United States, ex rel. Polansky v. Executive Health Resources, Inc.

Issues 

Does the government have the authority to dismiss a qui tam action brought under the False Claims Act after declining to proceed with the action at the outset; and, if so, what showing must it make to have the action dismissed?

Oral argument: 
December 6, 2022

This case asks the Supreme Court to decide whether the government may dismiss a qui tam action over the objections of the relator when the government chooses not to proceed with the action at the outset. Jesse Polansky argues that the text, structure, history, and purpose of the False Claims Act indicate that when the government chooses not to pursue an action at the outset of a case, the relator has the exclusive right to decide whether to proceed with an action or request its dismissal. Polansky maintains that the government cannot retain its right to dismiss after it declines to proceed at the outset. Executive Health Resources, Inc. counters that the False Claims Act allows the government to dismiss a qui tam action at any time because the Constitution vests executive power in the President. Executive Health Resources contends that delegating executive power to relators, as Polansky suggests, would be unconstitutional. The case has significant policy implications because litigating qui tam actions is costly for all parties involved, and a ruling for unrestricted governmental dismissal authority could chill relators from bringing future qui tam actions, whereas a ruling for limited government dismissal authority could burden the government with meritless qui tam actions.

Questions as Framed for the Court by the Parties 

Whether the government has authority to dismiss a False Claims Act suit after initially declining to proceed with the action, and what standard applies if the government has that authority.

Facts 

Respondent Executive Health Resources, Inc. (“EHR”) is a “physician advisor” company that certifies health care services as having been properly billed for Medicare reimbursement. Polansky v. Exec. Health Res. at 380–81. EHR’s consultant physicians review determinations by doctors at client healthcare providers about whether certain patients qualify for inpatient status under regulations promulgated by the Centers for Medicare & Medicaid Services (“CMS”). Id. Petitioner Jesse Polansky was a CMS official before EHR employed him as a consultant. Id. at 380. Polansky suspected that EHR was systematically enabling providers to over-bill Medicare by certifying for inpatient services patients who did not qualify. Id. at 381.

Polansky brought a qui tam action against EHR under the False Claims Act (“FCA”). Id. at 380. The FCA enables private individuals to bring claims for fraud in the name of the government. Id. Private plaintiffs—known as “relators”—are entitled to a share of the judgment if the claim prevails. Id. The FCA entitles the government to an opportunity to review each complaint and elect whether to take over as a plaintiff at an action’s outset. Id. The government investigated Polansky’s claims for two years before deciding it would not participate. Id. at 381. The complaint was unsealed, and Polansky continued as plaintiff without the government’s participation. Id.

Polansky litigated his case in the United States District Court for the Eastern District of Pennsylvania for several years, investing considerable time and resources. Id. at 381. Just as the Court was about to decide a summary judgment motion, the government notified the parties of its intent to dismiss the action. Id. at 381–82; Brief for Petitioner, United States, ex rel. Jesse Polansky, M.D., M.P.H. at 8. The government cited § 3730(c) of the FCA for its dismissal authority. Polansky at 381–82. That section provides that if “the government proceeds with the action . . . [it] may dismiss the action notwithstanding the objections of the [relator]” if the relator receives notice and an opportunity for a hearing on the motion. Id. The District Court stayed the case. Id. at 382. The government initially reached an agreement with Polansky to not dismiss the case in exchange for Polansky narrowing his complaint via amendment, but the government later invoked a contractual right to reconsider. Id. The District Court granted the government’s § 3730(c)(2)(A) motion to dismiss. Id. While the court acknowledged that it was unclear what standard applies to such a dismissal, it reasoned that the government’s showing was adequate under all of the prevailing standards. Id.

