United States ex rel. John Doe v. Credit Suisse AG

• Court: Court of Appeals for the Fourth Circuit
• Decided: August 29, 2024
• Docket: 22-1054
• Status: Published

Opinion

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PUBLISHED

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 22-1054

UNITED STATES EX REL. JOHN DOE

Plaintiff – Appellant,

v.

CREDIT SUISSE AG,

Defendant – Appellee,

UNITED STATES OF AMERICA,

Party-in-Interest – Appellee.

Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Claude M. Hilton, Senior District Judge. (1:21-cv-00224-CMH-IDD)

Argued: May 8, 2024 Decided: August 29, 2024

Before GREGORY and QUATTLEBAUM, Circuit Judges, and FLOYD, Senior Circuit Judge

Affirmed by published opinion. Senior Judge Floyd wrote the opinion in which Judge Gregory joined in full and Judge Quattlebaum concurred in the judgment. Judge Quattlebaum wrote a separate opinion dissenting in part and concurring in part.

ARGUED: Jeffrey A. Lamken, MOLOLAMKEN, LLP, Washington, D.C., for Appellant. Stephanie Robin Marcus, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Matthew Scott Owen, KIRKLAND & ELLIS LLP, Washington, D.C., for Appellees. USCA4 Appeal: 22-1054 Doc: 75 Filed: 08/29/2024 Pg: 2 of 16

ON BRIEF: Jeffrey A. Neiman, Fort Lauderdale, Florida, Jeffrey E. Marcus, Brandon S. Floch, MARCUS NEIMAN RASHBAUM & PINEIRO LLP, Miami, Florida, for Appellant. Brian M. Boynton, Principal Deputy Assistant Attorney General, Charles W. Scarborough, Civil Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Jessica D. Aber, United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Richmond, Virginia, for Appellee United States. Craig S. Primis, Meredith M. Pohl, Joseph M. Capobianco, KIRKLAND & ELLIS LLP, Washington, D.C., for Appellee Credit Suisse AG.

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FLOYD, Senior Circuit Judge:

A decade ago, the bank Credit Suisse pleaded guilty to conspiracy to aid U.S.

taxpayers in filing false income tax returns. Under a plea agreement, Credit Suisse paid a

criminal fine of some $1.3 billion and promised to work with the government to prevent

customers from shielding offshore assets. John Doe, a former employee of Credit Suisse,

filed this action alleging the bank failed to disclose its continued criminal conduct to the

United States and thus avoided paying a larger penalty. Doe brought the action as a qui

tam suit, meaning he sued on the government’s behalf, alleging violations of the False

Claims Act. The United States, as the real party in interest, moved to dismiss the action

pursuant to 31 U.S.C. § 3730(c)(2)(A). That section 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.” 31 U.S.C.

§ 3730(c)(2)(A) (emphasis added). The district court granted the motion to dismiss after

considering written submissions from both sides. Doe argues on appeal the dismissal was

improper because he was denied an actual “hearing” under Section 3730(c)(2)(A). For the

reasons that follow, we affirm.

I.

The False Claims Act (“FCA”) imposes civil liability for presenting false or

fraudulent claims for payment to the federal government. 31 U.S.C. §§ 3729–3733. The

FCA contains the “unusual” feature of allowing private parties, known as “relators,” to sue

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on the government’s behalf by bringing qui tam actions. 1 United States ex rel. Polansky v.

Exec. Health Res., Inc., 599 U.S. 419, 423 (2023). After a relator files a complaint, the

government has an opportunity to intervene and take over the action. 31 U.S.C.

§ 3730(b)(4)(A). If the government declines to intervene, the relator may continue to

pursue the case. 31 U.S.C. § 3730(b)(4)(B). The injury asserted by the relator is

“exclusively to the government,” and the FCA “effects a partial assignment of the

government’s own damages claim.” Polansky, 599 U.S. at 425 (cleaned up). The

government maintains broad authority to “dismiss the action notwithstanding the

objections” of the relator so long as “the court has provided the person with an opportunity

for a hearing on the motion.” 31 U.S.C. § 3730(c)(2)(A).

