DOJ Should Listen to Its Own Arguments

April 15, 2019By Anne K. Walsh

As it previewed back in December, the government formally filed its motion to dismiss the high-profile False Claims Act case against Gilead Sciences, Inc.  This case has had a long history, beginning in 2010 when the Relators filed their original complaint.  After investigation, in 2013, the government declined to intervene in the action but did not at that time move to dismiss the case.  (This decision pre-dated the 2018 Granston memo, which directed  the Department of Justice (“DOJ”) to affirmatively seek dismissal in certain circumstances.)

The government likely rues its decision not to seek dismissal back in 2013, given that DOJ has been engaged in multiple rounds of briefing to dismiss the case in the ensuing six years.  Although the stated reason for aggressively seeking dismissal is “to avoid the additional expenditure of government resources on a case that it fully investigated and decided not to pursue,” the unstated concern appears to be to avoid an adverse ruling about the standard for “materiality” applied to False Claims Act cases.  The “materiality” issue has begged for more clarity since the 2016 ruling in Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016), which requires a plaintiff to allege that a misrepresentation by the defendant was “material to the government’s payment decision.”

The factors the government considers in deciding to dismiss a matter, as outlined in the recent motion to dismiss brief, are instructive to the factors the government should be using in deciding whether to decline to intervene in the first place.  For example, in Gilead, the government claims:

In addition to preserving scarce resources, dismissal is also appropriate to prevent Relators from undermining the considered decisions of FDA and CMS about how to address the conduct at issue here.  .  .  .  In this case, FDA exercised continuing regulatory oversight of Gilead’s manufacturing processes, including multiple on-site inspections of Gilead’s facilities both before and after Relators filed their complaint.  FDA took the actions that it deemed appropriate.  Relators’ case now asks a jury to find that different action was nevertheless required.

Substituting “DOJ” for “Relators” in the above excerpt arguably should lead to the same result: that DOJ should not substitute its judgment when the affected agencies, FDA and CMS, have considered and taken actions they deemed appropriate.  Taking it one step further, these same factors support a finding that the company’s conduct was not material to the government’s payment decision, which in and of itself supports dismissal.  And these factors could extend outside the FCA world to require dismissal in all instances in which DOJ attempts to base a follow-on action using the same facts known to and addressed by the agency.

It will be interesting to see how the government distinguishes this case from others in which it has “already spent resources extensively investigating Relators’ claims, reviewing the merits of the case as presented by Relators, and monitoring the case after declination.”  If this is the standard, almost every FCA matter the government declines and that the Relator continues to advance should result in an affirmative motion to dismiss no later than the close of discovery.

Categories: Enforcement