Polansky appealed. Id. The United States Court of Appeals for the Third Circuit considered whether—and, if so, when—the FCA requires the government to intervene before seeking dismissal of an FCA qui tam action. Id. It also considered what standard applies to a § 3730(c)(2)(A) motion to dismiss. Id. Polansky urged the court to interpret the FCA as rendering the government powerless to seek dismissal unless it proceeds with the action at the outset. Id. at 384–85. The government, by contrast, argued that § 3730(c)(2)(A) is a standalone grant of authority to dismiss that does not require the government to intervene at any time or make any showing. Id. at 384. The court adopted a middle approach, allowing the government to intervene but requiring that it meet the Federal Rule of Civil Procedure Rule 41 standard for dismissal. Id. at 389. The court then reviewed the District Court dismissal for abuse of discretion and affirmed. Id. at 392. The United States Supreme Court granted Polansky certiorari on June 21, 2022. See Brief for Petitioner at 1.

Analysis 

THE GOVERNMENT’S AUTHORITY TO DISMISS

Petitioner Jesse Polansky argues that the government does not have statutory authority to dismiss a qui tam action after initially declining to proceed in the case as a plaintiff. Brief for Petitioner, United States, ex rel. Jesse Polansky, M.D., M.P.H. at 14. Polansky first explains that the text of § 3730(b)(4) of the FCA provides the government with a simple binary choice: the government “shall” either “proceed” with the action or decline to proceed. Id. Polansky argues that the FCA gives the relator an exclusive right to proceed with the action once the government declines to proceed. Id. at 14–15. Polansky additionally contends that “proceed” and “intervene” have distinct meanings under the False Claims Act because when the government elects to proceed with the action, it has exclusive rights, but when the government intervenes, a court cannot allow that intervention to limit “the status and rights of the [relator].” Id. at 23, 25. Polansky thus argues that the government never has statutory authority to dismiss an action it initially declined to proceed with, even if it later intervenes, since that would necessarily limit the status and rights of the relator. Id.

Turning to the structure of the FCA, Polansky argues that the provision the government cites for its dismissal authority, § 3730(c)(2)(A), is only applicable when the government has proceeded with the action. Id. at 14. Polansky argues that the rest of § 3730(c)(2) grants the government trial rights which presuppose that it is directing the action, which it would only be doing if it proceeded as a plaintiff at the outset. Id. Polansky contends this indicates that Congress meant the government’s dismissal authority to apply only in this context. Id. at 19. In contrast, Polansky observes, other paragraphs are respectively applicable “where the Government elects not to proceed” and “[w]hether or not the Government proceeds.” Id. at 18. According to Polansky, this shows that Congress would have put the provision granting the government dismissal authority in another subsection had it intended the government to retain that dismissal authority after initially declining to proceed with a case. Id. at 21.

Pointing to the history of the statute, Polansky notes that the original version of the FCA did not contain any provision allowing the government to take over an action. Id. at 26. Polansky asserts that the FCA as currently amended preserves this “traditional restriction” against the government overriding a relator where the government has declined to proceed. Id. at 27. Polansky argues that the statutory design demonstrates that Congress’ goal was to give the government ample opportunity and incentive to take over appropriate cases at the outset. Id. at 29. In cases where the government declines to take on the action, Polansky argues, Congress’ goal was to incentivize relators to pursue claims without fear of government dismissal. Id. at 30. Polansky asserts that the government’s interests remain adequately protected even where it has declined to proceed in an action, making it unnecessary for the government to retain dismissal authority. Id. at 29–30. Polansky points to both § 3730(c)(3) and the government’s independent authority to resist discovery and safeguard disclosures. Id. Polansky argues that, given these protections, EHR’s Take Care Clause argument is meritless. Id. at 33.

Respondent Executive Health Resources, Inc. (“EHR”) counters that the text and structure of the FCA permit the government to dismiss a qui tam suit at any time, and that, at a minimum, the government can dismiss after intervening. Brief for Respondent, Executive Health Resources, Inc., at 16, 20. EHR argues that § 3730(c)(2) does not explicitly limit its applicability to where the government has elected to proceed. Id. at 17–18. EHR contrasts this with other paragraphs, such as § 3730(c)(3), which explicitly provides that it applies only where the government declines to proceed. Id. Thus, according to EHR, Congress’ choice to omit similar language from § 3730(c)(2) is significant and suggests the government’s dismissal authority is broad. Id. EHR argues that, far from being exclusive, a relator’s status and rights are subject to statutory limitations that afford the government control regardless of whether it initially declines the action. Id. at 21. EHR argues that, at a minimum, the government can assert its authority to dismiss after intervening in a case. Id. at 21–22. EHR argues that intervening is merely the first step in proceeding. Id. EHR thus argues that, once the government has intervened, it can activate its authority to dismiss under § 3730(c)(2)(A) without limiting the status and rights of a relator in a manner that the FCA proscribes. Id.

