US Supreme Court Rules 8-1 in Favor of Government FCA Dismissal Authority
On June 16, 2023, in United States, ex rel. Polansky v. Executive Health Resources, Inc., the US Supreme Court addressed the government’s authority to dismiss a qui tam False Claims Act (FCA) suit over a relator’s objection when the government initially declines to intervene in the litigation.
In a case deemed “not a close call” by Justice Elena Kagan, writing for an eight-justice majority, the Court held that the federal government may dismiss a qui tam suit at any time during litigation of the case as long as it first intervenes in the case and satisfies Federal Rule of Civil Procedure 41(a), and shows requisite good cause. Despite the somewhat straightforward nature of the ruling that resolved a circuit split on the issue, Justice Clarence Thomas — in a solo dissent — called into question the entire nature of the FCA’s qui tam relator provision by questioning whether allowing a qui tam relator to prosecute claims of the government violates Article II of the US Constitution. Two other justices agreed that this constitutional question should be addressed by the Court in an appropriate case.
The case commenced in 2012 when Dr. Jesse Polansky filed a qui tam FCA action against Executive Health Resources (EHR). Polansky alleged that EHR was charging inpatient rates for what were actually cheaper, outpatient services. The federal government initially elected not to intervene after being served with the suit. By 2019, after costly discovery and other prolonged pre-trial litigation, the federal government concluded that the burdens of the suit outweighed its potential value and subsequently intervened to file a motion to dismiss. The district court granted the motion, and the US Court of Appeals for the Third Circuit affirmed.
In its decision upholding the Third Circuit’s opinion, the Supreme Court reiterated that the government does not relinquish its status as a “real party in interest” even if it initially declines to intervene in an FCA case. Slip op., at 3 (quoting United States ex rel. Eisenstein v. City of New York, 556 U.S. 928, 930 (2009)). Conducting a careful analysis of the various subsections in § 3730(c) (outlining the “Rights of the Parties” in FCA actions), the Court confirmed that “the timing of the intervention makes no difference,” and any other interpretation would “put the statute ‘at war with itself.’” Id. at 12, quoting United States v. American Tobacco Co., 221 U. S. 106, 180.
In his solo dissent, Justice Thomas had a very different conclusion. He interpreted § 3730(c) of the FCA to preclude the federal government from seeking dismissal if it does not intervene during the 60-day “seal period” at the outset of a case because, after that period of time, the relator becomes solely responsible for “conduct[ing] the action” and even if the government intervenes later, the “court [may not] limit the status and rights” of a relator. Slip op., at 30 (quoting §3730(c)(3)) (Thomas, J., dissenting). Thus, when the government does not initially intervene, it cannot later force the relator to abandon the case and forfeit its prospective right to a portion of the proceeds.
The timing issue aside, the Court also considered the appropriate burden that the government must meet when seeking dismissal of a qui tam action. The Court held that voluntary dismissals under Rule 41(a), generally given substantial deference by courts, are the most analogous comparator. Although the Court acknowledged that it “has never set out a grand theory” regarding Rule 41(a)’s requirements, Slip op., at 19, the majority agreed that, given its fact-dependent application, the same deference should apply in FCA cases.
Lurking Legal Issues — Are Qui Tam Actions on Constitutional Life Support?
Another aspect of Polansky that practitioners should note is the shared interest of Justices Thomas, Brett Kavanaugh, and Amy Coney Barrett in taking a future case to examine whether FCA qui tam actions violate Article II of the Constitution. More specifically, Justice Thomas asserted in his dissent that FCA qui tam actions occupy “a constitutional twilight zone,” and noted that a “substantial argument” exists that private individuals cannot wield the executive power of the United States on their own.
Justice Kavanaugh, who concurred in the judgment but advanced an observation similar to that of Justice Thomas, was joined by Justice Barrett, meaning that there is a faction of at least three justices who are inclined to consider the issue in the right case, and only one additional vote would be necessary to grant certiorari.
Takeaway and Guidance
What does this mean for FCA qui tam actions? From the view of Justice Kagan and the majority, the answer is clear — the government has the ability to intervene at any point in the litigation, not merely at the outset, and its discretion in choosing to dismiss a qui tam action is extremely broad.
But the dissent and concurrence, though only representative of three Justices, are not insignificant. Future cases could provide the opportunity for the Court to assess the constitutionality of FCA qui tam actions. One such foreseeable scenario is a dispute in which the government elects not to intervene, the relator continues to pursue the case, and the ultimate result is a significant, favorable outcome for the defendant. A ruling that such suits violate Article II would effectively upend the traditional concept of “whistleblowers” (a common euphemism for qui tam relators) to alert the federal government to improper conduct, and dramatically reshape the scope of the FCA itself.
Additional research and writing from Meredith Gillespie, a 2023 summer associate in ArentFox Schiff's Washington, DC office and a law student at Wake Forest University School of Law.
 Currently, relators can receive a portion of the government’s recovery in successful cases – 15-25% when the government intervenes, and up to 30% when it does not. See §§ 3730(d)(1)-(2).