Hoyte v. American Nat. Red Cross

• Decision Date: 04 March 2008
• Docket Number: No. 06-5230.,06-5230.
• Parties: Michelle HOYTE, Bringing this action on behalf of the United States of America, Appellant United States of America, Appellee v. AMERICAN NATIONAL RED CROSS, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

518 F.3d 61

Michelle HOYTE, Bringing this action on behalf of the United States of America, Appellant United States of America, Appellee v. AMERICAN NATIONAL RED CROSS, Appellee.

No. 06-5230.

United States Court of Appeals, District of Columbia Circuit.

Argued November 5, 2007.

Decided March 4, 2008.

Appeal from the United States District Court for the District of Columbia, (No. 04cv01054).

H. Vincent McKnight, Jr. argued the cause for the appellant.

Tracy L. Hilmer, Attorney, United States Department of Justice, argued the cause for appellee United States of America. Peter D. Keisler, Assistant Attorney General, Jeffrey A. Taylor, United States Attorney, Douglas N. Letter, Appellate Litigation Counsel, and Michael D. Granston and Daniel R. Anderson, Attorneys, United States Department of Justice, were on brief. R. Craig Lawrence, Assistant United States Attorney, entered an appearance.

John R. Fleder argued the cause for appellee American National Red Cross.

Before: HENDERSON and TATEL, Circuit Judges, and WILLIAMS, Senior Circuit Judge.

Opinion for the court filed by Circuit Judge HENDERSON.

Opinion concurring in part and dissenting in part filed by Circuit Judge TATEL.

KAREN LECRAFT HENDERSON, Circuit Judge:

Michelle Hoyte filed this action under the False Claims Act (FCA), 31 U.S.C. §§ 3729 et seq. The complaint alleges that Hoyte's former employer, the American National Red Cross (ARC), (1) violated FCA section 3729(a)(7) by failing to report to the Federal Drug Administration (FDA) that ARC had mishandled blood supplies, for which conduct the FDA was authorized to assess financial penalties pursuant to a district court consent decree, (Count I) and (2) violated FCA section 3730(h), the "whistleblower" provision, by discharging Hoyte in retaliation for her investigating, and complaining to supervisors about, the mishandled blood (Count II). The district court dismissed Count I (the reverse false claim¹) on the ground that it was obliged to defer to the Government's decision to dismiss the claim under FCA section 3730(c)(2)(A), which provides that "[t]he Government may dismiss [an FCA qui tam] action notwithstanding the objections of the person initiating the action." The court dismissed Count II (the retaliation claim) on the ground that Hoyte did not allege that ARC was under an "obligation to pay or transmit money or property to the Government," as section FCA 3729(a)(7) requires for a reverse false claim, and therefore Hoyte's investigation into the blood mishandling, for which investigation she alleged she was discharged, was not "in furtherance of" a viable qui tam action so as to be protected activity under the whistleblower provision. United States ex rel. Hoyte v. Am. Nat'l Red Cross, 439 F.Supp.2d 38 (D.D.C.2006). For the reasons set out below, we affirm the district court's dismissal of both counts.

I.

On April 15, 2003, the district court issued a consent decree incorporating an agreement between ARC and the United States in which ARC agreed to adopt and follow specified blood handling and reporting requirements. See United States v. Am. Nat'l Red Cross, C.A. No. 93-0949 (Apr. 15, 2003) (Consent Decree), reprinted in Joint App. (JA) at 27. The Consent Decree provides that the FDA "may assess" financial penalties for various violations of its provisions "up to" specified maximums. See, e.g., id. at 35-36, 42, 52, 56-57, 61-64.

Hoyte was an ARC employee from 1997 until June 17, 2004. She alleges that in February 2004, when she was Director of Quality Audits, she discovered ARC had mishandled 607 units of blood at its "Penn-Jersey" facility in Philadelphia. She further alleges that ARC's officials and staff were aware of the mishandled blood but did nothing about it even after she and her staff urged her superiors to report the matter to the FDA as required under the Consent Decree. Finally, she alleges that she scheduled a meeting with ARC's Senior Vice President for Quality Assurance and Regulatory Affairs for June 18, 2004 but was fired by her supervisor over the telephone the day before the meeting.

