2nd Circuit Affirms Dismissal of FCA Case Against Bank for Alleged Sanctions Breaches

The U.S. Court of Appeals for the 2nd Circuit in an Aug. 21 summary order affirmed a New York district court's dismissal of Brutus Trading's qui tam False Claims Act against Standard Chartered, which accused the financial firm of facilitating illegal banking transactions on behalf of sanctioned parties. After Brutus filed the qui tam case, in which a party with evidence of fraud against the U.S. government can file a lawsuit on behalf of the government, the U.S. then moved to toss the matter after finding that the "factual allegations were unsupported," the legal theory "was not cognizable, and the continuation of the suit would waste considerable government resources" (Brutus Trading v. Standard Chartered Bank, 2nd Cir. # 20-2578).

The U.S. District Court for the Southern District of New York granted this motion without an evidentiary hearing, leading to Brutus' appeal. The appellate court noted that Brutus did not oppose the finding that the U.S. motion to dismiss amounted to a motion to intervene, which was significant because the government's intervention in a qui tam FCA case sees the U.S. assume primary responsibility for prosecuting the case, absolving it of the actions of the party bringing the suit.

The 2nd Circuit noted that the Supreme Court's ruling in United States ex re. Polansky v. Exec. Health Res. established that "the government does not have an unfettered right to dismiss a qui tam action." However, the appellate court said it disagrees with Brutus' claim that the district court here "held no hearing of any kind." The court ruled that "there is no reason to believe that dismissal was unwarranted here" since Brutus did not oppose the govenrment's motion to dismiss and was given the chance to be heard.