Timothy J Taylor is an Associate in our Tysons office.

The U.S. Department of Justice (DOJ) has recently issued two memos requiring closer scrutiny of borderline FCA suits by DOJ attorneys. In some instances, DOJ may even ask that such suits be thrown out. On Jan. 10, 2018, Michael Granston, Director of the Fraud Section of DOJ's Commercial Litigation Branch, issued a now-leaked memo addressing when relator-led FCA suits should be dismissed. (DOJ can do that, though some courts require a rational reason for it.) The memo identifies the following seven situations where DOJ attorneys should consider dismissal:

  • The suit is meritless: "[The] relator's legal theory is inherently defective, or the relator's factual allegations are frivolous."
  • The suit is parasitic: The relator adds no new information but still wants a cut of the public's money.
  • The suit interferes with the government's programs: The relator's suit threatens to disrupt, delay or destroy a government program or a critical government supplier.
  • The suit interferes with the government's litigation strategy: The relator's suit threatens to disrupt or delay DOJ's own enforcement measures.
  • The suit interferes with national security: The relator's suit jeopardizes classified information.
  • The suit is not worth it: DOJ must monitor even declined suits, which can cost more money than the suit could generate.
  • The suit suffers from egregious procedural errors: The relator does something to "frustrate the government's efforts to conduct a proper investigation."

Then, on Jan. 25, 2018, then-Associate Attorney General Rachel Brand issued a two-page memo limiting the use of administrative "guidance" in civil enforcement actions. The memo defines "guidance" documents as those that have not undergone notice-and-comment rulemaking — or in other words, virtually anything that is not in the Code of Federal Regulations. The memo's instructions are blunt and clear. "[T]he Department may not use its enforcement authority to effectively convert agency guidance documents into binding rules. Likewise, department litigators may not use noncompliance with guidance documents as a basis for proving violations of applicable law in [affirmative civil enforcement] cases."

Lest there be any doubt, the memo states that it applies "when the Department is enforcing the FCA, alleging that a party knowingly submitted a false claim for payment by falsely certifying compliance with material statutory or regulatory requirements." Companies should look closely when they are under investigation for purported violations of professional standards or codes, of criteria found in manuals or on websites, or of rules based on expert opinion or popular consensus. Unless those violations are pinned to an actual law or regulation, they may not be a basis for an FCA suit.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.