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SCOTUS To Review DOJ Authority In FCA Whistleblower Lawsuit

On June 21, 2022, the Supreme Court of the United States granted certiorari in Polansky v. Executive Health Resources, a False Claims Act (“FCA”) lawsuit appealed to the Third Circuit after the District Court dismissed at the request of the government. The Supreme Court’s decision is anticipated to resolve a split among the circuit courts of appeal regarding the legal standard applicable when the Department of Justice (“DOJ”) moves to dismiss qui tam actions brought on behalf of the government.

The FCA, 31 U.S.C. §§ 3729 et seq., allows private citizens, known as “relators” or “whistleblowers,” to bring lawsuits against entities suspected of misusing government funds. These lawsuits are known as “qui tam” actions, derived from the Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” meaning “one who sues in this matter for the king as well as for himself.” If the suit is successful, the relator is entitled to a share of the recovered funds.

Importantly, because a qui tam action is filed on behalf of the government, whistleblowers must first allow the DOJ to investigate their claims. The government may then elect to take over prosecution of the case, do nothing and allow the relator to prosecute the case, or move to dismiss the lawsuit.

The instant action arose in 2012, when Dr. Jesse Polansky, a physician-consultant, sued his employer, Executive Health Resources Inc. (“EHR”), for unlawfully enabling its client hospitals to over-bill Medicare. Polansky alleged a scheme whereby EHR certified services that were not medically reasonable or necessary and inpatient services that should have been provided on an outpatient basis. These certifications allegedly caused the submission of false claims to the government. After two years of investigating Polansky’s claims, the DOJ declined to take over prosecution of the case, allowing Polansky to go it alone.

EHR filed a motion to dismiss the lawsuit, arguing that Polansky failed to sufficiently describe the “who, what, when, where, and how” of the alleged fraud as required under the heightened pleading standard of Federal Rule of Civil Procedure 9(b). In July 2016, the United States District Court for the Eastern District of Pennsylvania disagreed and largely denied the motion, finding that the “relator’s detailed and specific allegations of EHR’s role within the hospital review process and its influence on its clients’ final billing decisions are sufficient to plead causation” under the FCA.

However, despite the favorable District Court ruling, the Department of Justice moved to dismiss the lawsuit over the objections of Polansky and his lawyers in mid-2019. Although recognizing the circuit court split concerning when the Department of Justice can achieve dismissal of a whistleblower’s lawsuit under the FCA, the District Court found that the government had met its burden of proof under any applicable legal standard and dismissed the case.

Polansky then appealed the District Court’s decision to the Third Circuit Court of Appeals. In December 2021, the Third Circuit held that the government must first intervene in an FCA lawsuit and meet the civil dismissal standard of Federal Rule of Civil Procedure 41(a) before it may seek dismissal of the action.

This ruling presented a further split from the already misaligned circuit courts. The Third Circuit sided with the Seventh Circuit in requiring the government to intervene before it may seek dismissal.[1] On the opposite end of the spectrum, the District of Columbia Circuit has held that the government has an “unfettered” right to dismiss whistleblower lawsuits. [2] The Ninth and Tenth Circuits use a burden-shifting approach, whereby the government must establish a (1) “valid government purpose” and a (2) “a rational relation between dismissal and accomplishment of the purpose.” If accepted, the relator then needs to show that dismissal would be fraudulent, arbitrary and capricious, or illegal to avoid dismissal. [3] The First Circuit recently adopted a softer version of the Ninth and Tenth Circuits’ standard, determining that while the government does not bear the burden of proof on dismissal, it must provide reasons so the relator can attempt to persuade the government to change its mind. If the relator is unsuccessful, the court should dismiss unless the government is acting unconstitutionally or fraudulently. [4] Finally, the Second and Fifth Circuits have thus far avoided establishing any standard. [5]

The Supreme Court’s opinion is expected to provide much-needed clarity on the issue.

The two questions presented in Polansky’s petition are: (1) Does the government have the authority to dismiss a previously declined False Claims Act suit? (2) If yes, what standard dictates when the government may dismiss a non-intervened lawsuit? Polansky will likely argue that not only should the DOJ not have been able to dismiss his case, but that the government abdicated its right to intervene when it failed to do so earlier in the litigation.

Updates will be posted to this blog as the matter progresses. The caption for the lawsuit is Polansky v. Exec. Health Res., Case No. 21-1052, filed in the Supreme Court of the United States.

Under the FCA’s whistleblower provision, individuals may bring lawsuits on behalf of the Federal Government against entities suspected of misusing government money. Whistleblowers are eligible to receive up to 30 percent of the recouped funds. Federal whistleblower programs, such as the FCA framework, have recovered billions in taxpayer dollars and are an important part of the government’s anti-fraud toolkit.

The legal team at Miller Shah LLP has significant experience representing whistleblower matters. If you have any questions regarding this subject or this post, please contact Stephen Rutkowski (strutkowski@millershah.com) or John Roberts (jcroberts@millershah.com). The firm can also be reached toll-free at (866) 540-5505.

[1] United States ex rel. CIMZNHCA, LLC v. UCB, Inc.,970 F.3d 835, 839 (7th Cir. 2020).

[2] Swift v. United States, 318 F.3d 250, 253 (D.C. Cir. 2003).

[3] United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139, 1145 (9th Cir. 1998); Ridenour v. Kaiser-Hill Co., 397 F.3d 925, 936 (10th Cir. 2005).

[4] United States ex rel Borzilleri v. Bayer Healthcare Pharms., Inc.,No. 20-1066, 2022 WL 190264, at *1 (1st Cir. Jan. 21, 2022).

[5] United States ex rel. Borzilleri v. Abbvie, Inc., 837 F. App’x 813, 816 (2d. Cir. 2020); United States ex rel. Health Choice All. V. Eli Lilly & Co., 4 F.4th 255 (5th Cir. 2021).

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