Commercial Litigation Update

The Highlights

• Accelerated FCA Investigative Timeline: The U.S. Department of Justice (DOJ) is taking new steps to implement the directives of Executive Order 14395 of March 16, 2026, “Establishing the Task Force To Eliminate Fraud,” by expediting the review for newly filed False Claims Act (FCA) qui tam actions involving federally funded state-administered benefits programs. The May 27, 2026, memorandum from Assistant Attorney General Brett A. Shumate (“Shumate Memo”) states that all newly filed state-administered benefits program fraud qui tam actions will now be reviewed by DOJ in 60 to 120 days after filing to determine if the government will continue its investigation, permit the whistleblower to proceed, or act to dismiss the case.
• DOJ Reaffirmation of Relator Authority: The Shumate Memo reaffirms DOJ’s position that whistleblowers may “stand in the shoes” of the government and indicates that the agency will let relators lead litigation subject to DOJ’s “oversight and ultimate control.”
• Automatic Criminal and Administrative Referrals: New benefits program fraud qui tam matters will be automatically referred to the Criminal Division and/or the National Fraud Enforcement Division for evaluation of potential criminal violations and to the affected agency for potential administrative action, including payment suspension.

It should come as no surprise to constitutionalists, practitioners under the Federal False Claims Act (31 U.S.C. §§3729–3733) (FCA), and auditors of the oral argument in the case that the Supreme Court has held that the federal government may move to dismiss an FCA action under §3730(c)(2)(A) whenever it has intervened—whether during the seal period or later on. United States ex rel. Polansky v. Executive Health Resources, Inc. To assert this right, the government must actually intervene (which is not difficult since the statute allows it at any time before final judgment, even on appeal), and the propriety of dismissal is to be adjudicated pursuant to Fed. R. Civ. P. 41(a), the rule generally governing voluntary dismissal of suits in ordinary civil litigation, and dismissal should be granted in all but the most extraordinary cases. 

Continuing the issuance of opinions as to which the Justices are largely of one mind, the Court today handed down three decisions. Each gives important guidance to litigators on both sides of the ball. The first of these is a unanimous opinion settling the hotly debated question of whether intent under the federal False Claims Act (FCA) is a subjective or objective matter. It is the former. The second decision, also unanimous, clarified what a plaintiff must plead and prove to establish securities fraud regarding a stock offering through a direct listing. The third case offers a lone dissent over a majority and concurring opinions rejecting a labor union’s argument that the National Labor Relations Act (NLRA) preempts a state court tort action concerning workers sabotaging a company’s concrete trucks.