The FCA also contains a “reverse false claims” provision, which creates liability for

any person who “knowingly makes, uses, or causes to be made or used, a false record or

statement material to an obligation to pay or transmit money or property to the

Government” or who “knowingly conceals or knowingly and improperly avoids or

decreases an obligation to pay or transmit money or property to the Government.” 31

U.S.C. § 3729(a)(1)(G). “Obligation” is defined as “an established duty, whether or not

fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee

relationship, from a fee-based or similar relationship, from statute or regulation, or from

1 The term derives from the Latin phrase, qui tam pro domino rege quam pro se ipso in hac parte sequitur, which translates to “who as well for the king as for himself sues in this matter.” Qui Tam Action, Black’s Law Dictionary (12th ed. 2024). Qui tam actions are brought under statutes like the FCA that allow private persons to sue for a penalty, part of which the government receives if the suit is successful. Id. 4 USCA4 Appeal: 22-1054 Doc: 75 Filed: 08/29/2024 Pg: 5 of 16

the retention of any overpayment.” 31 U.S.C. § 3729(b)(3). Relator John Doe, a former

employee of Credit Suisse, filed this action under the “reverse false claims” provision of

the FCA.

The case originated in a federal investigation into tax offenses, after which the U.S.

Department of Justice charged Credit Suisse with one count of conspiracy for helping U.S.

citizens shield assets and income from the Internal Revenue Service (“IRS”). In 2014,

Credit Suisse accepted a plea agreement in which it pleaded guilty to the conspiracy charge,

represented that its criminal conduct had ended in 2009, and agreed to pay criminal fines

and restitution to the government totaling some $2 billion.

Doe’s qui tam action, filed in 2021, alleged that Credit Suisse failed to disclose

certain criminal conduct to the United States, thereby shielding itself from additional

criminal penalties. Doe alleged that Credit Suisse continued to conspire with U.S.

customers to conceal assets from the IRS even after the bank pleaded guilty. Doe claimed

that Credit Suisse obtained a “$1.3 billion discount” on its criminal penalty by lying to a

federal district court during the plea hearing. Opening Br. 12.

The government declined to intervene initially and soon thereafter moved to dismiss

before any answer or summary judgment motion was filed. 2 The government sought

dismissal because it concluded that Doe’s allegations failed to state a claim cognizable

2 This timing is important because, as explained below, if the government moves to dismiss before an answer or motion for summary judgment has been served, then Rule 41(a)(1) applies, which allows swift dismissal “without a court order.” But after an answer or motion for summary judgment has been served, a higher standard (Rule 41(a)(2)) applies, and a court order is required in order to obtain dismissal. 5 USCA4 Appeal: 22-1054 Doc: 75 Filed: 08/29/2024 Pg: 6 of 16

under the FCA and that continued litigation of the action would “impair ongoing activity

related to Credit Suisse’s obligations under the plea agreement, strain Government

resources, and intrude upon the Government’s privileged or protected information.” J.A.

266. Doe opposed the motion and requested an evidentiary hearing, contending that the

government’s reasons for wanting dismissal were improper. The district court denied

Doe’s request for a hearing and dismissed the action on the pleadings. The district court

granted the dismissal because (1) Doe had not stated a claim under the FCA since Credit

Suisse had no pre-existing obligation to pay additional penalties to the government and (2)

the government had discretion to dismiss the action voluntarily under Rule 41 for the

reasons it stated, including conserving government resources and preserving its ability to

continue monitoring Credit Suisse.

The government argues this case should be affirmed on (2) alone: the court properly

dismissed the action on the government’s motion and no in-person hearing was required.

