Overview
On September 18, the Department of Justice published a press release announcing two revisions to its Justice Manual's provisions on False Claims Act (FCA) lawsuits—(1) limiting the use of non-binding guidance memoranda issued by regulatory agencies (Guidance Documents) as a basis for establishing FCA liability, and (2) addressing government-initiated dismissals of civil qui tam actions.
Limitations on Issuance and Use of Guidance Documents
The revision to Section 1-19 of the Justice Manual, "Limitations on Issuance and Use of Guidance Documents," comes with some history.
Guidance Documents are agency statements that set forth a policy or interpretation on a statutory, regulatory, or technical issue. Unlike statutes and regulations, Guidance Documents are not subject to the formal rulemaking process under the Administrative Procedure Act[1] and do not carry the force and effect of law. Nonetheless, Guidance Documents have shaped enforcement practice by signaling the issuing agency's priorities, interpretive positions, and expectations for parties' compliance with the underlying law. Despite their non-binding nature, the government and relators, with some judicial success, have historically argued that conduct inconsistent with Guidance Documents constitutes evidence of a violation of the underlying formally promulgated regulation.
In January 2018, during the first Trump administration, then-Associate Attorney General Rachel Brand issued a memorandum (the Brand Memo) directing the DOJ's civil enforcement lawyers to limit the department's use of Guidance Documents in civil enforcement actions.[2] In July 2021, the Biden administration reversed course. Attorney General Merrick Garland rescinded the Brand Memo and issued a memo that emphasized the importance of Guidance Documents in advising the public of how the department understands and is likely to enforce statutes and rules.[3]
The recent change to Section 1-19 reflects a return to the principles of the Brand Memo. The revision "reinstates and builds upon" the department's policy from the first Trump administration that Guidance Documents "cannot impose legal obligations beyond those established by statute or regulation."[4] As revised, the Manual states that "[c]riminal and civil enforcement actions brought by the Department must be based on violations of applicable legal requirements, not mere noncompliance with guidance documents issued by federal agencies."[5]
Importantly, however, this revision makes clear that prosecutors need not treat Guidance Documents as completely irrelevant. The manual states the DOJ may still use Guidance Documents for the following purposes:
- To establish scienter, notice, knowledge, or mens rea based on awareness of Guidance Documents.[6]
- As evidence that a party has satisfied or failed to satisfy professional or industry standards or practices relating to applicable statutory or regulatory requirements.[7]
- As a reflection of scientific or technical processes.[8]
- To show a party falsely certified compliance with guidance where failure to comply is itself relevant to the claims at issue (e.g., if such certification is material to an agency's payment decision).[9]
- To provide relevant legal or factual context.[10]
The revision also highlights that the directive against reliance on Guidance Documents does not apply where a government contract requires compliance with an agency Guidance Document. As revised, Section 1-19 explains that "it is the contract – not the agency guidance itself – that makes the agency guidance pertinent."[11]
DOJ Dismissal of Civil Qui Tam Actions
The DOJ also made minor, but still significant, revisions to Section 4-4.111 of the Justice Manual, "DOJ Dismissal of a Civil Qui Tam Action."
The FCA's qui tam provisions allow private citizens known as "relators" to file civil actions on behalf of the United States against parties alleged to have defrauded the government.[12] Upon the filing of a qui tam complaint, the government has the opportunity to investigate and elect whether to intervene and take over the action or decline intervention either for purposes of settlement or to allow the relator to proceed independently. Critically, upon a declination of intervention and at any time during the relator's prosecution of the action, the government can seek to dismiss the action, even over the relator's objections, provided the relator has been notified of the government's motion and the court has given the relator an opportunity to be heard.[13]
In January 2018, then-Director of the Fraud Section of the Commercial Litigation Branch, Michael Granston, issued a memorandum (the Granston Memo) that provided DOJ attorneys with a framework for evaluating whether to exercise this authority.[14] The Granston Memo identified specific factors that may warrant dismissal by the government, but did not expressly require prosecutors to consider every factor.
The revision to Section 4-4.111 now requires government attorneys to undertake this analysis in every case. As revised, the manual clarifies that the DOJ "will in each case assess whether the government's interests are served by seeking dismissal,"[15] strengthening the provision's previous language which stated that attorneys "should also consider" such interests. In addition, the Manual now explains that dismissal is not warranted in every case where the government declines to intervene because "the government often will investigate a qui tam action only to the point where it concludes a declination is warranted, which may not equate to the conclusion that a qui tam is meritless."[16] The revision also emphasizes that in cases where the department initially concludes that dismissal is not warranted, it may still "re-evaluate whether dismissal becomes appropriate as the litigation progresses."[17]
In making these revisions, however, the DOJ did not change the non-exhaustive list of factors from the Granston Memo that can serve as a basis for dismissal:
- Curbing facially meritless qui tams (where the relator's legal theory is inherently defective, or the relator's factual allegations are frivolous);
- Preventing parasitic or opportunistic qui tam actions that duplicate a pre-existing Government investigation and add no useful information to the investigation;
- Preventing interference with an agency's policies or the administration of its programs;
- Controlling litigation brought on behalf of the United States, to protect the Department's litigation prerogatives;
- Safeguarding classified information and national security interests;
- Preserving resources, particularly where the Government's costs (including the opportunity costs of expending resources on other matters) are likely to exceed any expected gain;
- Addressing egregious procedural errors that could frustrate the Government's efforts to conduct a proper investigation.[18]
The revisions to this section, however, do not address DOJ's approach to the relator's role in the government's choice to dismiss. The Justice Manual does not address, for example, the extent to which the department should solicit the relator's input before deciding to seek dismissal of a complaint. As recently confirmed by the Supreme Court in United States ex rel. Polansky v. Executive Health Resources, Inc., the government may exercise its dismissal authority whenever it has intervened—whether during the seal period or later—over the relator's objection, so long as the relator received proper notice and an opportunity for a hearing.[19] But the Polansky decision does not set DOJ policy on how the Department should interact with relators in making its decision to dismiss a complaint, and its current approach remains unclear.
