Labor & Employment Law Daily Wrap Up, WHISTLEBLOWERS—5th Cir.: Fifth Circuit upholds dismissal of a qui tam lawsuit after the government had dismissed the case, (Apr 22, 2025)

By Donielle Tigay Stutland, J.D.

The government has broad discretion to dismiss qui tam actions.

The Fifth Circuit affirmed the district court's dismissal of a qui tam action under the False Claims Act (FCA), after finding that the government has broad authority to dismiss a qui tam suit under FCA § 3730(c)(2)(A) and Rule 41(a)(1). The court rejected the relator’s arguments on appeal that the district court had erred in denying him an evidentiary hearing, constitutional due process protections, and it erred in its application of the FCA’s settlement fairness standard. The Fifth Circuit found affirmed the district court’s judgment and concluded that the under the FCA, “the government, however, retains the right to commandeer a relator’s case and, if it so chooses, dismiss it,” (U.S. ex rel. Vanderlan v. Jackson HMA, L.L.C., No. 24-60215 (5th Cir. April 18, 2025)).

Background. Dr. Blake Vanderlan was a physician at a hospital operated by Jackson HMA, LLC (Jackson HMA) alleged that the hospital systematically violated the Emergency Medical Treatment and Labor Act (EMTALA). He reported these violations to the Department of Health and Human Services, prompting an investigation by the Center for Medicare and Medicaid Services (CMS).

CMS confirmed the hospital’s EMTALA violations under 42 C.F.R. §§ 489.20 and 489.24, and referred the matter to the Office of Inspector General (OIG) to assess potential civil monetary penalties. The OIG engaged in settlement discussions with Jackson HMA, but no penalties were imposed, no settlement was finalized, and administrative enforcement proceedings were stayed pending the qui tam litigation.

The physician filed a qui tam action under the FCA, alleging five violations, including a retaliation claim under 31 U.S.C. § 3730(h). He sought injunctive relief to block any settlement between Jackson HMA and the government. The government investigated his qui tam claims and declined to intervene.

The physician moved to involuntarily join the United States as a party and sought a preliminary injunction to block any government-Jackson HMA settlement. He later withdrew the joinder motion, and the district court denied the injunction. The district court severed Vanderlan’s retaliation claims from the qui tam claims.

The government eventually moved to dismiss the qui tam claims with prejudice as to Vanderlan but without prejudice as to itself, arguing that the lawsuit interfered with administrative settlement negotiations and lacked merit. The government cited a letter from Jackson HMA’s counsel (the “Selden Letter”) indicating that Jackson HMA was hesitant to settle the EMTALA investigation while the qui tam suit risked treble damages and penalties.

The district court granted the government’s motion to dismiss based on written filings, without specifying whether the dismissal was with or without prejudice. After reconsideration and a hearing, the court reaffirmed its decision, again omitting the nature of the dismissal. The physician appealed. On appeal, the Fifth Circuit reviewed the following: (A) whether it had appellate jurisdiction, (B) whether the district court erred in denying Vanderlan an evidentiary hearing, (C) whether the district court had discretion in denying or granting the government’s § 3730(c)(2)(A) motion, and (D) whether the district court appropriately applied the standard for dismissing, rather than for approving settlement of, a qui tam action.

Jurisdiction. The Fifth Circuit began it’s analysis by finding that it had appellate jurisdiction under 28 U.S.C. § 1291. The court noted that that the district court acted under Rule 41(a)(2). But the government’s voluntary dismissal falls under Rule 41(a)(1), as it moved to dismiss before Jackson HMA answered or sought summary. In its § 3730(c)(2)(A) motion, the government moved to dismiss the claims with prejudice as to Vanderlan but without prejudice as to itself. Because under Rule 41(a)(1), the court must look to the government’s notice of dismissal to determine finality, the court concluded that the dismissal was with prejudice as to the relator. The court concluded that because the government's dismissal of the qui tam claims was with prejudice as to the relator, making it a final decision, it had jurisdiction.

Evidentiary hearing. The court next turned to the relator’s issue of whether an evidentiary hearing is required under FCA § 3730(c)(2)(A) and whether the district court erred in denying the relator an evidentiary hearing. The relator argued that the FCA requires an evidentiary hearing when the government seeks voluntary dismissal of a relator’s claim.

The Fifth Circuit disagreed with the relator’s argument, finding that the FCA requires only a "hearing on the briefs," not a live evidentiary hearing, as confirmed by Polansky and other circuits. The Fifth Circuit indicated that the district court “reconsidered its ruling, allowed multiple rounds of briefing, held a live hearing where Vanderlan presented his argument, and gave him the chance to submit evidence.” Wrote the court, “The district court’s process exceeded what those cases required.”

The court also rejected the relator’s arguments that he was entitled to Rule 41(a)(2)’s safeguards, as the district court applied that standard. However, the court found his arguments for Rule 41(a)(2) protections lacking. Likewise, the court rejected the relator’s arguments related to due process under Mathews v. Eldridge forfeited, as it was not adequately raised in the district court.

Dismissal Under § 3730(c)(2)(A). Finally the court turned to the question of whether the district court erred in granting the government’s § 3730(c)(2)(A) motion. The court found that the district court properly granted the government’s motion to dismiss the qui tam claims under § 3730(c)(2)(A) and Rule 41(a)(1). The court highlighted that the FCA permits the government to dismiss a qui tam action “notwithstanding the objections” of the relator, so long as it provides notice and an opportunity for a hearing. See § 3730(c)(2)(A). Citing Polansky, the court continued, “even post-answer, postmotion for summary judgment (c)(2)(A) motions “will satisfy Rule 41 in all but the most exceptional cases,” and courts should afford “substantial deference” to the government’s decision.

Although the relator argued that the district court erred because he believes his claims have merit, the court highlighted that the purpose, however, of a qui tam action is to “vindicate the [g]overnment’s interests.” Here, the government argued that further litigation would interfere with the OIG’s efforts to resolve its claims against Jackson HMA for civil monetary penalties.

The court found that the government’s rationale—that continued litigation would interfere with administrative settlement negotiations—justified its decision to dismiss.

Settlement Standard. Finally, the court looked at the relator’s argument that the district court dd not apply the proper standard—dismissal under § 3730(c)(2)(A) rather than settlement under § 3730(c)(2)(B). The relator asserted Vanderlan asserts that he is entitled to a fairness hearing under § 3730(c)(2)(B) but concedes that “there is no language in the FCA that appears to guarantee these legal rights in a [g]overnment settlement that occurs after the FCA case is dismissed.”

The court clarified that § 3730(c)(2)(B) applies only when the government proposes a settlement and the relator objects, neither of which occurred here. The Fifth Circuit found that the relator’s argument that the district court should have applied the FCA’s settlement fairness standard under § 3730(c)(2)(B) was forfeited on appeal due to his failure to raise the issue.

The case is No. 24-60215.

Judge: Stewart, C.

Attorneys: Carl Victor Welsh, III (Pittman, Roberts & Welsh, P.L.L.C.) for W. Blake Vanderlan. Maxwell A. Baldim, U.S. Department of Justice, for U.S. Michael James Bentley (Bradley Arant Boult Cummings, L.L.P.) for Jackson HMA, L.L.C. d/b/a Central Mississippi Medical Center a/k/a Merit Health Central - Jackson.

Companies: Jackson HMA, L.L.C. d/b/a Central Mississippi Medical Center a/k/a Merit Health Central - Jackson

Cases: Whistleblowers Retaliation Procedure LouisianaNews MississippiNews TexasNews