Court Dismisses Without Hearing in Qui Tam Action

In a precedential decision, a federal appeals court confirmed that a False Claims Act (FCA) lawsuit may be dismissed without first giving a claimant in the action an in-person hearing. Federal law affords claimants only “an opportunity for a hearing” on such a motion to dismiss. ABA Section of Litigation leaders caution that practitioners should be sure to explicitly request a hearing if they want one.

FCA Allows Third Parties to Sue on Behalf of the Government

The FCA outlaws the making of false claims for payment against the United States. To help enforce the law, the FCA allows for third parties who are aware of such false claims, called relators, to file what is known as a qui tam lawsuit against the alleged offender. If successful, third-party relators may get a percentage of any amount recovered.

Once a relator files a qui tam action, the government has 60 days to review the claim and decide whether it will prosecute the lawsuit. This time may be extended. If the government does not intervene, the relator may prosecute the action. Whether or not it chooses to intervene, the government may move to dismiss the case at various points in litigation. However, the relator must be notified of the motion and be provided “with an opportunity for a hearing on the motion” before the court under the FCA.

Relator Does Not Request a Hearing         

In Chang v. Children’s Advocacy Center of Delaware, a relator filed a qui tam action in the U.S. District Court for the District of Delaware alleging that the defendant had misrepresented material facts when applying for government funding. The government declined to intervene, and the relator proceeded with prosecuting the claim. Almost three years later, the government moved to dismiss the qui tam action to limit its litigation costs associated with monitoring and investigating the case.

The relator filed an opposition to the government’s motion but did not request a hearing or oral argument. The court granted the motion to dismiss without conducting an in-person hearing or issuing any supporting memorandum of opinion. The relator appealed to the U.S. Court of Appeals for the Third Circuit, arguing that the FCA requires an automatic in-person hearing before dismissal and that he would have met his burden of proof had that hearing been held.

Hearing Is an “Opportunity,” Not a Right

The Third Circuit explained that “[t]he plain language of both the FCA and the DFCA provides relators an ‘opportunity for a hearing’ when the government moves to dismiss,” and relators must “avail themselves” of that opportunity by requesting one. The court observed that most other jurisdictions had interpreted this language to mean that “an in-person hearing is unnecessary unless the relator expressly requests a hearing or makes a colorable threshold showing of arbitrary government action.” Finding those cases to be persuasive, it concluded that “the dismissal provisions in the FCA and DFCA do not guarantee an automatic in-person hearing in every instance.” Because the relator had neither requested an in-person hearing, nor made the requisite showing of arbitrary government action, the Third Circuit upheld the district court’s dismissal of the case.

Section Leaders Advise Practitioners to Be Explicit

“This situation is similar to the right to a jury trial in federal court,” says William E. Weinberger, Los Angeles, CA, cochair of the Section of Litigation’s Corporate Counsel Committee. “In certain instances you have a right to a jury trial in federal court, but you need to request that jury trial. Here the relator may have had the right to a hearing, but he simply failed to exercise that right by not requesting that hearing,” observes Weinberger.

Section leaders believe the court was justified in its decision because of how the FCA is phrased as to the necessity of a hearing in this circumstance. “Because of how broad the guideline is, when the court did not automatically grant a hearing in this case, it did not create a due process issue,” offers Sean O’D. Bosack, Milwaukee, WI, cochair of the Section’s Corporate Counsel Committee.

In this case, the relator claimed that he would have met his burden of proof had he been allowed to present evidence at the hearing that never occurred. “Many times in federal court, judges make decisions based solely on the pleadings,” Bosack explained. Further, “different jurisdictions and even different judges in the same jurisdiction have different practices regarding whether they generally grant oral arguments on motions. Not only should practitioners request oral arguments if they want them, but if there is any kind of relevant evidentiary issue, they should also point that out to the court and ask for the opportunity to present the necessary evidence at a hearing,” he advises.