United States: DOJ Implements 2018 Granston Memo On False Claims Act

In early 2018, the U.S. Department of Justice announced a new policy encouraging prosecutors handling False Claims Act (FCA) cases to seek dismissal of qui tam complaints that threaten the government's interests. However, it was unclear how and to what extent prosecutors would carry out that directive. Now a year later, federal prosecutors appear to be embracing the new policy—and it is already having an effect on one case involving a drug manufacturer.

The January 2018 Granston memorandum outlined the Department's new approach to handling FCA prosecutions in "in light of the government's limited resources." Under the new policy, prosecutors are encouraged to move to dismiss qui tam claims as a way to "advance the government's interests, preserve limited resources, and avoid adverse precedent." This marked a departure from the Department's previous policy of rarely exercising its statutory authority to dismiss such claims. To guide prosecutors, the memorandum offered a nonexhaustive list of factors as to when a motion to dismiss a qui tam claim is proper. Those factors include: (1) "curbing meritless qui tams"; (2) "preventing parasitic or opportunistic qui tam actions"; (3) "preventing interference with agency policies and programs"; (4) "controlling litigation brought on behalf of the United States"; (5) "safeguarding classified information and national security interests"; (6) "preserving government resources"; and (7) "addressing egregious procedural errors." Overall, the memorandum instructed prosecutors to seek dismissal when the litigation does not serve the government's interests.

The Department's end of the year filings in a series of cases indicate that federal prosecutors are beginning to embrace the Grantson memorandum's directive.

First, in a November 2018 amicus brief to the Supreme Court in United States ex rel. Campie v. Gilead Science, Inc., the government announced its intent to move to dismiss the relator's suit, while at the same time arguing that the district court improperly dismissed the relator's claim at the pleading stage. In Gilead, the relators had alleged that a drug manufacturer misled the FDA about the source of an HIV drug's ingredients to obtain manufacturing approval and, as such, was not eligible for payment under government programs. After the trial court dismissed the claim, the Ninth Circuit reversed, finding that the relator sufficiently alleged a "material misrepresentation" to the government. Despite agreeing with the Ninth Circuit, the government informed the Supreme Court that it would move to dismiss the case because discovery would be "burdensome," "distract from the [FDA's] public health responsibilities" and "impinge on the agency decisionmaking." 

Then, on December 17, 2018, the government filed motions to dismiss in 11 FCA cases across seven federal judicial districts. According to the motions, the government is seeking to dismiss claims brought "by a professional relator" against a group of pharmaceutical companies and commercial outsourcing vendors. The government's pending motions argue for dismissal based on multiple factors outlined in the Granston memorandum, including that the relator's claims are meritless, would result in unjustified and substantial government expenditures, and conflict with "important policy and enforcement prerogatives of the federal government's healthcare programs."

Together, these filings indicate that the government is keen to utilize the Granston memorandum in future cases. In Gilead, the government proactively alerted the relator and the Court of its intent to move to dismiss at the earliest opportunity because it believed the case was burdensome and would interfere with agency operations. Similarly, the government's motions to dismiss 11 FCA cases signals an aggressive approach against relators who the government believes are abusing the FCA. These cases suggest that federal prosecutors are motivated to dismiss qui tam cases that burden the government or interfere with agency operations or decision-making.

If prosecutors continue to embrace the Granston policy, there may be greater opportunity for companies and their counsel to encourage dismissal of qui tam claims. Companies facing a qui tam complaint should work with experienced counsel to develop legal and factual grounds for dismissal based on the Granston factors. Counsel can then present the government with those grounds with the goal of achieving an early, cost-effective resolution of the case.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

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