A year ago, when the U.S. Justice Department issued guidance urging prosecutors to dismiss allegedly meritless whistleblower cases, defense lawyers cheered what they considered a significant new check on lawsuits alleging fraud against the government.
It didn’t take long for Justice Department lawyers to act on the guidance, which put a new focus on the False Claims Act, a law that allows whistleblowers to bring cases alleging fraud against government programs and keep a portion of any awarded damages. In December alone, the Justice Department moved to dismiss 11 whistleblower lawsuits against pharmaceutical manufacturers.
The dismissal motions demonstrated that the Justice Department “may continue to review [False Claims Act] litigation trends and seek to curtail actions that it views as unwarranted,” lawyers at O’Melveny & Myers said last year. They predicted more expansive dismissals could deter plaintiffs’ attorneys and ward off litigation-financing firms.
But the top Justice Department official behind the new guidance recently told defense lawyers not to get their hopes up.
“Historically, the department has used its dismissal authority judiciously, and it will continue to do so,” said Michael Granston, director of the fraud section in the Justice Department’s civil division. “Dismissal will remain the exception, not the new rule.”
The Justice Department guidance, known as the Granston memo, pressed prosecutors to take a more assertive approach when considering whether to step in and prosecute cases initially brought by whistleblowers, as the False Claims Act allows. Rather than simply opting to decline a case the government deems frivolous, the guidance called for prosecutors to weigh the option of recommending that a case be terminated outright.
The False Claims Act remains a multibillion-dollar fraud tool for the Justice Department, which annually recoups enormous settlements and judgments under the law. Fiscal year 2018′s recoveries were identified as $2.8 billion. A year earlier, Main Justice said it recovered $3.7 billion.
Summarizing the guidance Friday, in remarks at a False Claims Act conference in Washington, Granston said that when whistleblower cases are “frivolous or otherwise contrary to public interest, they can impose unnecessary costs on the government and also result in bad case law” that might limit the ability to bring meritorious cases in the future.
Granston cautioned defense lawyers against trying to ramp up the cost of litigation, saying it would not be a “successful strategy” for enticing the Justice Department to step in and seek to dismiss a whistleblower case.
“Just because a case may impose substantial discovery obligation on the government does not necessarily mean it is a candidate for dismissal absent a lack of substantial merit or other reasons to conclude that its costs will likely outweigh its benefits,” Granston said. “Thus, defendants should be on notice that pursuing undue or excessive discovery will not constitute a successful strategy for getting the government to exercise its dismissal authority. The government has and will use other mechanisms for responding to such discovery tactics.”