On August 23, 2019, Bloomberg Law published an article by Kathleen Carlson and Suzanne Notton of Sidley Austin discussing key provisions of the Illinois False Claims Act and recent trends in Illinois False Claims Act case law. This article is the first in a series of articles addressing the False Claims Acts of states that see relatively frequent state FCA lawsuits. In addition to Illinois, these states include California, Florida, Massachusetts, and New York. A copy of the article can be downloaded here.
On May 13, 2019, the United States Supreme Court unanimously held that the False Claims Act’s (“FCA”) alternative 10-year statute of limitations applies to non-intervened actions. As previously reported here, Cochise Consultancy, Inc. v. United States ex rel. Hunt, presented two main issues: whether relators are entitled to invoke the FCA’s 10-year statute of limitations set forth in 31 U.S.C. § 3731(b)(2), and whether relators are considered “official[s] of the United States” whose knowledge is relevant for determining when the 10-year limitations period applies. Writing for the unanimous Court, Justice Thomas ruled favorably for relators on both questions.
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.
On November 16, the Supreme Court agreed to resolve a percolating circuit split on an issue of critical importance under the FCA: are relators in non-intervened cases entitled to invoke the FCA’s alternate 10 year statute of limitations? The grant of certiorari in Cochise Consultancy, Inc. v. United States ex rel. Hunt, 887 F.3d 1081 (11th Cir. 2018) makes it the third Supreme Court case in recent years addressing the False Claims Act’s limitations periods. (more…)
The False Claims Act provides that a case must be brought within the later of (1) six years after the date on which the alleged violation is committed, or (2) three years after “the date when the facts material to the right of action are known or reasonably should have been known by the official of the United States with responsibility to act in the circumstance, but in no event more than 10 years after the date on which the violation is committed.” 31 U.S.C. § 3731(b). When the government has declined to intervene in an FCA action and a relator files a qui tam suit more than six years after the violation, the Fourth and Tenth Circuits have held that the relator’s suit is time-barred and the relator cannot take advantage of § 3731(b)(2)’s more generous statute of limitations. Last week, in United States ex. Rel. Hunt v. Cochise Consultancy, Inc., __ F.3d __, 2018 WL 1736788 (11th Cir. Apr. 11, 2018), the Eleventh Circuit split from the Fourth and Tenth Circuits, holding that § 3731(b)(2) “applies to an FCA claim brought by a relator even when the United States declines to intervene.” And departing from the Ninth Circuit, the Eleventh Circuit further held that because the period “begins to run when the relevant federal government official learns of the facts giving rise to the claim, when the relator learned of the fraud is immaterial for statute of limitations purposes.” (more…)
The ability to invoke the FCA’s statute of limitations defense often hinges on the timing of when “the official of the United States” knew or should have known of the alleged fraud. Most courts have sided with the government’s interpretation of “the official of the United States” as meaning only the Attorney General or his or her designees. A district court recently sided with the majority interpretation, but in so doing, affirmed avenues of discovery outside of DOJ Civil that should have put the government on notice of a potential FCA claim. See United States v. Kellogg Brown & Root Services, Inc., No. 12-cv-04110 (C.D. Ill. Sept. 16, 2016).
As we reported previously, earlier this year the Supreme Court held in Kellogg Brown & Root Services, Inc. et al. v. U.S. ex rel. Carter that the FCA’s first-to-file bar ceases to apply once a first-filed suit is dismissed. Notwithstanding that ruling, which ostensibly favored the relator, the district court on remand recently dismissed the case, again on first-to-file grounds. On remand, Carter argued that because the first-filed case that had preceded the filing of his case had since been dismissed, the Supreme Court’s decision suggested that the first-to-file bar no longer applied and therefore his case should not have been dismissed. The district court, however, disagreed with Carter’s interpretation of the Supreme Court opinion that “an existing case may proceed to trial automatically when a first-filed suit is dismissed.” Pointing to the U.S. District Court for the District of Columbia’s opinion in United States ex rel. Shea v. Verizon Communications, Inc., which stated that “Plaintiffs, other than the Government, may not file FCA actions while a related action is pending,” the district court held that because there was a first-filed case pending at the time that Carter filed his case, the first-to-file bar applied. In other words, the filing of Carter’s case was per se improper because a case was already pending when Carter filed his suit. The fact that the first-filed case was later dismissed would not, the district court concluded, operate to save from dismissal a case that was barred by the first-to-file bar at the time it was filed.