Takeaways
These developments serve as an important reminder for companies in several respects. Although neither revision creates any rights, companies now have two additional tools in their toolbox when seeking to persuade the government to resolve FCA investigations and lawsuits in their favor.
Where an investigation is based on conduct alleged to have violated a Guidance Document, companies can argue that reliance on such guidance to prove a violation of the underlying regulation is improper and would be inconsistent with the now clearly articulated principles of this administration's FCA enforcement policy. And where a company has successfully convinced the government to decline intervention, it can more forcefully advocate for the government to seek dismissal of the "relator-only" action, either in conjunction with its notice of non-intervention or thereafter as the litigation progresses if circumstances so warrant, by arguing that the case presents circumstances meeting one or more of the factors it now must consider under Section 4-4.111 of the Justice Manual.
It will be important to monitor how the changes to Section 4-4.111 will be reflected in the implementation of DOJ's May 27 guidance set forth in Civil Division Assistant Attorney General Brett Shumate's memorandum "Accelerating Review and Enhancing Enforcement in Benefits Fraud Matters" (Shumate Memo).[20] Under that guidance, FCA prosecutors are directed to accelerate review of those qui tam cases that involve federally funded, state-administered benefit programs, targeting an initial review in 60 –120 days, and requiring a prompt decision to either investigate, permit the relator to proceed, or dismiss under § 3730(c)(2). Requiring formal consideration of the factors set forth in the revisions to the Justice Manual could delay this process and permit relators bringing cases covered by the Shumate Memo to proceed to litigation on a complaint that would otherwise warrant dismissal under the Section 4-4.111 factors.
Contractors must also remain mindful of agency guidance incorporated into their contracts notwithstanding the revision to Section 1-19, given its advisement that the non-reliance directive does not apply to government contractors with contracts that incorporate Guidance Documents as contractual terms. Accordingly, violations of agency guidance incorporated in a contract can still be a basis for FCA liability where the violation is knowing and material to the government's payment decision.
Finally, as always, all DOJ pronouncements regarding FCA enforcement should serve as reminders for companies to continue to review the effectiveness of their compliance programs, including their policies and procedures, whistleblower policies, internal audit functions, and employee training. Steptoe is closely monitoring these and all other significant FCA developments and can help clients assess their potential exposure under the FCA, as well as develop and enhance compliance programs to mitigate FCA risk.
[1] See 5 U.S.C. § 553.
[2] Memorandum to Heads of Civil Litigating Components, United States Attorneys, from Associate Attorney General Rachel Brand, Re: Limiting Use of Agency Guidance Documents in Affirmative Civil Enforcement Cases (Jan. 25, 2018), https://www.justice.gov/archives/opa/press-release/file/1028756/dl?inline=.
[3] Memorandum to All Department Components, from the Attorney General, Re: Issuance and Use of Guidance Documents by the Department of Justice (July 1, 2021), https://www.justice.gov/archives/opa/media/1149371/dl?inline=.
[4] US Dep't of Just., DOJ Revises Justice Manual to Strengthen False Claims Act Enforcement (Sept. 18, 2026), https://www.justice.gov/opa/pr/doj-revises-justice-manual-strengthen-false-claims-act-enforcement.
[5] Justice Manual § 1-19.210.
[6] Id. § 1-19.220.
[7] Id. § 1-19.230.
[8] Id. § 1-19.240.
[9] Id. § 1-19.250.
[10] Id. § 1-19.260.
[11] Justice Manual § 1-19.250.
[12] 31 U.S.C. § 3730(b)(1).
[13] 31 U.S.C. § 3730(c)(2)(A).
[14] Memorandum to Attorneys, Commercial Litigation Branch, Fraud Section, from Director, Commercial Litigation Branch, Fraud Section, Michael D. Granston, Re: Factors for Evaluating Dismissal Pursuant to 31 U.S.C. 3730(c)(2)(A) (Jan. 10, 2018).
[15] Justice Manual § 4-4.111 (emphasis added).
[16] Id.
[17] Id.
[18] Id.
[19] 599 U.S. 419 (2023).
[20] Memorandum to Attorneys, Commercial Litigation Branch, Fraud Section, from Assistant Attorney General, Civil Division Brent A. Shumate, Re: Accelerating Review and Enhancing Enforcement in Benefits Fraud Matters (May 27, 2026), https://www.justice.gov/opa/media/1442566/dl.
