Following recent changes to Department of Justice policy regarding individual accountability in government investigations of corporate wrongdoing, DOJ has recently further demonstrated its willingness to consider a flexible approach in applying the False Claims Act.
In a January 28, 2019 speech by Deputy Associate Attorney General Stephen Cox to the 2019 Advanced Forum on False Claims and Qui Tam Enforcement, DOJ reaffirmed its commitment to applying the so-called Granston Memo, which sets forth the factors under which DOJ may dismiss qui tam actions under the False Claims Act. False Claims Act enforcement remains a key DOJ enforcement priority, but DOJ is now expressly allowing government investigators to exercise discretion in identifying qui tam actions that should be dismissed.
Issued in January 2018, the Granston Memo described the DOJ’s exercise of its authority to dismiss qui tam cases brought under the False Claims Act pursuant to 31 U.S.C. § 3730(c)(2)(A). Authored by the Director of the DOJ’s Commercial Litigation Branch, Fraud Section, Michael Granston, the Memo was generally interpreted as a signal of DOJ’s greater willingness to consider dismissing certain qui tam matters pursuant to its statutory authority. Specifically, the Granston Memo set forth a list of seven factors under which the DOJ historically exercised its statutory right to dismiss qui tam actions:
- Curbing meritless qui tam matters
- Preventing parasitic or opportunistic qui tam actions
- Preventing interference with agency policies and programs
- Controlling litigation brought on behalf of the United States
- Safeguarding classified information and national security interests
- Preserving government resources
- Addressing egregious procedural errors
The Granston Memo stated that these factors were neither exhaustive nor mutually exclusive, noting that “there may be other reasons for concluding that the government’s interests are best served by the dismissal of a qui tam action.” It further suggested that, although the DOJ may exercise its authority in connection with a decision not to intervene in a qui tam matter, it may also move to dismiss the matter at a later stage of litigation.
During his January 28 speech, Cox reiterated that DOJ views the Granston Memo as part of its “gatekeeping role,” advising that “when qui tam cases are non-meritorious, abusive, or contrary to the interests of justice, they impose unnecessary costs on the Department, on the judiciary, and on the defendants.” These “bad cases” result in bad case law and consume scarce DOJ time and resources. In this regard, Cox advised that DOJ views its ability to dismiss cases as “an important tool to protect the integrity of the False Claims Act and the interests of the United States.” Although he advised that DOJ has used this authority only sparingly, Cox specifically stated that DOJ has instructed its lawyers to consider dismissing qui tam cases when they are not in the DOJ’s best interests, as it has done on roughly two dozen matters since 2017.
Indeed, two recent matters demonstrate the DOJ’s willingness to use the Granston Memo factors to dismiss matters where a relator’s case is weak and dismissal is otherwise in the government’s interest.
First, in an amicus brief filed in opposition to a petition for certiorari in Gilead Sciences, Inc. v. United States ex rel. Campie, et al., the DOJ stated that it would dismiss the relators’ qui tam on remand pursuant to Section 3730(c)(2)(A). In the underlying case, the 9th U.S. Circuit Court of Appeals had decided that the relators had adequately pled the materiality element of the False Claims Act under the standard set forth in Health Services, Inc. v. United States ex rel. Escobar, even though the agency at issue had continued to accept and pay for products that failed to comply with certain regulatory requirements. Although the brief did not reference the Granston Memo by name, DOJ stated that its decision to dismiss the matter was based upon its own investigation of relators’ allegations, as well as the potential for “burdensome discovery and Touhy requests for [agency] documents and [agency] employee discovery (and potentially trial testimony), in order to establish ‘exactly what the government knew and when,’ which would distract from the agency’s public-health responsibilities.” Accordingly, the DOJ’s decision can reasonably be read as based on the Granston Memo’s priorities of preventing interference with agency policies and programs and preserving government resources (with the added bonus of preserving a materiality standard under the 9th Circuit decision that strongly benefits DOJ).
Second, in motions filed in December 2018, DOJ moved to dismiss 10 qui tam matters filed by a business that the DOJ contends was created primarily for the purpose of filing qui tamactions. These matters included: United States ex rel. SAPF, LLC, v. Amgen, Inc. and United States ex rel. SMSPF, LLC v. EMD Serono, Inc., both in the Eastern District of Pennsylvania; United States ex rel. SMSF, LLC v. Biogen, Inc., in Massachusetts; United States ex rel. NHCA-TEV, LLC v. Teva Pharma., in the Eastern District of Pennsylvania; United States ex rel. SCEF, LLC v. Astra Zeneca PLC, in the Western District of Washington; United States ex rel. Miller v. AbbVie, Inc., in the Northern District of Texas; United States ex rel. Carle, v. Otsuka Holdings Co., in the Northern District of Illinois; United States ex rel. CIMZNHCA v. UCB, Inc., in the Southern District of Illinois; United States ex rel. Health Choice Group, LLC v. Bayer Corp., in the Eastern District of Texas; and United States ex rel. Health Choice Alliance, LLC, also in the Eastern District of Texas. The relator had dismissed an 11th related action, United States ex rel. Health Choice Advocates, LLC v. Gilead, also in the Eastern District of Texas. DOJ justified the dismissal of the matters under Section 3730(c)(2)(A) based on the government’s interests in “preserving scarce government resources and protecting important policy prerogatives of the federal government’s healthcare programs,” similarly aligning with the Granston Memo factors.
Cox’s comments and these cases serve as strong indicators that DOJ is starting to exercise the discretion granted to government investigators in the Granston Memo to dismiss unmeritorious matters. While it remains to be seen how frequently and under what circumstances DOJ will exercise this discretion, defendants should analyze the application of the Granston Memo factors in any new matter to determine whether there is a possibility of terminating litigation at a stage that would avoid costly discovery and litigation.
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