This month, the U.S. Department of Justice (DOJ) made revisions to the Justice Manual in two areas affecting False Claims Act (FCA) prosecutions: (1) the use of sub-regulatory guidance; and (2) DOJ’s exercise of its dismissal authority.
Sub-Regulatory Guidance
One of the revisions “reinstates and builds upon” polices set forth in prior DOJ memos issued during the first Trump administration prohibiting DOJ attorneys from using sub-regulatory guidance as the basis for criminal or civil enforcement actions, including of course FCA lawsuits.[1] According to the updated guidance, DOJ “must establish a violation by reference to statutes and regulations” and “may not bring actions based solely on allegations of noncompliance with guidance documents” nor “treat a party’s noncompliance with a guidance document as itself a violation of applicable statutes or regulations.”[2]
However, the policy does permit use of guidance documents for other purposes. For example, if a guidance document describes a relevant statute or regulation, then DOJ may use “awareness of the guidance document (or its contents) as evidence that the party had the requisite scienter, notice, or knowledge of the law.”[3] Also, in certain cases, a guidance document may be used as evidence of criminal intent if “a party’s deliberate indifference to a guidance document is probative of deliberate indifference to the requirements imposed by statute, regulation, or other obligation (e.g., a contract or certification).”[4]
Guidance documents may also be used “as probative evidence that a party has satisfied, or failed to satisfy, professional or industry standards or practices relating to applicable statutory or regulatory requirements.”[5] The policy states that this rationale “applies more broadly in the healthcare arena, where guidance documents such as CMS’s Medicare Benefit Policy Manual or Local Coverage Determinations are relevant evidence of, inter alia, violations of the principal requirement that procedures billed to Medicare or Medicaid be medically ‘reasonable and necessary.’”[6]
Guidance documents may also be used to provide legal or factual context, as evidence of generally accepted scientific or technical methods in a particular field or “when a party’s compliance, or failure to comply, with the agency guidance is itself relevant to the claims at issue” such as “when a provider falsely certifies compliance with a guidance document, and the certification is material to an agency’s payment decision.”[7]
Dismissal Authority
The other revision “makes clear that the Department should consider exercising its dismissal authority when it declines to intervene in a qui tam action and, where it does not seek dismissal, revisit that assessment as appropriate during litigation.”[8] DOJ states that it “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.”[9]
The updated guidance states that dismissal “will not be warranted in every declined case, because to maximize its resources the government often will investigate a qui tam action only to the point where it concludes a declination is warranted, which may not equate to the conclusion that a qui tam is meritless.”[10] The guidance nonetheless states that “dismissals also provide an important tool to advance the government’s interests, preserve limited resources, and avoid adverse precedent.”[11] Further, while the DOJ announcement of the revision states that in seeking dismissal there will be “an emphasis” on actions “that lack legal or factual merit,” the updated guidance includes a much longer list of potential grounds for dismissal,[12] including:
- Preventing parasitic or opportunistic qui tam actions that duplicate a pre-existing government investigation and add no useful information to the investigation.
- Preventing interference with an agency’s policies or the administration of its programs.
- Controlling litigation brought on behalf of the United States, in order to protect [DOJ’s] litigation prerogatives.
- Safeguarding classified information and national security interests.
- Preserving government resources, particularly where the government’s costs (including the opportunity costs of expending resources on other matters) are likely to exceed any expected gain.
- Addressing egregious procedural errors that could frustrate the government’s efforts to conduct a proper investigation.
If you have any questions about this article or how DOJ’s updated guidance could affect your organization, you may contact the author at Geoffrey.Kaiser@rivkin.com or (516) 357-3161.
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[1] https://www.justice.gov/opa/pr/doj-revises-justice-manual-strengthen-false-claims-act-enforcement
[2] Justice Manual, § 1-19.210.
[3] Id. at § 1-19.220.
[4] Id.
[5] Id. at § 1-19.230.
[6] Id.
[7] Id. at §§ 1-19.240, .250, .260.
[8] https://www.justice.gov/opa/pr/doj-revises-justice-manual-strengthen-false-claims-act-enforcement
[9] Id.
[10] Justice Manual, § 4.4.111.
[11] Id.
[12] Id.
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