Supreme Court Appears Poised To Extend FCA Statute of Limitations to 10 Years In Non-Intervened Cases
On March 19, 2019, the Supreme Court heard oral argument in Cochise Consultancy v. United States ex rel. Hunt, a case that appears likely to resolve a circuit split on an issue of critical importance: in non-intervened FCA cases – which comprise the vast majority of FCA cases – are relators entitled to invoke the FCA’s alternative 10 year statute of limitations set forth in 31 U.S.C. § 3731(b)(2)? That provision provides for a ten year statute of limitations if the action is brought no more than three years after “the official of the United States charged with responsibility to act” knows, or should know, the material facts of the violation. While an opinion is not expected until later this year, the tenor and content of the Justices’ questions suggest that the Court’s answer to that question is likely to be yes.
As we previously reported here, this case was brought by Billy Joe Hunt (“Hunt”), a former employee of The Parsons Corporation (“Parsons”). The United States engaged Parsons as part of the Coalition Munitions Clearance Project to dispose of munitions abandoned or left behind by retreating enemy forces in the Iraq and Afghanistan wars. Parsons initially awarded the subcontract to ArmorGroup but ultimately gave the subcontract to Cochise Consultancy, Inc. (“Cochise”), a security services contractor. Cochise, under the contract, provided security to Parsons’ employees, their subcontractors, and others working on the project. Hunt, as a part of the contract, managed the day-to-day operations in Iraq and alleges that Parsons and Cochise conspired to make false claims through a bid-rigging and bribery scheme that resulted in charging the United States grossly inflated rates and for services not provided.
Hunt filed a qui tam complaint on November 27, 2013, more than six years after the alleged fraud occurred. However, the complaint was filed within three years of informing the United States of the alleged fraud. On January 29, 2016, the United States declined to intervene, and Parsons and Cochise moved to dismiss the complaint on the ground that the action was barred by the six year statute of limitations. The district court dismissed the case and held that Hunt could not rely on the alternative 10 year statute of limitations in 31 U.S.C. § 3731(b)(2) because the United States had not intervened in the case and because Hunt had learned of the alleged fraud more than three years earlier. On April 11, 2018, the Eleventh Circuit reversed and concluded, using the plain meaning construction, that the 10 year statute of limitations period was applicable and that the knowledge of the relevant government official – not the relator – triggered the statute of limitations clock. This conclusion broke from two other lines of circuit court precedent. In contrast, the Fourth, Fifth, and Tenth Circuits found that relators may not invoke the limitations period found in Section 3731(b)(2) and may rely only on the FCA’s alternative six-year statute of limitations under Section 3731(b)(1). The Third and Ninth Circuits, however, have held that Section 3731(b)(2) applies even to non-intervened actions, but that the three-year limitation runs from the time the relator learns of a violation.
Parsons and Cochise (collectively, the “Petitioners”) appealed the case to the Supreme Court. During yesterday’s oral argument, the Petitioners argued that the Eleventh Circuit’s holding could lead to absurd results and a cascade of congressionally unintended consequences, including allowing a relator to conceal the fraud for a decade, and runs afoul of the Supreme Court’s holding in Graham County Soil & Water Conservation District v. United States ex rel. Wilson, 550 U.S. 409 (2005). They also argued that the ability of relators to invoke the 10 year statute of limitations period when the United States has not intervened in the case is contrary to the statute’s language, structure, purpose, and history.
Additionally, the Petitioners argued that even if the alternative 10 year statute of limitations provision is applied in non-intervened cases, the relevant inquiry for determining whether the case was brought in a timely fashion is whether it was brought within three years of the relator’s knowledge of the fraud, rather than when a government official learned of the relevant facts. The Petitioners argued that because relators essentially stand in the shoes of the government in qui tam cases, the phrase “official of the United States” should be deemed to include relators. Otherwise, they argued, relators could sit on knowledge of an alleged fraud for years without consequence. In support of this argument, the Petitioners noted that the Court in Graham construed Section 3731(d) as being “limited to Section 3730(a) actions brought by the United States and 3830(b) actions in which the United States intervenes as a party.” Because Section 3731(b)(2) contains nearly identical language, the Petitioners argued that Section 3731(b)(2) should be given the same meaning.
Hunt argued that Section 3731(b)(2) applies to all FCA cases, regardless of whether the United States decides to intervene. He further argued that the plain language of the statute clearly shows that the 10 year statute of limitations provision is available for both the United States and relators in non-intervened cases, and that the result is consistent with the congressional purpose of encouraging the recoupment of fraud proceeds with a government-relator relationship in mind. Based on the Eleventh Circuit’s interpretation, relators have two options: a) file an action within six years of the violation; or b) if the government investigates but elects not to intervene, the relator has 10 years following the underlying violation to file an action, so long as the filing is made within three years of a government official’s knowledge of the fraud. A DOJ attorney also argued separately in support of the expansive view of the statute of limitations.
The Justices’ questions and comments seem to suggest that the language of the statute is not ambiguous as the Petitioners suggested, with Justice Kavanaugh commenting that he does “not see ambiguity” and that the statute “seems clear as written.” Justice Gorsuch appeared similarly troubled by the Petitioners’ favored reading of the text, which may require the Justices to interpret an “action under Section 3730” “in two different ways” within the statute. Although the Justices appear to agree that the statute is poorly drafted, several, including Chief Justice Roberts, pushed back on the Petitioners’ “unintended consequences” as an “academic concern” in light of other FCA provisions that encourage prompt action by relators. A number of Justices seemed equally concerned about the relevancy of Graham and whether a relator can be deemed as an “official of the United States.”
Clarification of the circuit split on the availability of the 10 year statute of limitations will have a significant impact on False Claims Act cases throughout the country. A ruling by the Court that the 10 year statute of limitations applies even in non-intervened cases would effect a seismic change in how FCA cases are investigated and litigated, and would result, in many cases, in significantly expanded discovery and greater financial liability. We will continue to monitor this case and report on the decision when it is issued.