Justice Manual Updates Provide More Ammunition to Defend Against FCA Actions

The U.S. Department of Justice (DOJ) has  announced changes to the Justice Manual affecting qui tam cases brought under the False Claims Act (FCA). Although DOJ stated that the changes will strengthen FCA enforcement, these updates – which memorialize prior policies – give defendants additional ammunition to challenge or seek dismissal of FCA claims. 

The amendments affect the use of guidance documents (section 1-19.000) and the dismissal of qui tam actions (section 4-4.111). As to guidance documents, the changes emphasize that DOJ should not rely on noncompliance with guidance documents to serve as the basis for a FCA case. As to dismissal procedures, the changes confirm that DOJ must assess dismissal of cases when evaluating a recommendation to decline intervention. 

These express changes, which align with prior DOJ initiatives, will give defendants more opportunities to argue against certain bases for FCA cases and to seek early dismissal.

DOJ Cannot Rely on Noncompliance with Guidance as the Basis for an FCA Case

Consistent with the main thrust of the 2017 Sessions Memo, issued by then-Attorney General Jeff Sessions, these Justice Manual changes clarify the use of sub-regulatory guidance in litigation by DOJ attorneys.

In particular, the Justice Manual updates emphasize that DOJ should not rely on noncompliance with guidance documents to serve as the basis for an FCA case. These new provisions change the prior language that indicated that “attorneys handling an enforcement action (or any other litigation) may rely on relevant guidance documents in any appropriate and lawful circumstances.” Earlier Justice Manual provisions advised U.S. Attorneys to freely cite and refer to guidance documents if the documents were entitled to deference or carried persuasive weight.

Now, the Justice Manual expressly provides for more limited uses for guidance documents, including: 

• When awareness of the guidance document supports the needed mens rea for an FCA claim because the guidance document describes the relevant statute or regulation.
• As evidence of the required professional standards (e.g., in the health care context, using the Medicare Benefit Policy Manuals as evidence for what is considered “reasonable and necessary” for reimbursement submissions).
• For scientific or technical processes.
• To show noncompliance when a party’s compliance with guidance is relevant to the claims at issue.
• To provide relevant factual or legal context.

DOJ Must Consider Using its Dismissal Authority in Non-Intervened Cases

The changes to the Justice Manual’s dismissal procedures expand the 2018 Granston Memo by then-Deputy Attorney General Michael Granston and reflect commentary by Deputy Assistant Attorney for the Civil Division Brenna Jenny that Reed Smith covered earlier this year. The changes confirm the intention by DOJ to more frequently seek dismissal of qui tam cases in which the DOJ has decided not to intervene. 

• The new provisions of the Justice Manual direct a U.S. Attorney to consider in every non-intervened case “whether the government’s interests are served by seeking dismissal pursuant to 31 U.S.C. § 3730(c)(2)(A).”
• According to DOJ’s press release, DOJ “will continue to exercise this authority judiciously, with an emphasis on seeking dismissal of qui tam actions that lack legal or factual merit and focusing Department resources on matters that advance the interests of the United States.“
• While the new provision indicates that “[d]ismissal will not be warranted in every declined case” it states DOJ will continue to track the litigation and may re-evaluate the decision to seek dismissal as the litigation proceeds.

What Does This Mean for Companies Defending Against FCA Claims?

Together, these changes to the Justice Manual will give companies more bases to defend against FCA claims. 

First, by expressly limiting the bases for the use of guidance documents, defendants have an opportunity to challenge guidance documents that whistleblowers may cite to support their actions as inappropriate to support the FCA allegations.

Second, by explicitly requiring DOJ to consider using its dismissal authority, defendants may benefit from sharing the reasons that DOJ should exercise its authority to end a case, either after it decides not to intervene or as the case progresses. For example, defendants could point out the lack of any statutory or regulatory basis to support FCA claims (leveraging the first set of changes), or after a non-intervened case is litigated by the whistleblower without government support, show DOJ where discovery has revealed the government had knowledge of a practice and did not view it as material, supporting dismissal. 

Reed Smith will continue to follow developments in the FCA litigation landscape to support its clients in internal and government investigations, and to defend its clients in non-intervened and intervened FCA actions. If you have any questions, please do not hesitate to reach out to the authors of this post or to the health care lawyers at Reed Smith.