DOJ lacked good cause to intervene because it did not adequately investigate the qui tam claims, and that DOJ’s asserted burdens — whether it intervened or not — were “pretextual.”

The court granted DOJ’s motion without holding a separate hearing. Although Polansky confirmed that the FCA’s statutory text guarantees relators an “opportunity for a hearing” before qui tam cases are dismissed under (c)(2)(A), the Wolf Creek court noted that “the Relator did not request a hearing and … any hearing on this matter would not likely have added anything to the detailed recitation of the evidence contained in the briefs filed by the Relator, the U.S. and Wolf Creek.” The court granted DOJ’s motion to intervene, noting that “[s]howing ‘good cause’ in this context is not burdensome” and “that the Government always has the predominant interest in a qui tam case.” The court then determined that the government satisfied Federal Rule of Civil Procedure 41(a)(2)’s standard for dismissal, because the government “fully explained why it seeks dismissal of Relator’s claims — a lack of evidence and unlikelihood of success on the merits, plus the burden on the U.S. should the case continue[].” The court further opined that the government “should not be required to prosecute or even continue ‘monitoring’ this seven year old case, which seems unlikely to result in any significant award,” particularly given the relator’s credibility issues.

The Wolf Creek opinion underscores the government’s broad dismissal authority under (c)(2)(A) in the wake of Polansky, and the minimal showing needed to support, as Polansky put it, “a reasonable argument for why the burdens of continued litigation outweigh its benefits.” We at Qui Notes will continue to watch for other cases where the government intervenes and seeks to dismiss the action.

© Arnold & Porter Kaye Scholer LLP 2023 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.