The government urges that this Court need not reach (1) and decide whether Doe stated a

viable claim under the FCA. The government argues that under the applicable Rule

41(a)(1) standard, a court has no authority to review the government’s grounds for

dismissal “absent a credible showing by a relator that the government’s dismissal of a case

violates the Constitution.” Appellee Br. 11. The government has the discretion “to control

litigation brought on its behalf” and is not required to disprove the merits of FCA claims

to prevail in a motion to dismiss. Appellee Br. 33.

Credit Suisse agrees with the government’s position but argues this case can and

should be affirmed on (1): Doe’s allegations were not cognizable under the FCA. The bank

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says it had no established duty to pay a higher criminal fine than the sentence required and

that Doe’s allegations were purely speculative (i.e., had Credit Suisse disclosed the

information, it would have faced a steeper fine). Credit Suisse further argues that Doe has

failed to identify a false statement in the plea agreement or colloquy and that Doe’s claim

is time-barred in any event. Credit Suisse agrees with the government that an in-person

hearing is not required or warranted in this case.

After Doe appealed to this Court, the case was placed in abeyance pending the

Supreme Court’s decision in Polansky. The Supreme Court in Polansky issued two

holdings, neither of which directly resolves this appeal. First, it held that the government

may seek dismissal of an FCA action over a relator’s objection as long as the government

intervened at some point during the litigation, whether at the outset or later on. Polansky,

599 U.S. at 430. Second, the Court held that district courts faced with a motion to dismiss

from the government should apply the rule generally governing the voluntary dismissal of

suits: Federal Rule of Civil Procedure 41(a). Id. at 435–36.

But Polansky did not address the question presented here: What procedures satisfy

the “hearing” requirement of 31 U.S.C. § 3730(c)(2)(A)? Do written submissions alone—

the procedure used here—satisfy the requirement?

II.

The applicable standard of review is not entirely clear from the case law. Doe and

the government both say this Court should review de novo the district court’s grant of the

government’s motion to dismiss under the FCA. They cite out-of-circuit cases in support

of de novo review. See Borzilleri v. Bayer Healthcare Pharm., 24 F.4th 32, 45 (1st Cir.

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2022); Chang v. Children’s Advocacy Ctr. of Del., 938 F.3d 384, 386 (3d Cir. 2019). But

the First Circuit appeared to question the appropriateness of de novo review, and the Third

Circuit did not explain why de novo review applied. See Borzilleri, 24 F.4th at 45 n.11

(“Both parties appear to assume we will apply de novo review to the district court’s

decision on the government’s motion to dismiss. Without the benefit of briefing on this

subject, and in the absence of a developed consensus on this issue in our sister circuits, we

make no judgment on the appropriateness of that assumption.”); Chang, 938 F.3d at 386.

Credit Suisse says the applicable standard of review is abuse of discretion and cites

Polansky, 599 U.S. at 429. See also Polansky, 599 U.S. at 438 (“A district court’s Rule 41

order is generally reviewable under an abuse-of-discretion standard . . . .”). But Polansky

concerned Rule 41(a)(2), which is a voluntary dismissal that happens after an answer or

summary judgment motion has been served and which requires a “court order, on terms

that the court considers proper.” By contrast, here the dismissal happened at the pre-

answer, pre-summary judgment stage, during which Rule 41(a)(1) applies, meaning no

court order was required. Since, as explained more below, a district court “has no

adjudicatory role” in deciding a Rule 41(a)(1) dismissal, abuse-of-discretion review does

not entirely make sense either. How can a court abuse its discretion when it has no

discretion to exercise in the first place?

We assume, without deciding, that our review is de novo. We save this question for

another day since we would affirm under either standard of review.

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III.

