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The chances of winning a whistleblower suit against the U.S. government are expected to become slimmer, thanks to a recent Department of Justice memo highlighting the government’s right to dismiss False Claims Act cases when it declines to participate.

U.S. attorneys around the country are expected to make more frequent use of their statutory authority to dismiss marginal False Claims Act cases in light of a Jan. 10 memo in which the head of the agency’s fraud division offered guidelines on when to take such actions, according to lawyers who handle those cases. And that action could scare away some plaintiffs from filing such cases, they said.

But lawyers cautioned that some federal prosecutors will embrace the new directive more readily than others.

“Whether or not it’s a big deal depends on what happens from this point. The memo makes the point that the authority has always been there but rarely used,” said John Zen Jackson, a commercial litigator at McElroy, Deutsch, Mulvaney & Carpenter in Morristown.

“This memo seems to suggest that the U.S. attorneys start proactively getting rid of these cases, even when relators be otherwise willing, at their own expense, to protect the government’s interests,” said Kevin Costello of Costello & Mains in Mount Laurel, who represents plaintiffs in whistleblower cases.

“On the surface it doesn’t represent a significant change, but I think the message it’s sending is of concern. The whole purpose of qui tam litigation is to protect losses suffered by taxpayers at the hands of a business world that looks to the government as a soft target,” Costello said . “The government, historically, has always been at least receptive to entertaining the idea of taking over these cases and never has attempted to discourage relators from taking on fraud.”

The memo from Michael Granston, director of the DOJ’s fraud section in the Commercial Litigation Branch, said the number of qui tam actions has grown steadily, exceeding 600 per year nationwide. But the number of cases in which the government intervenes has remained stable, Granston said. Yet even when the government does not intervene, it incurs significant expenditures for monitoring cases and sometimes must produce discovery or participate in other ways, he wrote.

“Thus, when evaluating a recommendation to decline intervention in a qui tam action, attorneys should also consider whether the government’s interests are served, in addition, by seeking dismissal,” Granston said.

The False Claims Act provides the federal government with authority to dismiss cases but does not set forth grounds for dismissal. Courts have differed in defining various standards for the exercise of that authority. For example, the U.S. Court of Appeals for the Ninth Circuit ruled in 1998 that there must be a “valid government purpose” that is rationally related to dismissal, while the D.C. Circuit held in 2003 that the federal government has the “unfettered right” to dismiss a False Claims Act case.

Thomas Finn of McCarter & English in Hartford, Connecticut, who represents defendants in False Claims Act cases, said actions by the government to dismiss meritless claims would have the effect of furthering the policy goals of the False Claims Act.

“Any memo that sets forth and reminds government lawyers of this mechanism and tool to dismiss cases that do not have substantial merit is of great value, particularly for a company that provides goods and services,” Finn said.

“I think it furthers the policy goals because it’s in everyone’s interest to have cases that do not have substantial merit to be dismissed. I think it benefits the government, it benefits providers of goods and services to the government, and it benefits relators who have legitimate claims,” Finn said.

“Nothing contained in the memo, as I interpret it, would at all inhibit a relator or a person with knowledge of government fraud that has a legitimate claim from coming forward,” Finn added. “It helps further the goals of eradicating and addressing fraudulent and deceptive practices.”

Costello, however, said he is concerned that the memo suggests the U.S. government is retreating from the whistleblower law.

“My suspicion is this administration might not be as quick to hold corporate perpetrators of fraud responsible as previous administrations have been,” Costello said. “It’s hard to predict what U.S. attorneys will do with this memo. I’m more concerned with the fact that it may inspire U.S. attorneys to be more reluctant to embrace qui tam cases because they might be afraid of reprisals from their supervisors.”

Ross Begelman of Begelman & Orlow in Cherry Hill, New Jersey, who represents relators in whistleblower cases, said he is not concerned that his cases will be dismissed by the government. But he questions the need for the memo, and does not see meritless False Claims Act cases as a problem.

“Some of the largest cases in the nation were based on declined cases. I have made a living from declined cases,” Begelman said. He adds that the memo merely restates the current law and provides guidance to U.S. attorneys.  

“I do not expect it to affect any case I have brought or am bringing,” Begelman said.