A Tale of Two Memos for White-Collar Cases and Whistleblowers

In the past month, the U.S. Justice Department has released two memoranda that will affect civil enforcement generally and the False Claims Act specifically.

The first memo confirms that DOJ will more actively dismiss the whistleblower cases it turns down rather than let them run their course. The memo follows a surprise announcement in October that we covered here. It’s an internal memo, but it’s already been published in the legal press. Here’s a summary.

Under the False Claims Act, the government may move to dismiss a case over a whistleblower’s dissent as long as it gives notice of the motion and there’s a hearing on it.

In exercising this power, the memo calls on civil prosecutors to consider these factors:

1. Whether the case clearly lacks merit at the outset or after investigation.
2. Whether it piggybacks off an existing government investigation but adds nothing to it.
3. Whether it interferes with the government’s policies and programs in that sector or industry.
4. Whether it interferes with the government’s goals for litigation brought on its behalf.
5. Whether it poses a risk to national security from disclosure of classified information.
6. Whether it will cost the government more in time, labor, dollars, or lost opportunities than it will return on the investment.

Three more points. First, these factors are not mutually exclusive, so more than one may apply at a time. Second, they’re not exhaustive, so the government can move to dismiss for other reasons, too. Third, it ain’t all or nothing, so the government can move to dismiss some claims or defendants but not others.

The second memo says something more profound for enforcement generally. Effective January 25, civil prosecutors may no longer treat an agency’s “guidance” as a set of binding rules whose violation means a violation of law. That’s because an agency’s guidance can’t create binding rules beyond what exists by statute or regulation. For one thing, it doesn’t go through the same process as formal regulations do, where an agency will give notice of a proposed rule to stakeholders and afford them a chance to comment. (Which makes for better rules). Sometimes, it doesn’t even emanate from the agency but a contractor. Because guidance doesn’t have the force of law, the fact that a person or business didn’t comply with it doesn’t prove or even presume that they violated the law.

The memo defines such guidance as “any agency statement of general applicability and future effect, whether styled as ‘guidance’ or otherwise, that is designed to advise parties outside of the federal Executive Branch about legal rights and obligations.” The memo expressly applies, for example, when the government enforces the False Claims Act by alleging that someone falsely certified their compliance with statutes or regulations.