The district court satisfied the “hearing” requirement by considering the parties’

written submissions, and dismissal was appropriate since Doe did not raise a colorable

claim that doing so would violate his constitutional rights. Again, the relevant FCA section

states: “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.” 31 U.S.C. § 3730(c)(2)(A) (emphasis added). In a footnote in Polansky, the

Supreme Court said that when the government seeks dismissal before an answer is filed,

“Rule 41 entitles the movant to a dismissal; the district court has no adjudicatory role.”

Polansky, 599 U.S. at 436 n.4. The Court did not address what “purpose” a hearing would

serve given the court’s de minimis role but suggested that it “might inquire into allegations

that a dismissal ‘violate[s] the relator’s rights to due process or equal protection.’” Id.

(quoting Polansky v. Exec. Health Res. Inc., 17 F.4th 376, 390 n.16 (3d Cir. 2021)).

Because Doe has not raised any colorable claim that his due process or equal

protection rights have been violated, the district court’s dismissal was proper. Instead,

Doe’s only claimed error is, essentially, that the government sought dismissal for reasons

he disagrees with. But the purpose of a qui tam suit is to “vindicate the Government’s

interests.” Id. at 438. In Polansky, the Supreme Court said the government merely needs

to provide reasons for its assessment that the suit would not “vindicate” its interests, and

“[a]bsent some extraordinary circumstance, that sort of showing is all that is needed for the

Government to prevail.” Id. Keep in mind that Polansky dealt with Rule 41(a)(2), which

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is a dismissal that happens post-answer and requires a court order. Thus, here, in

considering a Rule 41(a)(1) motion to dismiss, the government is entitled to even greater

deference since no court order is required.

That still leaves the question of the meaning of “hearing” in 31 U.S.C.

§ 3730(c)(2)(A). On the one hand, Congress seemed to use that word intentionally. The

statute does not use the more general “opportunity to be heard” phrasing, for instance. But

we think the hearing requirement of Section 3730(c)(2)(A) can be satisfied with procedures

short of a formal evidentiary hearing in a courtroom. This is so for several reasons.

First, other courts that have considered this question—several district courts and the

Second Circuit in an unpublished opinion—have found that written submissions can satisfy

the hearing requirement. Brutus Trading, LLC v. Standard Chartered Bank, No. 20-2578,

2023 WL 5344973, at *2 (2d Cir. Aug. 21, 2023) (“Here, the district court met the hearing

requirement by carefully considering the parties’ written submissions.”); United States ex

rel. Vanderlan v. Jackson HMA, LLC, No. 3:15-CV-767, 2020 WL 2323077, at *7–8 (S.D.

Miss. May 11, 2020) (collecting cases).

Second, this Court and others have found that the word “hearing” in a nearby part

of Section 3730 of the FCA encompasses civil proceedings involving written papers—not

just live, formal hearings. That subsection, 3730(e)(4)(A), bars qui tam actions if the

allegations were already publicly disclosed in a “criminal, civil, or administrative hearing.”

This Court concluded that the meaning of “hearing” in Section 3730(e)(4)(A) is “fluid[]”

and that “an entire civil proceeding” can constitute a “hearing.” United States ex rel. Siller

v. Becton Dickinson & Co., 21 F.3d 1339, 1350 (4th Cir. 1994), superseded on other

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grounds as recognized in United States ex rel. May v. Purdue Pharma L.P., 737 F.3d 908,

917 (4th Cir. 2013). The term “hearing” is not just limited to “live” proceedings before a

judge. Id.; see also United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d

645, 652 (D.C. Cir. 1994) (noting that “hearing” can mean “informal, ‘paper’

proceedings”). Thus, we should similarly interpret the term “hearing” in the subsection

relevant here, 3730(c)(2)(A). See Powerex Corp. v. Reliant Energy Servs., Inc., 551 U.S.

224, 232 (2007) (“A standard principle of statutory construction provides that identical

words and phrases within the same statute should normally be given the same meaning.”).

Under Siller, then, a live, in-person court appearance is not required to satisfy the “hearing”

requirement of Section 3730(c)(2)(A).

