DOJ's Granston Memo And Recent Government-Requested Dismissal Of False Claims Act Case Have Significant Implications For FDA-Regulated Entities

Author:Mr Douglas Hallward-Driemeier, Kirsten Mayer, Beth P. Weinman, Joshua Oyster and Deborah Cho
Profession:Ropes & Gray LLP


For more than twenty years, qui tam relators have played a significant role in setting the agenda for enforcement of the Federal Food, Drug, and Cosmetic Act (“FDCA”) through whistleblower lawsuits alleging that violations of the FDCA caused the federal government (the “Government”) to pay for drugs that it should not have paid for, and would not have paid for had it known of the violations. Since a physician and former pharmaceutical company medical liaison filed a False Claims Act lawsuit in 1996 alleging that his former company had illegally driven up sales of the company's drug by marketing it for off-label uses,1 whistleblowers have prompted investigations into a range of FDCA compliance issues, including promotional activities, current good manufacturing practices2 and reporting violations,3 that have resulted in significant False Claims Act (“FCA”) settlements and criminal fines.

For every FCA complaint that involves allegations that lead to an investigation and settlement with the United States, many more complaints are filed involving alleged violations of the FDCA in which the Government declines to intervene.4 Some of these declined cases proceed to years of civil litigation without the active participation of the Government.5

As the real party in interest in a FCA case, the Government is always entitled to seek dismissal of an FCA complaint under 31 U.S.C. § 3730(c)(2)(A), even in cases in which it does not intervene. The Government exercises this authority rarely. However, the Department of Justice (“DOJ”) does recognize the need to protect Government interests potentially threatened by relator-driven FCA litigation.6 Recent FCA cases highlight several key considerations for FDA-regulated defendants navigating FCA litigation and considering a request for a Government-initiated dismissal under section 31 U.S.C. § 3730(c)(2)(A). This article describes the evolving use of this provision, the recent (c)(2)(a) dismissal of a case against a drug manufacturer,7 and key takeaways for the life sciences industry.


The False Claims Act

The FCA imposes civil liability on a person who knowingly submits a false claim for payment to the Government.8 Importantly, the FCA authorizes a private individual, referred to as the relator, to file suit for violations of the FCA on behalf of the Government, in what is known as a qui tam action.9 After the Department of Justice (“DOJ”) investigates the allegations in a qui tam complaint, it may intervene in the action on behalf of the Government and take the lead in pursuing relief, or it may decline to do so, allowing the relator to lead the case.

Although the relator may continue litigating the case if the Government declines to intervene, the FCA provides that “the Government may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.”10

The Granston Memo

Historically, DOJ rarely has sought dismissal of non-intervened qui tam cases under 31 U.S.C. § 3730(c)(2)(A) (often referred to as “(c)(2)(A) dismissals”). Rather, in most cases, DOJ has let relators proceed on their own, at times filing Statements of Interest to assert particular Government interests in the ongoing litigation. In January 2018, a DOJ memorandum, commonly referred to as the “Granston memo,” outlined non-exhaustive factors the Government should consider in determining whether to seek dismissal in cases in which it has declined to intervene. The memo describes the FCA's provision on dismissal as “an important tool to advance the Government's interests, preserve limited resources, and avoid adverse precedent”11 and advises prosecutors to consider filing a motion for dismissal if such dismissal would:

Curb meritless qui tam actions; Prevent parasitic or opportunistic qui tam actions; Prevent interference with agency policies and programs; Control litigation brought on behalf of the United States; Safeguard classified information and national security interests; Preserve Government resources; or Address egregious procedural errors.12 The Granston memo also recommends advising relators when the Government is considering a (c)(2)(A) dismissal in order to provide them with the opportunity to voluntarily dismiss their actions.13

Currently, the Circuit Courts of Appeals are split regarding the standard that courts should apply when reviewing Government-requested dismissals under the FCA. In Swift v. United States, the D.C. Circuit held that the Government has an “unfettered right” to dismiss a qui tam action under § 3730(c)(2)(A).14 The Ninth Circuit, on the other hand, adopted a different standard of review in United States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., holding that a two-step analysis applies to test the Government's justification for dismissal.15 First, the Government must identify a valid Government purpose for dismissal, and, second, it must show a rational relationship between the dismissal and accomplishment of the valid Government purpose. In the Granston memo, the DOJ espoused its view that the appropriate standard for dismissal is the standard adopted by the D.C. Circuit in Swift providing the Government an unfettered right to dismiss a qui tam action.16 Nonetheless, the Granston memo advises the Government to argue that, even where a court applies the higher Sequoia Orange standard, its review should be highly deferential and that the Government satisfies any potential standard for dismissal.17

The principles articulated in the Granston memo are incorporated in the Justice Manual at section 4-4.111.18

Impact of the Granston Memo on DOJ

In late 2018, DOJ sought dismissal of multiple cases brought by professional relators under the FCA alleging that certain patient assistance and support services provided by pharmaceutical manufacturers were...

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