Last week, a federal judge in the Eastern District of North Carolina invalidated a tolling agreement between DOJ and the defendants, finding that the Government breached the agreement by failing to provide the defendant with the agreed-upon thirty days’ notice before filing suit. See United States v. Bertie Ambulance Serv., Inc., No. 2:14-CV000053-F (Oct. 8, 2015). Bertie Ambulance Service provides patients in eastern North Carolina with emergency transport service as well as transport to non-emergency scheduled dialysis treatments. The Government began investigating Bertie in 2004 for the submission of false claims for Medicare and Medicaid payments, eventually alleging in its complaint that Bertie regularly submitted reimbursement claims for services that “were not medically necessary, were not supported by a valid Physician Certification Statement, or otherwise did not qualify for reimbursement.” Upon notifying Bertie of the investigation on August 31, 2010, the Government requested that Bertie consent to tolling the six-year statute of limitations, and the parties ultimately entered into four tolling agreements that covered the period from September 1, 2010, to August 29, 2014. Bertie agreed to waive its statute of limitations defense in exchange for the Government providing “thirty (30) days notice to the prospective defendants before the United States files any action alleging the Government claims.”
Posted by Scott Stein and Monica Groat
Today the Supreme Court issued its opinion in Kellogg Brown & Root Services, Inc. et al. v. U.S. ex rel. Carter, a case we have written about extensively here, here, here, and here. In a unanimous opinion authored by Justice Alito, the Court held that the Wartime Suspension of Limitations Act (WSLA) does not apply to toll the statute of limitations in civil FCA cases, rejecting the position advanced by the relator and the Department of Justice. However, relators will find solace in the portion of the Court’s ruling holding that the first-to-file bar applies only so long as a first-filed case is active and pending, and ceases to apply when the first-filed case is settled or dismissed. A copy of the Court’s decision can be found here.
Posted by Scott Stein and Monica Groat
Yesterday, the Supreme Court heard oral argument in Kellogg Brown & Root v. Carter, a case which raises two important issues under the False Claims Act: (1) whether the Wartime Suspension of Limitations Act (WSLA) applies to toll the statute of limitations in civil FCA cases, and (2) whether a first-filed case is still deemed to be “pending” within the meaning of the FCA, barring any subsequently-filed suit, even after the first-filed case is settled or dismissed. We have previously written about this case here, here, and here. Though it is always precarious to predict the outcome of a case based on oral argument, the questioning at the argument suggests that while many of the justices were receptive to KBR’s argument that the WSLA does not apply to civil FCA claims, the relators and DOJ appeared to have the upper hand with regard to the scope of the first-to-file bar.
The lawyer for petitioner Kellogg Brown & Root (KBR) framed the first question before the Court as “whether Congress changed [the WSLA] along the way to make it civil” when the statute was amended in 1944 to delete the phrase “now indictable” from the phrase “offenses now indictable,” referencing the scope of actions to which the statute’s tolling provisions applied. Most members of the Court seemed skeptical of the arguments advanced by both respondent Carter and the Solicitor General that these amendments were intended to broaden the scope of the WSLA to apply to both criminal and civil matters. The Justices appeared to be far more receptive to KBR’s argument that Congress removed the phrase “now indictable” from the WLSA to ensure that the statute operated prospectively, and added the word “any” to clarify that the statute was applied to any offenses “against the United States.”
Carter’s lawyer and the Deputy Solicitor General arguing on behalf of the United States as amicus curie advanced several arguments in favor of reading the 1944 amendments to expand the WSLA to civil matters, but the Justices did not appear particularly receptive. Several of the Justices appeared wary of the argument advanced by both Carter and the Solicitor General that the use of the term “offenses” used in the WSLA and other sections of Title 18 of the United States Code could be read to refer to civil offenses.
The parties spent less time addressing the first-to-file bar. KBR’s attorney argued that if the Court found in KBR’s favor on the WLSA argument, it would not need to address the first-to-file issue at all. KBR did maintain the argument advanced in its briefs that the FCA’s first-to-file bar continues to apply to any subsequently filed suit even after a first-filed case is settled or dismissed. However, a number of justices appeared skeptical of this argument. Justice Kennedy noted that KBR’s arguments “give no significance of the word ‘pending'” and “almost write that out of the statute.” Justice Sotomayor and other justices suggested that the original source provision provided adequate protection from non-meritorious second-filed suits. Justice Ginsburg seemed more receptive to the argument that the first-to-file bar creates a race to the courthouse that incentivizes relators to bring information to the Government’s intention and may ultimately incentivize settlement.
A number of justices expressed concerns about whether the relator in a second-filed non-intervened suit would be bound by an adverse judgment against the relator in a first-filed non-intervened suit. To assuage those concerns, the Deputy Solicitor General argued that the United States, and any relator in a second-filed suit, would be bound by an adverse judgment in a non-intervened suit by a first-filed relator. This is actually a significant concession that runs directly contrary to the position that DOJ routinely takes in lower courts around the county – an issue we plan to cover in a separate post.
A decision in Kellogg Brown & Root is expected by June 2015, and we will provide an update when it is available.