Third, Polansky confirmed that the government is entitled to “substantial deference”

in opting to dismiss a qui tam action, which is litigated on behalf of and in the name of the

government. 599 U.S. at 437. Even at the post-answer stage, when a dismissal requires a

court order, a district court must “think several times over before denying a motion to

dismiss.” Id. at 438. Here, deference owed to the government is even greater because the

government moved for dismissal at the pre-answer stage—when no court order is required

and when “the district court has no adjudicatory role.” Id. at 436 n.4. It would be illogical

to require district courts to hold live, in-person evidentiary hearings when they have “no

adjudicatory role” to play.

Doe has not made a colorable claim that the dismissal infringed upon his due process

or equal protection rights; had Doe made such a claim, the district court might have decided

to hold an in-person hearing. Instead, Doe only claims that the government’s “true motive

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for dismissal, at least in part, was to insulate itself from scrutiny about its inadequate 2014

investigation of Credit Suisse.” Opening Br. 23. But that allegation, even if Doe could

support it, does not establish a colorable constitutional violation warranting a hearing. Doe

essentially wants to continue to press his qui tam suit as a means to second-guess and pry

into the government’s prosecutorial decisions. We reject the suggestion that a relator is

entitled to a formal, in-person hearing “to convince the government not to end the case.”

United States v. UCB, Inc., 970 F.3d 835, 850 (7th Cir. 2020) (quoting Swift v. United

States, 318 F.3d 250, 253 (D.C. Cir. 2003)).

The district court noted the government’s valid reasons for moving to dismiss the

action and properly granted the motion after considering Doe’s opposition brief. The

government explained that litigating Doe’s suit “would infringe on privileged information

relating to prosecutorial decision-making and protected and inadmissible plea

negotiations.” JA 244. In addition, the litigation would “interfere with ongoing

discussions between the United States and Credit Suisse regarding Credit Suisse’s

obligations under the plea agreement.” Appellee Br. 29–30. Also, the government has the

authority to weigh an action’s “costs and benefits” and dismiss it where the government

deems the litigation would be a waste of resources. Polansky, 599 U.S. at 428. These

reasons alone were enough to grant the government’s motion to dismiss under Rule 41(a).

Doe had an opportunity to be heard when he submitted his opposition to the motion.

Lastly, we decline Credit Suisse’s invitation to reach the merits of the district court’s

ruling. There is no need to address whether Doe validly stated a reverse FCA claim. The

district court’s consideration of the parties’ arguments—even without an actual hearing—

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was enough to satisfy the strictures of 31 U.S.C. § 3730(c)(2)(A) and Rule 41(a). The

government does not need to disprove the validity of an FCA claim in order to dismiss it

since the government has discretion to control litigation brought on its behalf and in its

name.

IV.

For the foregoing reasons, the judgment of the district court is affirmed.

AFFIRMED

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QUATTLEBAUM, Circuit Judge, dissenting in part and concurring in part and in the judgment:

I disagree with my friends in the majority that a district court’s decision based on

the papers submitted by the parties satisfies 31 U.S.C. § 3730(c)(2)(A)’s requirement of

“an opportunity for a hearing.” As the majority notes, Congress elected to use the term

“hearing” in that provision; not the phrase an “opportunity to be heard.” Maj. Op. at 10. To

me, “hearing” requires, at a minimum, the opportunity to make oral arguments to a court.

See Vermont Agency of Nat. Res. v. U.S. ex rel. Stevens, 529 U.S. 765, 769 (2000) (“the

relator . . . is entitled to a hearing before voluntary dismissal and to a court determination

of reasonableness before settlement, § 3730(c)(2).”); United States ex rel. Health Choice

Alliance, LLC v. Eli Lilly & Co., 4 F.4th 255, 264–65 (5th Cir. 2021) (after interpreting the

word “hearing” using dictionaries, stating that “some type of actual hearing is required”).

