Nearly a year ago, the Supreme Court denied certiorari in Gilead Sciences, Inc. v. United States ex rel. Campie after the government promised to seek a "Granston" dismissal—that is, move to voluntarily dismiss the case over relators' objections—on remand. On November 5, 2019, the district court granted the government's motion and dismissed relators' False Claims Act claims. See United States ex rel. Campie v. Gilead Sciences, Inc., No. 11-cv-941, 2019 WL 5722618 (N.D. Cal. Nov. 5, 2019).
In Campie, relators alleged that Gilead violated the FCA by seeking payment for an HIV medication that was made in China using non-FDA approved materials. The Ninth Circuit reversed the district court's dismissal, holding that relators adequately pleaded materiality despite the government's continued payment after learning of the alleged wrongdoing. Gilead petitioned for certiorari, and while the government in its CVSG brief supported the Ninth Circuit's narrow view of Escobar, it promised to dismiss the case on remand. The government explained that it conducted a "thorough investigation of [relators'] allegations and the merits thereof" and expressed concern that "both parties might file burdensome discovery and Touhy requests . . . , which would distract from the [FDA's] public-health responsibilities."
The case then returned to the Northern District of California. As we have written, the Ninth Circuit's decision in United States ex rel. Sequoia Orange Co. v. Gaird-Neece Packing Corp., 151 F.3d 1139 (1998), requires the government to show a "valid government purpose" and a "rational relation between dismissal and accomplishment of the purpose" to obtain dismissal. The government in Campie identified two government purposes: (1) "prevent[ing] [relators] from undermining the considered decisions of FDA and CMS about how to address the conduct at issue here," and (2) "avoid[ing] the additional expenditure of government resources on a case that it fully investigated and decided not to pursue," particularly since the FDA had "taken into account [relators'] claims in its regulatory oversight of Gilead and taken actions it deemed appropriate." Campie, 2019 WL 5722618, at *5. Relators did not dispute that these could be valid government purposes, but argued there was no factual basis to support them, relying on the same district judge's prior decision in United States v. Academy Mortgage Corp., No. 16-cv-2120, 2018 WL 3208157 (N.D. Cal. June 29, 2018).
The court disagreed and granted the government's motion. The court distinguished Academy Mortgage on the grounds that in that case "there was no indication that the government had conducted any real investigation of the FCA claim," whereas in Campie, there was "substantial evidence that . . . the United States investigated [relators'] allegations for over two years," including by reviewing pleadings, conducting interviews, reviewing documents, and consulting agency experts. Campie, 2019 WL 5722618, at *5-*6. The court also found it significant that the FDA was closely involved with oversight of Gilead, including specifically with respect to the issues raised by relators, and took corrective actions but did not stop payment. Id. at *6. As to the government's argument that dismissal was required to avoid unnecessary costs, the court held that the government was not required to perform a "quantitative" analysis (i.e., "some kind of mathematical calculation"); rather, the government simply needed to demonstrate that it "engaged in a meaningful consideration of cost and benefit such that its decision to seek dismissal is supported by a rational basis." Id. at *7. The court found the government did so because "extensive" materiality discovery "cannot be avoided" given relators' allegations. Id. at *8.
As noted, the same district judge who granted the government's motion in Campie refused to grant a Granston motion in Academy Mortgage. There, the court concluded that "the Government did not perform a full investigation of the . . . complaint" and "with its considerable resources, could have easily conducted additional investigation to assess the potential recovery . . . before moving to dismiss." Academy Mortgage, 2018 WL 3208157, at *1-*2. The government appealed, and the case is scheduled to be argued before the Ninth Circuit next week. Stay tuned for updates on the argument.
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