The Department of Justice’s efforts to dismiss a high-profile False Claims Act lawsuit have hit a snag this week. As we previously reported in an expert analysis for Law360, the DOJ filed an amicus brief in Gilead Sciences Inc. v. United States ex rel. Jeffrey Campie et al., No. 17-936 last November in which it agreed with the relators on the issue of materiality, yet took the unusual step of notifying the Supreme Court that it intended to dismiss the case pursuant to its authority under 31 U.S.C. § 3730(c)(2)(A). After the Supreme Court denied cert, the DOJ made good on its promise by moving to dismiss the Gilead case this April in the Northern District of California.
Judge Edward Chen, who presides over the Gilead case, happens to be the first judge in the nation to ever deny a motion to dismiss by the DOJ under its False Claims Act dismissal authority. In Academy Mortgage, Judge Chen denied the government’s motion to dismiss, finding that the DOJ had not conducted a sufficient investigation of the relator’s amended complaint. Judge Chen is still in a very small club, one that has now grown to two, with Judge Staci M. Yandle denying the DOJ’s motion earlier this year in one of eleven False Claims Act cases brought by the National Health Care Analysis Group. Both decisions are currently being appealed by the DOJ.
Judge Chen has not yet ruled on the DOJ’s motion to dismiss in Gilead, and yesterday asked the parties for supplemental briefing regarding any cost-benefit analysis that the DOJ conducted before deciding to dismiss the relators’ case. Judge Chen’s request could signal that he is reluctant to grant the DOJ’s motion to dismiss, as the DOJ has already detailed an extensive investigation it conducted along with the Food and Drug Administration, the anticipated burdens that would result from litigation, and its skepticism of the merits of the relators’ allegations.
But Judge Chen seems to want more – a specific cost-benefit analysis that weighs the anticipated costs to the government if the litigation were to proceed compared to the potential recovery and likelihood of that recovery for the government. Even under the standard articulated by the Ninth Circuit in Sequoia Orange, which is more stringent than the standard of the D.C. Circuit in Swift, the DOJ need only identify a “valid government purpose” for dismissing and a “rational relationship between dismissal and accomplishment of the purpose.” The burden then shifts to the relator to “demonstrate that dismissal is fraudulent, arbitrary and capricious, or illegal.” Most courts have not considered this a high bar, and have accepted the DOJ’s proffered reasons for dismissal at face value.
Judge Chen, however, appears to be taking Judge Yandle’s lead from earlier this year in which she held that the government’s decision to dismiss “must have been based on a minimally adequate investigation, including a meaningful cost-benefit analysis.” On Thursday, Judge Chen signaled that absent a specific cost-benefit analysis, he may consider the DOJ’s dismissal decision to be arbitrary.
In this author’s opinion, Judge Chen and Judge Yandle have it wrong. Requiring a specific cost-benefit analysis to avoid arbitrariness undermines an otherwise extremely deferential standard applied to the DOJ’s dismissal authority under the False Claims Act. This shifts the burden back to the government to establish that it conducted an exercise destined to be flawed from the outset, as accurately anticipating the costs and burdens of litigation, the likelihood of success, or the amount of any recovery, especially under a statute as complex as the False Claims Act, is wrought with uncertainty.
Derek Adams, a former Trial Attorney with the Department of Justice, Civil Fraud Section, is a partner in the firm’s Litigation and Government Investigations practice group. Derek has extensive experience with False Claims Act matters, and can be reached at firstname.lastname@example.org or (202) 466-8960 if you have any questions.
Views expressed in this blog are solely those of the author and do not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific situation.