Supreme Court Declines to Resolve Circuit Split Over Deference Owed to Department of Justice Decisions to Dismiss Whistleblower Suits Brought Under the False Claims Act

Litigation News

Supreme Court Declines to Resolve Circuit Split Over Deference Owed to Department of Justice Decisions to Dismiss Whistleblower Suits Brought Under the False Claims Act

On April 6, 2020, the US Supreme Court denied a petition for certiorari in an appeal involving the amount of discretion the Department of Justice should have in obtaining dismissal of whistleblower suits brought under the qui tam provisions of the False Claims Act. Under 18 U.S.C. § 3730(c)(2)(A) of the FCA, the Department of Justice can dismiss an FCA action over the objections of the whistleblower, known as the “relator,” who brought the suit if the whistleblower “has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.

In recent years, the Department of Justice has used this provision to obtain dismissal of certain cases that would drain government resources if permitted to proceed, among other reasons. Courts have been split, however, regarding the amount of discretion that should be afforded to the Department of Justice when deciding whether to dismiss a whistleblower suit under this provision. The DC Circuit has held that the Department of Justice should have “virtually unfettered discretion” to dismiss in these circumstances, while the Ninth Circuit has said that the Department of Justice must have a “valid government purpose” and show “a rational relation between dismissal and accomplishment of the purpose” to justify a dismissal. The Supreme Court’s denial of the petition leaves the circuit split intact.

The Court denied the petition for certiorari in United States ex rel. Schneider v. JPMorgan Chase Bank Nat’l Ass’n, No. 19-678.

DOJ News

Biopharmaceutical Company Agrees to Pay $6.5 Million to Resolve FCA Allegations

MiMedx Group Inc., a biopharmaceutical company based in Marietta, Georgia, has agreed to pay $6.5 million to resolve allegations that it violated the FCA by knowingly submitting false commercial pricing disclosures to the U.S. Department of Veterans Affairs (“VA”). According to the Department of Justice, MiMedx submitted false information to the VA regarding its commercial pricing practices, which enabled it to charge the VA inflated prices for the human tissue graft products that it manufactures. The allegations arose from a whistleblower suit filed by former MiMedx sales representatives in the US District Court for the District of Minnesota under the qui tam provisions of the FCA. The former sales representatives will receive a $1,625,000 share of the settlement.

See here for the DOJ press release.

Retail Drugstore Chain Rite Aid Agrees to Pay $4.75 Million to Resolve Controlled Substances Act Violations

Rite Aid, a retail drugstore chain, has agreed to pay $4.75 million to resolve allegations that, in violation of the Controlled Substances Act, its employees recorded false or incomplete information about customers who purchased tens of thousands of products containing pseudoephedrine. The Controlled Substances Act requires retail sellers to maintain a logbook of customers who purchase pseudoephedrine, an ingredient found in many cough and cold medicines, which is also used by some to illegally manufacture methamphetamine.

In settling, Rite Aid admitted that, between August 2009 and January 2014, certain of its employees entered inaccurate or incomplete information about customers, including their names and addresses, in the logbook in connection with tens of thousands of sales. The Department of Justice reported that, shortly after the alleged violations were brought to Rite Aid’s attention, the company voluntarily implemented enhancements to its process for sales of pseudoephedrine to better ensure compliance with federal law.

See here for the DOJ press release.