Consumer Finance Insights
March 19, 2020

DOJ Downplays Circuit Split on FCA Deference to Government Dismissals of Whistleblower Actions

On Wednesday, March 4, 2020, the United States Department of Justice (DOJ) filed a brief with the United States Supreme Court asking the Court to decline review of a case concerning the government’s power to dismiss qui tam–or “whistleblower”–actions under the False Claims Act (FCA).

The case in question is U.S. ex rel. Schneider v. JPMorgan Chase Bank, N.A., No. 198-678, where whistleblower Laurence Schneider asks the Court to consider “[w]hether the Government is entitled to absolute deference regarding its decision to dismiss an FCA action . . . or whether the qui tam relator should be granted the right to demonstrate that the Government’s rationale for dismissal is ‘fraudulent, illegal, or arbitrary and capricious.’”  In his underlying qui tam action, Schneider contends that JPMorgan Chase Bank NA and related entities (collectively, JPMorgan), among other things, “submitted false certifications of compliance with the National Mortgage Settlement Agreement” in violation of the FCA.  After a variety of back-and-forth between district and circuit courts alike, the government eventually moved to dismiss Schneider’s FCA claims.  The United States District Court for the District of Columbia granted the government’s motion, contending that it was bound by D.C. Circuit precedent giving the government virtually unlimited deference to dismiss such claims.  For its part, the D.C. Circuit summarily affirmed the lower court without addressing Schneider’s arguments that the court should not have granted the government’s motion to dismiss because it was “arbitrary and capricious.”

In his petition, Schneider contends that there is a circuit split in this area that necessitates the Court’s review.  On the one hand, the D.C. Circuit gives nearly absolute deference to the government’s dismissal recommendations, refusing to engage in any real scrutiny.  But on the other hand, the Ninth and Tenth Circuits, according to Schneider, more closely analyze dismissal motions for legitimate bases.  Schneider, in an attempt to bolster his petition, plays up the importance of this split by citing the increased frequency with which the government has sought dismissal of whistleblower actions over the past two years.

But the DOJ does not see the alleged split as so stark nor the issue as so important as Schneider.  While it does not take issue with Schneider’s contention that there are differences between the circuits in their review of government dismissal requests, the DOJ feverishly disputes that those differences matter.  According to the DOJ, all circuits provide broad deference to government dismissal decisions, with the “only difference” being one of “degree of that deference.”  In the DOJ’s view, these “slight difference[s]” are “very rarely if ever . . . outcome determinative.”  In fact, the DOJ argues that this has traditionally been the case, with “[m]ultiple courts” refusing to “chose between the competing standards because the government would prevail under either one.”

For its part, JPMorgan also opposed Schneider’s petition, calling the question presented nothing more than an “academic” exercise rooted in the slight questions of degree identified by the DOJ.  JPMorgan also downplayed the nature of the circuit split—contending that the “petition . . . fails to present [an issue] warranting th[e] Court’s review—where not a single court of appeals has ever held that an FCA whistleblower case “should be allowed to proceed despite a government decision to dismiss.”

Schneider’s petition will be considered during the April 4, 2020 conference.  While it is presently unclear how the Court will act on Schneider’s petition, a decision either way could shed light on how courts will consider government motions to dismiss FCA qui tam actions in the future.  We will be sure to keep our readers updated with any developments from the Court.