EHR additionally contends that reading the FCA to deprive the government of dismissal authority after it initially declines to proceed with an action would render the statute unconstitutional; thus, the FCA either cannot be read that way or must be struck down. Id. at 22. EHR notes that the Constitution places all executive power in the President. EHR further notes that the Take Care Clause imposes upon the President a duty to ensure the laws are faithfully executed. Id. at 22–23, 30. EHR argues that this responsibility entitles the President to exercise “substantial” control over executive functions. Id. at 25–26. EHR asserts that prosecuting fraud on the United States is an executive function. Id. at 22. EHR further contends that, because qui tam provisions delegate executive power to private individuals, they are inherently in tension with constitutional principles. Id. at 24. According to EHR, the FCA does not give the President substantial enough control even where it is interpreted to allow the government to dismiss declined qui tam actions without limitation. Id. at 28. EHR maintains that courts have upheld the FCA despite its questionable constitutionality on the assumption that the government retains substantial executive control through an unrestricted ability to dismiss a qui tam action. Id. at 28–29. EHR also maintains that the FCA would violate the Appointments Clause if it gave relators exclusive authority to litigate on behalf of the United States. Id. at 35–36. This, according to EHR, is because only officers appointed by the President with the advice and consent of the Senate, as the Appointments Clause requires, can wield such authority. Id. EHR argues that Polansky’s reading would so empower relators as to make them officers under the Constitution whose appointments would have to conform with the Appointments Clause. Id.

WHETHER JUDICIAL REVIEW APPLIES, AND, IF SO, WHAT STANDARD COURTS MUST USE

Polansky argues that, even if the government retains dismissal authority, dismissals must satisfy rational basis review, meaning that the government must point to a valid government interest and demonstrate a rational connection between dismissal and that interest. Brief for Petitioner at 40. Polansky argues that the FCA vests a relator with a property interest (the cause of action) which the government cannot deprive the relator of without constitutional scrutiny. Id. This, according to Polansky, is because allowing the government to arbitrarily dismiss qui tam actions at any time would violate due process. Id. Polansky notes that both the Ninth Circuit and Tenth Circuit have adopted rational basis review in similar cases. Id. at 35.

Polansky also argues that the Third Circuit erred in applying Federal Rule of Civil Procedure 41, which governs dismissal in ordinary civil cases. Id. at 35–40. Polansky maintains that Rule 41 envisions a single plaintiff dismissing its own suit, not the government as a non-party intervening to dismiss the original plaintiff’s action. Id. at 39. Polansky argues that the FCA affords protections which go beyond Rule 41 and are necessary to protect the interests of relators because relators invest considerable time and sums of money in litigating these actions as private parties. Id.

EHR, on the other hand, argues that the government’s dismissal is not subject to any standard of judicial review. Brief for Respondent at 42. EHR explains that the Constitution entrusts the President with unreviewable prosecutorial discretion to prosecute wrongs allegedly committed against the United States. Id. EHR reasons that a decision to dismiss an ongoing action is an exercise of prosecutorial discretion, just like declining to prosecute in the first instance. Id. at 30. EHR asserts that exercises of prosecutorial discretion require a complicated balancing of factors that is ill-suited to judicial review. Id. at 46. EHR adds that subjecting prosecutorial discretion to judicial review would infringe upon separation-of-powers principles. Id. at 42. EHR also asserts that Polansky cannot invoke due process as a basis for requiring judicial review because his property right would not materialize until his claim prevails. Id. at 48. EHR further argues that, even if rational basis review applies, the lower courts have already concluded that dismissal in the present case was appropriate under any standard. Id. at 48–49.

