The Intricacies of Qui Tam Actions and the Role of Government Dismissals

In the world of legal battles, few are as complex and as fraught with procedural intricacies as qui tam actions brought under the False Claims Act (“FCA”).  The qui tam provision of the FCA allows private individuals, known as relators, to file lawsuits on behalf of the government and if successful, relators can receive a portion of the recovered damages.  A recent case, United States ex rel. John Doe v. Credit Suisse AG, offers a glimpse into the procedural labyrinth that governs these actions and underscores the delicate balance between private citizens’ rights to pursue fraud claims and the government’s overarching authority to control litigation brought on its behalf.

In this case, John Doe, a former employee of Credit Suisse, alleged that the bank continued its criminal conduct of helping U.S. taxpayers shield offshore assets even after pleading guilty to conspiracy charges in 2014.  Doe claimed that Credit Suisse’s failure to disclose this ongoing conduct allowed it to avoid paying additional penalties, thus violating the FCA’s “reverse false claims” provision.  The government moved to dismiss Doe’s action, arguing that his allegations did not state a viable claim under the FCA and that continued litigation would strain government resources and interfere with ongoing monitoring of Credit Suisse’s compliance with its plea agreement.  

The district court granted the government’s motion without holding an in-person hearing, relying instead on written submissions from both parties.  Doe appealed, arguing that the dismissal was improper because he was denied an actual “hearing” as required under the FCA.

The Fourth Circuit disagreed with Doe and affirmed the district court’s decision, holding that the “hearing” requirement can be satisfied through written submissions rather than an in-person hearing.

The Fourth Circuit’s decision underscores the flexibility courts have in interpreting the “hearing” requirement under the FCA as allowing for written submissions rather than an in-person proceeding, particularly when the government’s reasons for dismissal are clear and uncontroverted.  This interpretation aligns with the broader trend in federal litigation towards greater reliance on written briefs and submissions, which can streamline proceedings and reduce the burden on judicial resources. However, it also raises questions about the extent to which relators can effectively challenge government dismissals without the opportunity for oral argument.

The Fourth Circuit’s decision also aligns with the Supreme Court’s recent ruling in United States ex rel. Polansky v. Exec. Health Res., Inc., which emphasized the government’s broad authority to dismiss qui tam actions and the substantial deference courts must give to the government’s assessment of whether continued litigation serves the public interest.  The government’s authority to dismiss qui tam actions is a critical aspect of the FCA’s framework, ensuring that the government retains control over litigation conducted in its name and allowing it to prioritize resources and avoid cases that do not align with its enforcement strategies.

This case serves as a reminder of evolving landscape and complexities of FCA litigation.