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Government Obtains Early Dismissal of Relator’s False Claims Act Suit

A U.S. District Court in Idaho dismissed a recent False Claims Act (FCA) case upon the request of the government, pursuant to the government’s authority under the FCA statute to seek early dismissal of such suits in lieu of intervening or allowing the relator to proceed on his or her own.

The suit revolved around a pair of companies that received research grants from the Department of Energy (DOE) to research issues related to nuclear energy.  Among other things, the agreement between the companies and DOE allowed the companies to patent any discoveries, but required the companies to inform the government about the discoveries and to grant the government an irrevocable license to use the patented technology at no cost.  The relator claimed that the companies made such a discovery and sought to patent it, but failed to inform the government and to provide the license.  The companies claimed that the discovery at issue was not covered by the relevant agreement.  In the interim, the patent office declined to issue the requested patent, and the companies were in the process of an ongoing appeal before the patent office.

Under the FCA, private individuals—known as relators—can file suit on the government’s behalf against entities which allegedly defrauded the government, and will receive a share of any recovery.  After filing, the government will normally either intervene and prosecute the suit itself, or else not intervene and let the relator prosecute the suit on the government’s behalf.  Here, the government chose a less-common third option and moved to dismiss the case pursuant to its power to seek dismissal over the relator’s objection.

The government claimed that the litigation was contrary to its interests for several reasons.  First, since the patent was not issued, the government was not harmed by the companies’ actions.  If the technology is not patented, the government can freely use it.  Second, if the suit continues, the government will need to expend resources to monitor the case, and DOE will likely need to produce information in discovery, which would burden the agency.  Third, the litigation would likely interfere with the ongoing work between the companies and DOE, and would likely discourage other companies from engaging in similar research programs with DOE.  Fourth, the government asserted that the FCA claims were legally defective (though the suit could still be dismissed upon the government’s request even if they were otherwise valid).

Based on the foregoing, the court found that the government had identified a valid governmental purpose for the dismissal, and that there was a rational relationship between dismissal and accomplishment of that purpose.  Further, the relator was unable to show that the government’s request was fraudulent, arbitrary and capricious, or illegal.  Accordingly, the court dismissed the suit over the relator’s objections.  The court noted that the government was not barred from reasserting the suit if it later determined that an FCA suit against the companies was appropriate.

This decision comes against the backdrop of the “Granston Memo,” a January 2018 memo from the Department of Justice (DOJ) which stated that DOJ should give greater consideration to its option to seek early dismissal of FCA cases where doing so could better serve the government’s interests. Historically, this power was used very rarely.  In determining whether to seek early dismissal, DOJ will consider issues such as: 1) whether the suit is meritless; 2) whether the suit duplicates other government investigations; 3) preventing interference with agency policies and programs; 4) controlling litigation brought on behalf of the United States; 5) safeguarding national security and classified information; 6) preserving government resources; and 7) whether the relator has cooperated with the government.

For the text of the decision, click here.