Posted by Scott Stein and Catherine Kim
In contrast to the Fourth Circuit’s holding in United States ex rel. Carter v. Halliburton, No. 12-1011 (4th Cir. Mar. 18, 2013), which we previously wrote about here, a district court in the Western District of Pennsylvania recently declined to apply the tolling provisions of the Wartime Suspension of Limitations Act (WSLA) to a False Claims Act case. United States ex re. Emanuele v. Medicor Associates, et al., No. 10-245 (W.D. Pa. July 26, 2013).
A qui tam was originally filed under seal on October 8, 2010 by a cardiologist employed at Medicor, who alleged that Medicor had entered into various “sham” contractual arrangements with a medical center for the purpose of providing kickbacks to induce patient referrals. The relator also alleged that Medicor knowingly submitted false claims to Medicare and other federal healthcare programs for medically unnecessary procedures.
After the government elected not to intervene in the case, each of the defendants filed a motion to dismiss for failure to state a claim, arguing, among other things, that the relator’s claims were barred by the FCA statute of limitations. The district court agreed, ruling that the claims based on conduct that occurred prior to October 8, 2004 were time barred and that the relator’s remaining claims failed to satisfy the specific pleading requirements of Rule 9(b). However, the court provided the relator an opportunity to cure the deficiencies in his Complaint.
In addition to filing an Amended Complaint, the relator also filed a Supplemental Opposition to the Defendants’ Motion to Dismiss, asserting that the FCA statute of limitations should be tolled under the WSLA in accordance with the Fourth Circuit’s decision in Carter, thereby allowing the relator to file claims for conduct that occurred as far back as October 11, 2002.
Prior to amendment in 2008, the WSLA provided:
When the United States is at war . . . the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States . . . shall be suspended until three years after the termination of hostilities as proclaimed by the President or by a concurrent resolution of Congress.
18 U.S.C. § 3287 (2007).
However, after reviewing the Fourth Circuit’s split decision, the Pennsylvania district court agreed with the Carter dissent that the legislative history and Congressional intent behind both the WSLA and the FCA “caution against application of the WSLA’s tolling provisions to private FCA claims” in light of the fact that neither the WSLA nor its legislative history include any reference to private actions. The district court also highlighted that the policies underlying the FCA would be thwarted by allowing private relators to benefit from the WSLA’s tolling provisions, as relators would subsequently have incentive to postpone the filing of FCA claims in order to increase their potential recovery. Moreover, the district court found that its interpretation of the WSLA was consistent with its earlier conclusion that the tolling provisions of the FCA do not apply where the United States is not a party to the action.
It remains to be seen whether courts in other jurisdictions that have yet to address this issue will adopt the interpretation of the Fourth Circuit or the Pennsylvania district court when assessing the potential applicability of the WSLA to private FCA actions. However, this issue bears monitoring given the significance of the statute of limitations to both liability and damages.