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Supreme Court to Clarify Statute of Limitations For Declined FCA Cases

This week, the Supreme Court granted cert in a False Claims case. Cochise Consultancy Inc. v. United States, ex rel. Hunt, No. 18-315 (Nov. 16, 2018). It will now determine the correct False Claims Act statute of limitations period.  In particular, it will decide whether the False Claims Act’s extended 10-year period applies to declined cases in which the relator litigates on behalf of the government.

Every other term or so, the Court takes an FCA case, alternating between the blockbuster, like Escobar. Universal Health Services v. United States ex rel Escobar, 136 S.Ct. 1989 (2016) (establishing materiality as a basis for dismissal of False Claims Act cases). And the mundane, like Rigsby. State Farm Fire and Casualty Co., v. United States ex rel. Rigsby, 137 S.Ct. 436 (2016) (dealing with the remedy for violations of the False Claims Act’s seal requirement).

Hunt will likely fall in the later category. It will answer affect damages in some cases, but will not not portend a sea-change in FCA litigation.

The Statute: Two False Claims Act Statute of Limitations Periods 

Statutes of limitation define how long a party has to file a claim in court. Suit cannot be brought for conduct before the statute of limitations.  Moreover, damages are limited to the conduct occurring after the period began. The False Claims Act includes two separate statute of limitations requiring a claim to be brought within the later of:

  • “3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed,” id. § 3731(b)(2).

The FCA permits “qui tam” claims. In other words, the whistleblower may litigate on behalf of the government if it does not. Hunt will decide whether the 10-year limitations period applies to “declined” cases or only those in which the government litigates.

The Relator in Hunt sued Seven Years After the Fraud

Cochise Consultancy obtained nearly $1 million per month from the military to provide security in Iraq.  It obtained the contract by bribing various DOD employees. Hunt filed his case in November 2013, seven years after the fraud.  The government declined to intervene. Then, Hunt prosecuted the case on the government’s behalf.

The district court dismissed the case as time-barred.  It reasoned that either the 10-year limitations period is unavailable in declined cases or that it began to run when Hunt learned of the fraud. Under this theory it expired in 2009.

The 11th Circuit Concludes that 10-year False Claims Act Statute of Limitations Applies to Declined Cases 

On appeal, the defendants relied on the decisions of two prior appeals courts concluding that, because the 10-year limitations period begins to run once government officials have knowledge of the fraud, applying that provision in declined cases would lead to the “absurd” result that the limitations depends on knowledge of a non-party. Cochise Consultancy Inc. v. United States, ex rel. Hunt, No. 16-12836, at 22 (April 11 2018); see United States ex rel. Sanders v. N. Am. Bus Indus., Inc., 546 F.3d 288, 293 (4th Cir. 2008); United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 726 (10th Cir. 2006).

The Eleventh Circuit rejected this argument as failing to “consider the unique role that the United States plays even in a non-intervened qui tam case,” concluding that “it would not be ‘absurd’ or ‘bizarre’ to peg the limitations period to the knowledge of a government official” in that context. Hunt, No. 16-12836, at 22. The Court also rejected as a “legal fiction” the Ninth Circuit’s rule that in a declined case, the relator himself becomes a government official for purposes of the limitations period. Id. at 32; see United States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211, 1217 (9th Cir. 1996).

Hunt Emphasizes the Importance of Government Intervention

The relator and Eleventh Circuit clearly have the better of the argument. Firstly, there is nothing in the text of the FCA that would indicate that the 10-year limitations period applies only to intervened cases. Certainly, the Supreme Court’s unanimous rejection of additional elements of liability for “implied certification” cases in favor of the elements delineated in the statutory text suggests that the Court will find a plain text analysis attractive in HuntUniversal Health Services v. United States ex rel Escobar, 136 S.Ct. 1989 (2016).

Moreover, the absurdity analysis employed by the Fourth and Tenth Circuits is in tension with the reality of False Claims Act cases. Even in a declined case, a relator sues on behalf of the government who remains the real party in interest. Under this structure, there is nothing absurd or unusual in basing the FCA limitations period on the government’s knowledge, even when it declines to intervene.

Regardless of how the Supreme Court resolves the question, this cases strongly highlights the importance to relators of government intervention in their case. The Eleventh Circuit explicitly noted this reality, explaining that though relators receive a larger share of declined cases, it is strongly in their interest for the government to intervene in a case.. Hunt, No. 16-12836, at 12-13. As the Court explained, “the government’s intervention makes it far more likely that there will be a recovery. When the United States elects to intervene, about 90 percent of the time the case generates a recovery, either through settlement or a final judgment. But only about 10 percent of non-intervened cases result in recovery.” Id.

Conclusion

At the Whistleblower Law Collaborative, we are all former government prosecutors, and this is no coincidence. We understand that the best way to maximize our clients’ odds of success in FCA and other whistleblower cases is to obtain the government’s intervention and active assistance. Our experience working as government prosecutors makes us uniquely situated to understand how to present cases in a way that will best ensure the government takes an active role.

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