In United States, ex rel. Polansky v. Executive Health Resource the U.S. Supreme Court will decide whether the federal government has authority to dismiss a False Claims Act lawsuit after initially declining to proceed with the action, and if so, what standard applies.
The False Claims Act allows “relators,” including states and local governments, to bring lawsuits against those who have defrauded the federal government. Local governments, but not states, maybe be sued under the False Claims Act as well. Early on in False Claims Act litigation the federal government may intervene.
In this case, Dr. Jesse Polansky and a number of states brought a false claims lawsuit against Executive Health Resources claiming it was involved in Medicare fraud. Before trial the federal government notified the parties it intended to dismiss the entire lawsuit though it “originally opted not to proceed with the action and had not formally intervened.”
Section 3730(c)(1) of the False Claims Act states “If the Government proceeds with the action . . . [the relator] shall have the right to continue as a party to the action, subject to the limitations set forth in paragraph (2).”
Section 3730(c)(2) states “The Government may dismiss the action notwithstanding the objections of the [relator] if the [relator] has . . . [notice and] an opportunity for a hearing[.]”
Section 3730(c)(3) states “If the Government elects not to proceed with the action, the [relator] shall have the right to conduct the action. . . . When [the relator] proceeds with the action, the court, without limiting the status and rights of the [relator], may nevertheless permit the Government to intervene at a later date upon a showing of good cause.
The federal government argued, citing § 3730(c)(2), that it may “move for dismissal of the relator’s action at any point in the litigation regardless of whether it has intervened.” Polansky, citing § 3730(c)(3), argued the federal government has authority to dismiss the lawsuit “only if it intervenes at the outset and, having declined to do so, it is powerless to seek dismissal even if it subsequently intervenes.”
The Third Circuit rejected both parties’ positions. It held the federal government must intervene before it can move to dismiss, but it can seek leave to intervene at any point in the litigation upon a showing of good cause.
The Third Circuit rejected the federal government’s argument opining § 3730(c)(2) isn’t a “standalone provision” granting the federal government “unconditional authority” to seek dismissal as a non-party.
The Third Circuit rejected Polansky’s reading of the statute that the federal government “may seek dismissal only if it intervened at the first opportunity.” It opined “nowhere [in the False Claims Act] suggests that the relator’s right to control the action is exclusive vis-a-vis the [federal] Government.”
Regarding the applicable standard to apply to the United States’ motion to dismiss, the Third Circuit held Federal Rules of Civil Procedure Rule 41(a) applies.
According to the Third Circuit this means: “The relator must receive notice and an opportunity for a hearing, 31 U.S.C. § 3730(c)(2)(A), and the Government must meet whatever threshold the relevant prong of Rule 41(a) requires. If the defendant has yet to answer or move for summary judgment, the Government is entitled to dismissal, albeit with an opportunity for the relator to be heard, subject only to the bedrock constitutional bar on arbitrary Government action. And if the litigation is already past that ‘point of no return,’ then dismissal must be ‘only by court order, on terms the court consider proper.’”
Again, Polansky and the federal government both proposed different tests to decide the motion dismiss, which the Third Circuit rejected.