Supreme Court Denies Defense Request to Review Key FCA Materiality Decision After Government Offers to Dismiss Claims

The Court’s denial of defendant Gilead’s request for review may have been due in part to the Solicitor General’s unusual offer in its amicus brief to dismiss the whistleblower claims against Gilead upon remand to the district court.

In Campie, the Ninth Circuit reinstated FCA claims against Gilead for allegedly misrepresenting compliance with FDA regulations regarding the manufacture and labeling of certain HIV drugs, resulting in receipt of billions of dollars from the government. The district court had dismissed the claims at the pleadings stage in part because it found that the allegedly false submissions were not material to the government’s payment decisions.

In reversing, the Ninth Circuit rejected Gilead’s argument that the government’s continued payment for the drugs despite knowledge of the alleged FDA violations evinced a lack of materiality sufficient to dismiss at the pleadings stage. In support, Gilead had cited Universal Health Services v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016), where the Supreme Court explained that “if the Government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated, and has signaled no change in position, that is strong evidence that the requirements are not material.”

But the Ninth Circuit explained that the government’s “actual knowledge” remained a disputed factual issue—not grounds for dismissal based on the pleading alone—and the “relators allege more than the mere possibility that the government would be entitled to refuse payment if it were aware of the violations, sufficiently pleading materiality at [the motion to dismiss] stage of the case.”

After Gilead asked the Supreme Court to review the Ninth Circuit’s decision, the Solicitor General filed an unusual amicus brief that offered to move for dismissal of the relator’s claims if the case were remanded to the district court. The government is authorized to seek dismissal of qui tam suits under 31 U.S.C. § 3730(c)(2)(A), a provision that the government has increasingly used over the past year to deal with meritless qui tam suits. The Solicitor General indicated that the government would take this action based in part on the government’s investigation and evaluation of the merits, as well as the potential that FDA would need to engage in burdensome discovery that would distract it from its other responsibilities. The Solicitor General’s position was consistent with the thinking in DOJ’s “Granston Memo,” which leaked in January of 2018 and enumerated factors prosecutors should consider when deciding whether to seek dismissal under § 3730(c)(2)(A).

Now that the Supreme Court has denied Gilead’s request for review—leaving intact the Ninth Circuit’s government-friendly opinion regarding the FCA materiality requirements at the pleadings stage—we expect that the government will move for dismissal at the district court consistent with the Solicitor General’s representations.