DOJ has long used guidance memoranda to reflect enforcement priorities and provide specific guidance to its prosecutors. This remains true in the Trump administration. In the first quarter of 2018, the new administration put its stamp on how it intends to handle FCA enforcement in the coming years.
The Granston Memo
On January 10, 2018, DOJ's Civil Division issued a memorandum to prosecutors handling qui tam FCA cases outlining circumstances under which the United States should seek dismissal of cases that "lack substantial merit." Authored by Michael Granston, the director of the Civil Division's Fraud Section, the so-called "Granston Memo" outlines seven factors that prosecutors should consider in determining whether to exercise DOJ's statutory authority to dismiss qui tam matters pursuant to 31 USC § 3730(c)(2)(A).
These factors include: (1) curbing meritless qui tams, "either because the legal theory is inherently defective, or the relator's factual allegations are frivolous;"(2) preventing parasitic or opportunistic qui tam actions, where qui tam cases duplicate pre-existing government investigations and "add no useful information;" (3) preventing interference with agency policies and programs; (4) "avoid[ing] the risk of unfavorable precedent;" (5) safeguarding classified information and national security interests; (6) preserving government resources; and (7) addressing egregious "procedural errors." In particular, the Granston Memo also notes that cases may be dismissed where the action is "both lacking in merit and raises the risk of significant economic harm that could cause a critical supplier to exit the government program or industry." What remains to be seen is how aggressively the United States intends to aid FCA defendants in these efforts.
While DOJ asserts that the Granston Memo merely reiterates existing statutory authority, the memo's detailed guidance opens the door for FCA defendants to advocate for the dismissal of frivolous relator cases.
The Brand Memo
Shortly after issuance of the Granston Memo, then-Associate Attorney General Rachel Brand issued a memorandum mandating that "[DOJ] litigators may not use noncompliance with guidance documents as a basis for proving violations of applicable laws in [affirmative civil action] cases." 1 Agency guidance is not law. It does not have the force or effect of a statute or regulation. Nonetheless, for years, relators have cited the failure to comply with agency guidance as grounds for pursuing FCA claims.
The "Brand Memo" seeks to limit this trend, at least where the United States is considering intervention in a case. The memorandum effectively directs DOJ lawyers to limit the use of agency guidance as the sole basis for seeking authority to pursue an FCA enforcement action. 2 While the Brand Memo provides some flexibility for prosecutors to use agency guidance—e.g., using evidence that a defendant read guidance to prove knowledge—it generally represents a positive move for FCA defendants. It forces DOJ line attorneys to be more skeptical of the purported merits of qui tam suits that appear to rely on regulatory nitpicking by qui tam relators.
Once again, the ultimate effect of this memorandum on existing and future cases is not yet clear. Without question, the Brand Memo should have an effect on how DOJ thinks about and implements intervention decisions. But it has limits. Because it only controls the behavior of DOJ attorneys, it may not reduce the number of qui tam complaint filings that rely on regulatory missteps to establish the falsity of the claim. And, as with all DOJ guidance memoranda, the Brand Memo does not obligate the courts.
It is too soon to measure the full impact of the recently issued Granston and Brand memos. What is clear, however, is that the Trump administration is putting its own stamp on FCA enforcement. While the Granston Memo provides additional ammunition to FCA defendants, it is not yet clear whether it will result in the dismissal of more cases. In contrast, the Brand Memo has more defined parameters and is likely to result in an adjustment in the types of cases in which the DOJ intervenes.
1 Press Release, US Dep't of Justice, Associate Attorney General Brand Announces End To Use of Civil Enforcement Authority to Enforce Agency Guidance Documents (Jan. 25, 2018), https://www.justice.gov/opa/pr/associate-attorney-general-brand-announces-end-use-civil-enforcement-authority-enforce-agency.
2 The Brand Memo bolsters Attorney General Sessions' November 2017 memorandum prohibiting DOJ from using its civil enforcement authority to convert agency guidance into binding rules.
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