15 May 2019

Supreme Court Unanimously Extends FCA Statute of Limitations to 10 Years for Non-Intervened Cases

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.

The FCA’s limitations provision states in relevant part:

(b) A civil action under section 3730 may not be brought—
(1) more than 6 years after the date on which the violation of section 3729 is committed, or
(2) more than 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, whichever occurs last.

31 U.S.C. § 3731(b)(1)-(2)

As discussed in earlier posts here and here, on November 27, 2013, the Relator, Billy Joe Hunt (“Hunt”), filed a qui tam complaint, alleging that The Parsons Corporation and Cochise Consultancy, Inc. (“Cochise”) submitted false claims to the United States in connection with a defense contract in Iraq.  Less than three years before filing his qui tam action, Hunt disclosed the fraudulent scheme to the United States.  After the United States declined to intervene, Cochise moved to dismiss, arguing that Hunt failed to file his complaint within the six-year statute of limitations under section 3731(b)(1).  The critical question then became whether Hunt could avail himself of the provisions in section 3731(b)(2), which would render his complaint timely.

The Court agreed that section 3731(b)(2) was applicable.  Specifically, focusing on the plain language of the FCA, the Court concluded that the limitations periods in sections 3730(b)(1) and (2) apply to all actions regardless of the initiating party or whether the Government has intervened in the case.  The Court, thus, rejected Cochise’s argument that would effectively require that a relator-initiated, non-intervened action be an “action under section 3730” for the purpose of subsection (b)(1) but not subsection (b)(2).  This reading would, in the Court’s view, conflict with common rules of statutory interpretation and attribute different meanings to the same statutory phrase.  The Court similarly rejected Cochise’s reliance on the Court’s decision in Graham County Soil & Water Conservation District v. United States ex rel. Wilson, 545 U.S. 409 (2005), stating that “[n]othing in Graham County supports giving the same phrase in § 3731(b) two different meanings depending on whether the Government intervenes.”  The Court also disagreed with Cochise’s position that the expansion of the statute of limitations period would lead to “counterintuitive results.”  Relying on the harm to the United States and its substantial recovery as a result of successful qui tam actions, the Court concluded that an extension of the statute of limitations period was reasonable where the United States lacked actual or constructive knowledge of the fraud.

The Court also concluded that a relator in a non-intervened action is not considered an “official of the United States.”  This is because a relator is neither an appointed United States officer nor employed by the United States.  The Court also reasoned that the title of section 3730(b) – “Action by Private Persons” – further suggests that a relator is nothing other than a “private person.”  Last, the Court referenced the phrase “the” official “charged with responsibility to act in the circumstances,” which signified to the Court, Congress’ intent to exclude private relators as being considered “the official of the United States,” in addition to lacking the ability to investigate or prosecute FCA actions as contemplated by section 3731(b).

The net effect of the Court’s decision is to expand the scope of liability for defendants under the FCA.  Under the Court’s ruling, relators may file an action up to ten years after a purported violation of section 3729, so long as they file within three years of the date an official of the United States knows, or should know, of the material facts.  As a practical matter, relators still have incentives not to delay filing, including the first-to-file and public disclosure bars.  But there will be many cases in which defendants will now incur increased expenses in conducting discovery to defend such actions and could face liability for conduct previously thought to be outside of the FCA’s limitations period.

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