On June 25, 2004, Hoyte filed this qui tam action under FCA section 3730(b)(1), which provides that "[a] person may bring a civil action for a violation of section 3729 for the person and for the United States Government."² As noted, the complaint includes a reverse false claim count under section 3729(a)(7) for which Hoyte is authorized to bring a qui tam action under section 3730(b) and a retaliation claim under the FCA's whistleblower provision, section 3730(h). The United States filed a notice of election to decline intervention in the suit on November 7, 2005, pursuant to section 3730(b)(2).³ On January 24, 2006, ARC moved to dismiss both Count I and Count II for failure to state a claim under Fed.R.Civ.P. 12(b)(6) and to dismiss Count II for lack of jurisdiction under Fed. R.Civ.P. 12(b)(1) as well. The United States then moved on February 16, 2006 to dismiss Count I, asserting that under section 3730(c)(2)(A) "the United States' decision to dismiss th[e] case is not subject to judicial review." U.S. Mot. to Dismiss 1.

On April 27, 2006 the district court held a hearing on the motions to dismiss at the conclusion of which it granted the Government's motion to dismiss Count I and deferred ruling on ARC's motion. 4/27/06 Hr'g Tr. 43-44. On July 14, 2006 the court issued an opinion and order in which it granted ARC's motion to dismiss Count II. United States ex rel. Hoyte v. Am. Nat'l Red Cross, 439 F.Supp.2d 38 (D.D.C. 2006).

Hoyte filed a notice of appeal on August 3, 2006.

II.

Hoyte contends the district court erred in dismissing Count I and Count II. We consider each count in turn.

A. Count I: Reverse False Claim Charge

Section 3730(c)(2)(A), which sets out the "[r]ights of the parties to qui tam actions" brought on behalf of the United States, provides: "The Government may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion." In granting the Government's motion to dismiss Count I, the district court concluded that under this provision, as construed in Swift v. United States, 318 F.3d 250 (D.C.Cir.2003), the court did not "have a role to play" in the Government's decision whether to dismiss Count I given "the general presumption of the Government's right to end a prosecution" and the absence of special circumstances that "warrant an exception such as fraud on the court." 4/27/06 Hr'g Tr. 41. The district court correctly dismissed Count I.

In Swift, a Department of Justice (DOJ) lawyer filed a qui tam action alleging that three employees of the DOJ Office of Legal Counsel had conspired to defraud the Government of $6,169.20 using falsified time sheets and leave slips. The Government moved to dismiss the action and the district court granted the motion. On appeal, we upheld the dismissal, concluding that the Government has what amounts to "an unfettered right to dismiss" a qui tam action, citing four bases for our conclusion: (1) the separation of powers doctrine, (2) the Government's broad discretion in initiating or continuing a criminal prosecution, (3) Federal Rule of Civil Procedure 41(a)(1)(i), which permits a plaintiff to dismiss a civil action "without order of the court," and (4) the language of section § 3730(c)(2)(A) itself, which grants to "[t]he Government" (not the court) unilateral authority to "dismiss the action notwithstanding the objections of the person initiating the action." Swift, 318 F.3d at 252. As we there explained: "Nothing in § 3730(c)(2)(A) purports to deprive the Executive Branch of its historical prerogative to decide which cases should go forward in the name of the United States. The provision neither sets `substantive priorities' nor circumscribes the government's `power to discriminate among issues or cases it will pursue.'" Id. at 253 (quoting Heckler v. Chaney, 470 U.S. 821, 833, 105 S.Ct. 1649, 84 L.Ed.2d 714 (1985)). In addition, we noted that, although "the government conceded at oral argument that there may be an exception for `fraud on the court,' no evidence of that sort was presented" and therefore we "d[id] not pass on whether this type of exception, or any other, might be consistent with our reading of § 3730(c)(2)(A)." Id.

We conclude that under Swift the district court correctly deferred to the Government's virtually "unfettered" discretion to dismiss the qui tam claim. As in Swift, there is no evidence here of fraud on the court or any similar exceptional circumstance to warrant departure from the usual deference we owe the Government's determination whether an action should proceed in the Government's name. Hoyte asks us to recognize a new exception for a dismissal "clearly contrary to manifest public interest," Appellant's Br. at 14, contending that in Swift we left the door open for future recognition of other types of exceptions in addition to "fraud on the court." In Swift, however, we flatly rejected the relator's suggestion that we routinely review the Government's decision to dismiss a qui tam action, instead holding the door only barely ajar for review in an exceptional circumstance—in particular, where there is "fraud on the court." See id. at 253. It is clear from Swift that any exception to section 3730(c)(2)(A)—if there are any—must be like "fraud on the court" and Hoyte's proposed "manifest public interest" exception is not.⁴ Hoyte was afforded the hearing the FCA mandates to give her "a formal opportunity to convince the government not to end the case." Id. The Government was not persuaded to proceed, however, and its decision to dismiss the case, based on its own assessment, is not reviewable in the district court or this court. Accordingly, we affirm the district court's dismissal of Count I.

B. Count II:...