A legal battle over the statute of limitations in False Claims Act cases has advanced to the Supreme Court, with the potential to significantly affect government efforts to recover funds lost to fraud.
In the oral argument today in Cochise Consultancy Inc. v. United States ex rel. Hunt, the Supreme Court justices explored whether the literal reading of the False Claims Act’s statute of limitations was consistent with the law’s purposes.
The court’s decision is expected to clarify just how much time can elapse from the date a violation of the False Claims Act is committed before a complaint must be filed or the government loses the right to recover for the violation.
The case involves a whistleblower, Billy Joe Hunt, who alleged that two defense contractors, Cochise Consultancy Inc. and the Parsons Corp., defrauded the government in connection with a subcontract for security services related to cleaning up munitions left behind in Iraq.
The alleged fraud took place during 2006, and Hunt reported it to the US government in 2010 while he was being interviewed about his involvement in a separate kickback scheme. Hunt served ten months in federal prison on charges related to the kickback scheme.
In late 2013, after his release from prison, Hunt filed a qui tam whistleblower case against the companies, alleging that they had defrauded the government.
Cochise moved to dismiss the complaint on the grounds that the complaint had been filed too late. The district court held that although there were conflicting appellate court interpretations of the False Claims Act statute of limitations, under any of them Hunt was too late.
The Court of Appeals for the Eleventh Circuit reversed the lower court’s decision, holding that the complaint was filed before the statute of limitations expired. The contractors then sought the Supreme Court’s review of that decision.
False Claims Act statute of limitations
The False Claims Act’s statute of limitations is set out in 31 U.S.C. 3731(b), which states that any complaint under the False Claims Act may not be brought:
- more than six years after the date on which the violation of the False Claims Act is committed, or
- more than three years after the date when relevant facts are known or reasonably should have been known by the responsible official of the United States,
but in no event longer than ten years after the violation occurred, whichever occurs last.
The text of this section does not distinguish between cases brought by qui tam relators and those initiated, or intervened in, by the government.
Until 1986, the provision contained only a six-year statute of limitations. But when Congress amended the False Claims Act that year to strengthen it and to “increase [ ] the incentives, financial and otherwise, for private individuals to bring suits on behalf of the government,” it added the provision that a complaint could be brought within three years of when the responsible government official learned of the relevant facts, but in no event longer than ten years after the violation occurred.
The Senate Judiciary Committee explained that the purpose of this new provision was “to ensure the government’s rights are not lost through a wrongdoer’s successful deception.”
The split in Cochise among the circuit courts
Cochise is expected to resolve divisions among the Courts of Appeal on whether whistleblowers who file qui tam lawsuits, known as “relators,” must do so within six years, under the first provision, or whether that period may be extended under the second provision (three years) based on when the responsible government official learned of the fraud.
The Supreme Court also is expected to decide whether the second provision is triggered by knowledge of the relator or the knowledge of the government.
The Eleventh Circuit held in Cochise that the longer timeframe applies to all qui tam cases, including those where the government has not intervened – as is the case in Cochise.
This was important in Cochise because the relator filed his complaint within three years of when he notified government officials of the fraud, but longer than six years after the fraud occurred.
The Eleventh Circuit concluded that its interpretation of the statute of limitations provision applies to all qui tam cases whether or not intervened is consistent with the statutory language as well as with the broad underlying purpose of the False Claims Act and Congress’s efforts in the law to encourage more private enforcement of the False Claims Act.
In contrast to the Eleventh Circuit’s approach, the Fourth and Tenth Circuit courts have held that the additional three-year period applies only in cases filed by the government or qui tam cases in which the government intervenes.
Those courts reasoned that the three-year period could not apply in non-intervened cases where the government was not a party because the Congress could not have intended that the statute of limitations depends on the knowledge of a nonparty.
The Eleventh Circuit was unpersuaded by those cases because they did not take into account the unique role that the US plays in qui tam cases even when it does not intervene. The Eleventh Circuit also rejected the contractors’ policy arguments that a longer statute of limitations period could allow relators to delay filing their complaints, noting that other provisions of the False Claims Act serve to discourage delay.
The Ninth Circuit adopted a third interpretation. It held that while the additional three-year period applies to all qui tam cases even if the government does not intervene, the three-year period is triggered by the relator’s knowledge, not the government’s knowledge.
The Eleventh Circuit rejected that approach, concluding that nothing in the text of the statute supports the “legal fiction” that a relator is an official of the United States charged with responsibility to act.
Justices view False Claims Act’s statute of limitations as clear
Although some justices noted that the False Claims Act may have been imperfectly drafted, they generally viewed the directive of the statute of limitations provision – which provides that a case must be brought within six years of when the violation occurred, or within three years of when an official of the United States learns of it, but in no event longer than ten years of when the violation occurred – as “very clear as written.”
Justice Elena Kagan observed that the statute of limitations provision might reflect “a bad policy choice, but … you can imagine reasons why Congress would have made that choice.” For example, she said, Congress might have not wanted the statute of limitations to turn on the government’s intervention in a case.
Chief Justice John Roberts observed that the concern that whistleblowers would delay bringing cases was academic, given other incentives to act quickly. A case could be blocked if another whistleblower filed a qui tam lawsuit alleging the same false claims first, or if the government itself took action before a whistleblower filed a qui tam lawsuit.
The justices asked the parties to address an earlier decision in a qui tam case, Graham County Soil & Water Conservation District v. U.S. ex rel. Wilson. In that case, the Supreme Court concluded that the statute of limitations provision did not apply to retaliation cases under the False Claims Act, even though a literal reading of the statute would suggest that it did.
Justice Ruth Bader Ginsburg distinguished that case from Cochise as involving a different kind of claim that did not fit the statutory language used in the statute of limitations provision.
A decision in Cochise is expected before the Supreme Court’s term ends in June.