The Supreme Court’s recent United States ex rel. Polansky v. Executive Health Resources,

Inc., 599 U.S. 419 (2023) decision seems to confirm that § 3730(c)(2)(A) requires an actual

hearing. There, the Court addressed what standard should be used by a district court in

ruling on a government’s motion to dismiss a qui tam action before an answer is filed. The

Court held that the appropriate standard derives from Federal Rule of Civil Procedure

41(a), which governs voluntary dismissals in ordinary civil litigation. Id. at 435. Under

Rule 41(a), “[i]f the defendant has not yet served an answer or summary-judgment motion,

the plaintiff need only file a notice of dismissal.” Id. But the Court explained that “[t]he

application of Rule 41 in the [False Claim Act] context will differ” from the normal

operation of that rule. Id. at 436. That is because the FCA requires “notice and an

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opportunity for a hearing” before dismissal. Id. “So the district court must use that

procedural framework to apply Rule 41’s standards.” Id.

In reaching this conclusion, the Court seemed to recognize that applying Rule

41(a)’s limited adjudicatory role for courts when no answer has been filed to the FCA’s

hearing requirement might lead to some strange results. In fact, the Court discussed that

very situation:

The Court of Appeals briefly addressed the purpose of a hearing when dismissal is sought before an answer is filed. In that context, Rule 41 entitles the movant to a dismissal; the district court has no adjudicatory role. So what is the court supposed to do at the hearing the FCA requires? The Third Circuit suggested that Rule 41’s standards “rest atop the foundation of bedrock constitutional constraints on Government action.” So a hearing, whether pre- or post-answer, might inquire into allegations that a dismissal “violate[s] the relator’s rights to due process or equal protection.” But because Polansky has not raised a claim of that sort, we do not consider the circumstances in which, or procedures by which, a court should find the Constitution to prevent the Government from dismissing a qui tam action.

Id. at 437 n.4 (emphasis added) (internal citations omitted).

Nothing in Polansky suggests a court may forgo the FCA’s hearing requirement. To

the contrary, the decision seems to assume a hearing will take place. This tells me that

under § 3730(c)(2)(A), the district court must hold a hearing on a government’s motion to

dismiss, even if no answer has been filed. True, this might produce some weird results.

Seemingly, hearings would be required even when there is little or nothing for the court to

do. That seems silly, or as the majority puts it, “illogical.” Maj. Op. at 11. But if Congress

passes an illogical statute, it’s their job to fix it, not ours.

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Besides, Congress may have had reasons for requiring hearings not expressed in the

statute. For example, perhaps the hearing is designed to promote transparency, requiring

the government to explain, and answer questions about, the decision to dismiss. Or perhaps

the hearing is to at least ensure that the dismissal does not offend the constitutional issues

identified in Polansky. But regardless, Congress mandated a hearing. Courts should not

judicially write that requirement out of the FCA. In my view, the district court erred in not

holding a hearing on the government’s motion to dismiss.

That said, we must still consider whether that error was harmless—as we must do

for all errors. See 28 U.S.C. § 2111 (instructing reviewing courts to “give judgment after

an examination of the record without regard to errors or defects which do not affect the

substantial rights of the parties”); see also Fed. R. Civ. P. 61 (“At every stage of the

proceeding, the court must disregard all errors and defects that do not affect any party’s

substantial rights”); United States v. Lane, 474 U.S. 438, 445–46 (1986) (distinguishing

between constitutional errors and “errors of state law or federal statutes and rules” and

holding that all harmless errors should be ignored, “including most constitutional

violations”) (internal citations omitted). I agree with the majority that “Doe has not raised

any colorable claim that his due process or equal protection rights have been violated.”

Maj. Op. at 9. Nor has he pointed to any substantial right of his that was affected. As a

result, I would find that the failure to conduct a hearing in this case was harmless. For that

reason, I would affirm the district court’s dismissal of Doe’s claims.