Fourth Circuit Clarifies (c)(2)(A)’s “Hearing” Requirement in U.S. ex rel. Doe v. Credit Suisse AG

Post-Polansky, the Department of Justice (DOJ) has increasingly flexed its clarified authority under § 3730(c)(2)(A) to intervene and seek dismissal of qui tam actions at any stage of litigation. In response, courts have swiftly dismissed over the objections of relators when the government deems continued litigation contrary to the public’s, or its own, interest, and the relator has received notice and “opportunity for a hearing.” 

But Polansky did not resolve the question of what exactly a “hearing” must entail. As a result, district courts often satisfy (c)(2)(A)’s “hearing” requirement in different ways. Some district courts, like in the cases of U.S. ex rel. Guglielmo v. Leidos, Inc., No. 1:19-CV-1576 (D.D.C.), and U.S. ex rel. Relator LLC v. Dayhoff, No. 0:23-cv-60292-KMW (S.D. Fla.), have held live, in-person proceedings before granting the government’s motion to dismiss. Others have granted dismissal after simply reviewing the parties’ written submissions, as in the cases of U.S. ex rel. Hill v. Ernst & Young U.S., LLP, No. 1:23-CV-319 (E.D. Va.); U.S. ex rel. Vanderlan v. Jackson HMA, LLC, No. 3:15-CV-767-DPJ-FKB (S.D. Miss.); and U.S. ex rel. USN4U v. Wolf Creek Federal Services, No. 1:17-cv-0558 (N.D. Ohio). Recently, the Fourth Circuit answered the question directly in U.S. ex rel. Doe v. Credit Suisse AG, No. 22-1054, 2024 WL 3974986, --- F.4th --- (4th Cir. Aug. 29, 2024), holding that (c)(2)(A) does not require an in-person “hearing.” 

In Credit Suisse, the John Doe relator alleged that his former employer, Credit Suisse, had previously pled guilty to one count of conspiracy to aid taxpayers in filing false income tax returns and had obtained an ostensible “$1.3 billion discount” on its criminal penalty by supposedly withholding the full extent of its illegal conduct. DOJ initially declined intervention, but later moved to intervene and dismiss the case under (c)(2)(A), before the defendant had answered the complaint. The district court granted dismissal on the papers, without a live hearing, concluding that Doe had failed to state a claim under the FCA and that the government had provided valid reasons for dismissal, including conserving government resources, preserving the ability to continue monitoring Credit Suisse under its plea agreement, and protecting the government’s privileged or protected information. On appeal, Doe argued (among other things) that the district court improperly granted the government’s dismissal motion without holding an “actual hearing.” 

After staying the appeal for nearly a year pending the Polansky decision, the Fourth Circuit affirmed the dismissal, with a two-judge majority holding that the district court satisfied (c)(2)(A)’s hearing requirement after reviewing Doe’s opposition brief. The majority opinion by Judge Floyd provided three reasons why (c)(2)(A) may be satisfied with less than a formal evidentiary hearing. First, it noted that the Second Circuit, in an unpublished summary decision, as well as several district courts, have already decided that a review of written submissions satisfied the hearing requirement. Second, the Fourth Circuit itself and other courts have long interpreted the separate reference to a “hearing” in the FCA’s public disclosure bar as having a “fluid” meaning that does not require a live proceeding. Third, the appeals court concluded that mandating a live evidentiary hearing would be “illogical” when, under Polansky, the government receives substantial deference for its dismissal decisions in the first place. The majority opinion also held that dismissing the case was proper because the relator offered no colorable claim that it would violate his constitutional rights. Because the appeals court deemed the government’s reasons for dismissal sufficient under Polansky, it didn’t reach the relator’s merits argument that he had also stated a valid FCA claim.
 
The third member of the panel, Judge Quattlebaum, concurred in the judgment and part of the majority’s analysis but dissented from the majority’s analysis of the hearing requirement. Judge Quattlebaum read Polansky and (c)(2)(A)’s plain text as requiring a live hearing, reasoning that Congress’ use of the term “hearing” mandated, at a minimum, the opportunity to argue orally before a court and that nothing in Polansky permitted courts to forego this mandate. Specifically, he cited Polansky’s footnoted question, “So what is the court supposed to do at the hearing the FCA requires?” as presuming that district courts would hold a live hearing. He further concluded that even if a district judge might have a limited role at such a live hearing, the onus was on Congress, rather than the judiciary, to rewrite the statute to avoid such a potentially “illogical” result. Still, Judge Quattlebaum agreed with affirming the dismissal. Because the relator did not raise any colorable claim of constitutional violations by the government, he concluded that any failure by the district court to hold a hearing was harmless error. 

Following the Credit Suisse decision, the binding rule in the Fourth Circuit is now that a district court can satisfy (c)(2)(A)’s hearing requirement based solely on a review of written submissions. We at Qui Notes will continue to monitor and report the latest developments in the (c)(2)(A) space. If you have any questions about the government’s dismissal authority under § 3730(c)(2)(A), please contact the authors or any of their colleagues in Arnold & Porter’s White Collar Defense & Investigations practice group.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.