Must courts hold in-person hearings when the government seeks to dismiss whistleblower lawsuits brought under the False Claims Act?

The U.S. Court of Appeals for the Fourth Circuit weighed that question Wednesday in an appeal brought by an anonymous whistleblower who wants the court to revive his lawsuit accusing Credit Suisse AG of having cheated the government out of more than $1 billion.

The False Claims Act—which allows individuals to file actions on the government's behalf alleging that defendants defrauded the United States—requires an "opportunity for a hearing" if a whistleblower objects to dismissal request by the government.

A federal trial judge granted the Department of Justice's motion to dismiss John Doe's case without an oral hearing, accepting the DOJ's  argument that the lawsuit could interfere with the government's "ability to continue working with Credit Suisse in pursuit of uniquely governmental and federal interests."

Fourth Circuit Judge A. Marvin Quattlebaum Jr. questioned Doe's argument that written submissions aren't sufficient, citing the U.S. Supreme Court's recent Polansky v. Executive Health Resources decision  that justices should review motions to dismiss FCA suits under Rule 41 of the Federal Rules of Civil Procedure.

The rule says a movant is entitled to dismissal if the motion is filed before the filing of an answer or summary judgment motion.

"So what are we all doing with this?" Quattlebaum asked. "It still seems to suggest Rule 41 is telling us there's not much more for our court to do."

Doe's lawyer, Jeffrey A. Lamken of MoloLamken, argued that a person bringing an FCA suit has a constitutionally protected property right in the action, so the government cannot terminate a case without an evidentiary hearing first.

In dismissing the lawsuit, the trial judge also said Doe—a former Credit Suisse employee — failed to state a claim under the FCA.

Doe's lawsuit claims Credit Suisse had to disclose a list of accounts held by U.S. citizens to justify a 2014 plea agreement it entered into with the government. The company had pleaded guilty in 2014 to conspiring to help taxpayers hide offshore accounts from the IRS and agreed to pay $2.6 billion in fines and restitution.

The complaint alleges that Credit Suisse knowingly didn't reveal accounts that were part of the illegal banking operation, causing a lower criminal penalty. According to Doe, the company violated the FCA's reverse false claims provision, which creates liability if a person "knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government."

Doe argues that an oral hearing is required when the government's dismissal motion is based on "illegitimate reasons." Here, Doe says the government was motivated to dismiss the lawsuit out of a desire to shield the DOJ from scrutiny about inadequate oversight of Credit Suisse.

The government contends that under recent Supreme Court precedent, a court must grant dismissal unless doing so would violate the Constitution in a serious way, which is not the case here.

Furthermore, the government has the right to voluntarily dismiss actions before an answer or  summary judgment motion, since whistleblowers are bringing claims on the government's behalf in FCA actions, said the DOJ's attorney Stephanie Robin Marcus.

 "[Doe] hasn't alleged any violation of his constitutional right," Marcus said. "And the types of allegations he's making are speculative, and they involve prosecutorial discretion in decision making, privileged communications, ongoing implementation of a plea agreement. This really would not be an appropriate subject for a hearing."

Fourth Circuit Judge Roger Gregory questioned if the government has "unbridled discretion" when deciding whether to dismiss FCA suits.

"Congress wanted people to be able to bring these things," Gregory said, referring to whistleblower lawsuits.

Marcus pressed the argument that the government can decide it's not in its interest to pursue FCA claims, such as here where it would interfere with a criminal investigation.

Judge Henry Floyd also sat on the Fourth Circuit panel.

The Fourth Circuit heard arguments in United States ex rel. John Doe v. Credit Suisse AG, No. 22-1054.