Another One Bites The Dust: The Government Secures Its Third Federal Qui Tam Dismissal Under Its Broad (C)(2)(A) Authority Since Polansky – White Collar Crime, Anti-Corruption & Fraud

On April 12, 2024, in U.S. ex rel. Vanderlan v. Jackson HMA,
LLC, the U.S. District Court for the Southern District of
Mississippi dismissed a qui tam case based on the
government’s motion to dismiss under 31 U.S.C. §
3730(c)(2)(A). This case marks the third grant of a federal
(c)(2)(A) motion to dismiss since the June 2023 Supreme Court
decision in U.S. ex rel. Polansky v. Executive Health
Resources Inc. and may signal the government’s growing
willingness to seek dismissal of FCA cases in light of
Polansky.

In Jackson, relator Vanderlan sued a Jackson,
Mississippi hospital (JHMA) under the FCA for its alleged practice
of “patient dumping” in violation of the Emergency
Medical Treatment and Labor Act (EMTALA), claiming JHMA had falsely
certified compliance with EMTALA. (Patient dumping is a
profit-motivated scheme wherein medical providers reject or
prematurely transfer patients unable to pay for their medical
care.) In addition to the relator’s EMTALA claim, Vanderlan
included in his 2015 complaint a retaliation claim against JHMA for
the termination of his employment with the hospital.

In 2018, the government moved under § 3730(c)(2)(A) to
dismiss the EMTALA claim, arguing that the costs of litigating the
matter outweighed the benefits. The district court granted the
government’s motion absent any oral argument or hearing,
leaving only Vanderlan’s retaliation claim remaining. After the
Polansky decision, however, the district court
“invited” Vanderlan to supplement his motion for
reconsideration of the court’s dismissal order. Also, in light
of Polansky, the government intervened in the matter
without objection. The district court then severed Vanderlan’s
retaliation claim into a separate action so that Vanderlan could
continue to pursue this claim regardless of the outcome of the
court’s reconsideration.

After conducting a de novo review of the parties’
arguments and the applicable law, the court again granted the
government’s motion to dismiss. The court concluded that the
government met the minimal burden established in Polansky
when it offered a “reasonable argument” for why the costs
of proceeding in litigation outweigh the benefits. Once this low
burden was met, the government was owed substantial deference under
Polansky. Though Vanderlan alleged the EMTALA violations
were so exceptional that they exceeded the scope of the
government’s right to seek dismissal, the court was
unconvinced. Further, although Vanderlan argued that a grant of
dismissal cannot precede discovery or an evidentiary hearing, the
court found that Polansky suggests otherwise. Under
Polansky, “[i]f the government offers a reasonable
argument for why the burdens of continued litigation
outweigh its benefits, the court should grant the motion,” and
the term “argument” does not suggest a discovery nor an
evidentiary hearing requirement. Lastly, the court rejected
Vanderlan’s claim that a grant of dismissal absent discovery or
an evidentiary hearing would violate his Constitutional rights. The
court reasoned that it satisfied Vanderlan’s right to
procedural due process by providing Vanderlan notice and an
opportunity to be heard through briefing, oral argument, and
proffered exhibits. Vanderlan’s right to substantive due
process was satisfied by a finding that the government’s
decision to dismiss was reasonable and not arbitrary or
capricious.

Since Polansky, two other district courts have granted
motions brought by the government under (c)(2)(A). As previously discussed in this blog, in December
2023, the U.S. District Court for the Northern District of Ohio
granted a (c)(2)(A) dismissal motion in U.S. ex rel. USN4U v.
Wolf Creek Federal Services. In February 2024, the U.S.
District Court for the District of Maine granted a (c)(2)(A)
dismissal motion in U.S. ex. rel. Sargent v. McDonough.
The government moved to dismiss the case, arguing that the cost of
pursuing an FCA against employees of the Department of Veterans
Affairs would outweigh its benefits. Relying on Polansky,
the district court granted the government’s motion, finding
that “the Government reasonably foresees little-to-no gain for
its efforts” and that, in the absence of extraordinary
interests of the relator, the government is entitled to
dismissal.

Since Polansky, two circuit courts have also affirmed
pre-Polansky district court grants of dismissal brought
under (c)(2)(A). In Brutus Trading LLC v. Standard Chartered Bank et
al., the relator alleged that the bank facilitated illegal
transactions linked to Iran in violation of U.S. sanctions and
defrauded the government by concealing the extent of its illegal
conduct when entering into a deferred prosecution agreement in
2012. After the district court granted the government’s motion
to dismiss under (c)(2)(A) without holding a hearing, Brutus
appealed, arguing that failing to hold a hearing violated the
statutory hearing requirement and due process. After
Polansky was decided, the court ordered that the parties
submit supplemental briefing in light of that decision. In August
2023, the Second Circuit rejected Brutus’ arguments and
affirmed the district court’s dismissal, finding that “the
district court satisfied the hearing requirement by ‘carefully
considering’ ‘the parties’ voluminous briefs,
declarations, and exhibits before granting the government’s
motion.'” In U.S. ex rel. Carver v. Physicians Pain
Specialists of Alabama, the relator, Carver, brought an FCA
suit against her employer, Physicians Pain Specialists of Alabama,
alleging that the pain management clinic submitted fraudulent
claims for payment to federal health care programs. When the
government moved to intervene and dismiss the qui tam case
under its (c)(2)(A) authority, the district court granted the
government’s motion. Carver appealed. After the appeal had been
briefed, the Supreme Court decided Polansky. Relying on
Polansky, the Eleventh Circuit affirmed the lower
court’s grant of dismissal, finding that the government
provided “good grounds for thinking that this suit would not
do what all qui tam actions are supposed to do: vindicate
the [g]overnment’s interests.”

Together, Wolf Creek, Sargent, and, most
recently, Jackson may indicate both the government’s
increasing willingness to exercise its broad dismissal authority
under 31 U.S.C. § 3730(c)(2)(A) after Polansky, as
well as the courts’ acceptance of that authority. Stay tuned to
Qui Notes as we continue to monitor the outcomes of
post-Polansky (c)(2)(A) dismissal motions. For our
previous discussions of the Polansky decision, see the
following Qui Notes posts:

* Alejandra Uria contributed to this blog. Alejandra is a
graduate of Yale Law School.

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