The federal government can move to dismiss any False Claim suit, even over the objection of whistleblowers who stand to gain financially from ongoing litigation, the Supreme Court ruled Friday morning.
Experts have previously told McKnight’s Long-Term Care News that a decision allowing the government more rights to dismiss would likely reduce the number of meritless cases skilled nursing and other healthcare providers face.
In United States, ex rel. Polansky v. Executive Health Resources, the Court had to decide whether government attorneys can seek the dismissal of cases in which they don’t see enough merit to get involved, and what standards should be adopted to allow those dismissals.
The court ruled 8-1 that states may move to dismiss such qui tam actions whenever they have intervened — whether that be in an early period when the case is sealed or later as new details emerge or the government finds the case baseless.
The decision is an important one for nursing homes, whose owners are often targeted in high-dollar suits in which “relators,” or private individuals, attempt to bring a case on the government’s behalf, alleging misuse of federal dollars. Relators stand to collect triple the amount of financial damage alleged. The number of False Claims allegations has exploded since Congress established their right to sue in 1986.
Taking the drag out of False Claims
Though most claims are deemed meritless by the government, which can either decide to help a relator with a case or pass on it, even those rejected for federal litigation can drag on for years or result in costly settlements.
“The court ruled that the government does not have to take over the case in order to get it dismissed, it can let the relator litigate the case and then intervene purely for the purpose of having the case dismissed,” appellate expert Kirk McGill, special counsel at Hall Estill, told McKnight’s Long-Term Care News. “As someone who does qui tam suits, that is a major disincentive for a law firm to bank roll a qui tam suit because you could do years of work, as occurred in this particular case, and the government can dismiss the case out from under you.”
Jesse Polansky, a doctor who accused a firm of helping hospitals bill inpatient rates for outpatient procedures, wanted to block the government from dismissing a case once it had approved a post-seal motion to intervene.
The majority opinion, authored by Justice Elena Kagan, splits the difference. It holds that the government can dismiss a case only in which it intervenes, but refutes Polansky’s argument that the timing matters.
The court also said District Court judges considering a motion to dismiss an FCA action over a relator’s objection should use the existing Federal Rule of Civil Procedure 41(a), which governs voluntary dismissal of ordinary civil litigation.
Former US Department of Justice Attorney Alex Hontos called that a “very low” bar.
“This is a win for the government (and those defendants seeking so-called “Granston dismissals” of qui tam suits),” Hontos said in an email Friday. “More FCA cases will be dismissed over the objection of relators.”
He predicted that the Justice Department, given the green light by the High Court, might now move quickly to dismiss more “unmeritorious or burdensome claims.” But the ruling and its lone dissenting opinion may lead to even bigger False Claims changes ahead.
Dissent raises more questions
Justice Clarice Thomas argued that he would have sent the case back to the Third Circuit and allowed Polansky to continue his case, denying the government the right to dismiss.
But in his dissent, he also said he’d have had the court consider the constitutionality of the entire case.
“The FCA’s qui tam provisions have long inhabited something of a constitutional twilight zone. There are substantial arguments that the qui tam device is inconsistent with Article II and that private relators may not represent the interests of the United States in litigation,” Thomas wrote.
Justices Brett Kavanaugh and Amy Coney Barret concurred with Thomas on that issue, with Kavanaugh writing that the Supreme Court should consider the arguments on the Article II issue in an appropriate case.
While McGill said Friday’s ruling would affect only a narrow group of cases, he predicted more to come based on Thomas’ dissent.
He called the three justices’ combined concerns “a very big deal for anyone who does business with the government.”
The False Claims Act “is an anti-fraud measure of supreme importance that has worked successfully to recover huge amounts of money for the government over the past 150 years. That the entire framework could be struck down by the Supreme Court is a big deal,” McGill said.
“Just the risk that the court might do so could disincentivize coming forward in qui tam suits because if the court struck down the qui tam provisions while they’re suit was on going, then they would get no reward.”
Hontos predicted that healthcare defendants would now be more likely to deploy constitutional challenges as part of pre-trial motions practice in light of the Polansky decision.“If the Supreme Court declares, in a future case, that the FCA’s qui tam provision is constitutionally infirm, that would change decades of understood law,” he said.