Discussion 

COSTS OF LITIGATION TO THE PARTIES, THE JUDICIARY, AND THE ECONOMY

Taxpayers Against Fraud Education Fund (“TAFEF”), in support of Polansky, argues that allowing the government to dismiss an action after relators have invested substantial amounts of time and money would chill future actions and thereby thwart the purpose of the FCA. Brief of Amicus Curiae Taxpayers Against Fraud Education Fund ("TAFEF"), in Support of Petitioner at 10, 17. TAFEF contends that the purpose of the FCA is to ease the resource strain that prosecuting fraud puts on the government by incentivizing private actors to bring those challenges. Id. at 10–11. TAFEF maintains that it would be unfair for the government to claim the benefit of not paying for an FCA action and then, by dismissing the action, injure a relator who risked their time, money, and career to litigate the action. Id. at 6, 10–11, 13. Further, TAFEF contends that companies committing fraud on the government deliberately burden the government with costly discovery requests (even where the government has elected not to proceed as a plaintiff) and thereby impel the government to dismiss. Id. at 18. TAFEF argues that the government will submit to these improper pressures if it can dismiss at any time without judicial review, and that this, in turn, will discourage relators from bringing actions. Id. TAFEF adds that if the government is allowed to dismiss at any time, thereby preventing relators from continuing their actions and discouraging other relators from bringing actions, fraud will “flourish.” Id. Thus, TAFEF concludes it is the very fact that litigation has a high cost to the government—encouraging dismissal and potentially letting fraud remain unchecked—that means relators should be allowed to continue litigating, without the overhanging threat of dismissal. Id.

Pharmaceutical Research and Manufacturers of America (“PhRMA”), in support of EHR, argues that many qui tam actions are “meritless and burdensome” and impose high costs on the government, meaning the government should be allowed to dismiss even after declining to proceed with a case at the outset. Brief of Amicus Curiae Pharmaceutical Research and Manufacturers of America ("PhRMA"), in Support of Respondent at 13–14. PhRMA contends that the government may not know whether a suit has merit until far into the litigation, by which time substantial costs have already been incurred and the further costs of continuing the litigation have become apparent. Id. at 14, 16–19. PhRMA maintains that the government incurs burdensome costs, such as discovery, even after declining to intervene in the case, which is why the government must be allowed to dismiss the case at any time to preserve its resources. Id. at 21, 23. PhRMA also argues that if the government is not allowed to dismiss, the high cost of litigating FCA actions will negatively impact private healthcare providers and pharmaceutical companies, which will have less money to spend on providing lifesaving care and developing lifesaving treatments. Id. at 14. Similarly, the Chamber of Commerce, American Health Care Association, and American Hospital Association (“COC,” “AHCA,” and “AHA”), in support of EHR, contend that FCA litigation burdens the entire economy, with nearly every sector spending enormous sums to combat what are often meritless actions. Brief of Amici Curiae Chamber of Commerce of the United State of America, et al. ("COC"), in Support of Respondent at 11–12. Finally, the COC, AHCA, and AHA also point to limited judicial resources as a reason why the government should be allowed to dismiss. Id. at 15.

CHECKS ON FRAUD, CORRUPTION, AND OPPORTUNISM

Brutus Trading, in support of Polansky, argues that relators act as an important check on the government, preventing it from dismissing a case merely due to government corruption or a negligent failure to find evidence. Brief of Amicus Curiae Brutus Trading, LLC, in Support of Petitioner at 14, 22. Similarly, TAFEF contends that relators were given the right to object to motions to dismiss so that they could serve as a check against the government arbitrarily or improperly dismissing an action. Brief of TAFEF at 11–12.

The COC, AHCA, and AHA, in support of EHR, argue that gamesmanship and opportunism by relators looking for a windfall puts pressure on defendants to settle, even in meritless cases, because of the high cost of litigation. Brief of COC at 14, 16–18. PhRMA adds that within the healthcare industry, which generates 90% of FCA recoveries, opportunism is common. Brief of PhRMA at 14, 28–29. PhRMA contends that the effects of abuse are considerable because opportunistic litigation distracts the government from protecting public health. Id. The government’s ability to dismiss thus serves as an essential check on relator opportunism, according to PhRMA and the COC, AHCA, and AHA. Id.; Brief of COC at 19.

Conclusion 

Acknowledgments 

Additional Resources