By Adrienne Dresevic, Esq. and Clinton Mikel, Esq. of The Health Law Partners, P.C.
The US Department of Justice (DOJ) issued two internal memos in January which reveal important policy changes relating to whistleblower lawsuits filed under the False Claims Act (FCA).
The first memo suggests an end to the DOJ’s practice of allowing meritless qui tam actions to continue after the DOJ declines to intervene on behalf of the government.
On January 10, Michael D. Granston, Director of the Commercial Litigation Branch, Fraud Section, issued an internal memo titled, “Factors for Evaluating Dismissal Pursuant to 31 U.S.C. 3730(c)(2)(A).” The memo was subsequently leaked to the public. According to the memo, over the last several years, the DOJ has seen record increases in qui tam actions filed under the FCA, but the rate of DOJ intervention remained static, indicating a substantial increase in meritless actions.
The DOJ may dismiss a qui tam action over a relator’s objection in the DOJ’s unfettered discretion. While recognizing that historically this sort of dismissal was used sparingly, the memo indicates a more aggressive policy whereby dismissal should be sought when various factors are present, including when an action lacks merit, either when the qui tam complaint is facially lacking in merit, or when the DOJ concludes after completing its investigation that the case lacks merit.
There has been a shift in recent years towards relators proceeding with qui tam cases in which the government has declined to intervene. Relators/their counsel often perceive the ability to extract a settlement offer from the defendant solely to avoid the costs of litigation. Hopefully the guidance set forth in the memo will be taken to heart by various Assistant US Attorney offices and utilized to dismiss meritless False Claims Act cases over relators’ objections.
A PDF of the January 10, 2018 memo can be found here: https://assets.documentcloud.org/documents/4358602/Memo-for-Evaluating-Dismissal-Pursuant-to-31-U-S.pdf.
The second memo limits the use of guidance documents – and noncompliance of guidance documents – to establish violations of law in affirmative civil enforcement (ACE) actions.
On January 25, the US Associate Attorney General, the third-ranking official in the DOJ, issued an internal memo titled “Limiting Use of Agency Guidance Documents in Affirmative Civil Enforcement Cases.” The memo referenced an earlier guidance policy issued by Attorney General Jeff Sessions indicating that the DOJ would no longer issue guidance documents that effectively bind the public without undergoing the notice-and-comment rulemaking process. Guidance documents are documents that do not undergo the notice and comment regulatory rulemaking process, such as documents used to educate regulated parties through plain-language restatements of existing legal requirements, or that provide agencies guidance with non-binding advice on technical issues through examples or practices to guide the application or interpretation of statutes and regulations.
Accordingly, the memo provides that “effective immediately for ACE cases, the Department may not use its enforcement authority to effectively convert agency guidance documents into binding rules,” and “Department litigators may not use noncompliance with guidance documents as a basis for proving violations of applicable law in ACE cases.”
“In the past, the Department of Justice and other agencies had blurred the distinction between regulations and guidance documents,” the DOJ said in a January 25 statement regarding the new policy.
“Although guidance documents can be helpful in educating the public about already existing law, they do not have the binding force or effect of law and should not be used as a substitute for rulemaking,” the DOJ statement quoted Associate Attorney General Rachel as saying. “Consistent with our duty to uphold the rule of law with fair notice and due process, this policy helps restore the appropriate role of guidance documents and avoids rulemaking by enforcement.”
The memo, however, provides that the Department may continue to use agency guidance documents for proper purposes such as to “simply explain or paraphrase legal mandates from existing statutes or regulations” and as “evidence that a party read such a guidance document to help prove that the party had the requisite knowledge of the mandate [at issue].”
This recent change in policy will directly impact the healthcare industry, which is overflowing with sub-regulatory guidance documents issued by the OIG, CMS, the FDA, local coverage decisions from Medicare Administrative Contractors, and innumerous other agencies.
Sub-regulatory guidance has often been cited by qui tam relators and government attorneys in support of FCA actions. These memos are an important reminder and tool for pushing back on the same.
A PDF of the January 25, 2018 memo can be found here: https://www.justice.gov/file/1028756/download.
The FCA can subject imaging providers, hospitals, and IDTFs to draconian punitive penalties. The mere threat or filing of a FCA qui tam suit can be financially ruinous. The recently leaked DOJ memos are important tools and policy shifts for those interested in defending against FCA litigation.
 A relator is the individual who has brought the qui tam action.
Adrienne Dresevic, Esq. is a Founding Shareholder of The Health Law Partners, P.C., a nationally recognized healthcare law firm with offices in Michigan and New York. Practicing in all areas of healthcare law, she devotes a substantial portion of her practice to providing clients with counsel and analysis regarding compliance, Stark Law, Anti-Kickback Statute, and compliance related issues. Ms. Dresevic serves on the American Bar Association Health Law Section’s Council, which serves as the voice of the national health law bar within the ABA. Ms. Dresevic also serves as the ABA Health Law Section’s Co-Chair of the Physicians Legal Issues Conference Committee, Vice Chair of the Programs Committee (Executive Leadership), and Vice Chair of the Sponsorship Committee. She is licensed to practice law in Michigan and New York, and can be contacted at firstname.lastname@example.org.
Clinton Mikel, Esq. graduated from the University of Michigan Law School. Practicing healthcare law, he concentrates in Stark, fraud/abuse, telehealth/telemedicine, compliance, and the corporate and financial aspects of healthcare practice.
The authors are members of The Health Law Partners, P.C. and may be reached at (248) 996-8510 or (212) 734-0128, or at www.thehlp.com.