False Claims Act Statute of Limitations Destined for Timely Supreme Court Review

Let’s be honest. The question can stump the most experienced False Claims Act (FCA) practitioner: What is the correct statute of limitations under the FCA? Is it three years, six years, or 10 years, all time periods referenced in the FCA statute?[1] Does the government’s intervention decision in a qui tam action impact the limitations analysis? Well, it is always safe to answer, “It depends,” but FCA limitation periods until recently had a few reasoned assumptions, one of which was that relators had a shorter limitations period than the United States to pursue an action. Now, there is clear conflict in the circuit courts and an opportunity for the US Supreme Court to clarify a quirky but consequential FCA procedural issue.

In issuing certiorari to the US Court of Appeals for the Eleventh Circuit, in Cochise Consultancy Inc. v. United States, ex rel. Hunt, –S.Ct. –, 2018 WL 4385694 (2018), the Court will address whether relators may assert the same limitations tolling period allowed for the United States when the government has declined to intervene in the action. This legal issue has significant potency in the context of the growing litigation trend in declined qui tams, the de facto lengthy duration of FCA seal periods when sued defendants have no idea they have been sued for years and their litigation rights are held in statutory abeyance, and the new US Department of Justice (DOJ) policy on intervening to dismiss qui tams when there is a DOJ declination of the action.

All of these important procedural issues in FCA practice can be impacted by the applicable FCA statute of limitations and have a direct impact on how FCA cases are fairly processed. The Cochise appeal is a hot case to watch then as we can expect the Court to level set the FCA statute of limitations provisions, determine if relators may invoke the three-year tolling period in declined FCA cases, and, potentially, confirm whether relators are government officials under the statute—a status that may be consequential beyond the limitations question.

To begin with, as a statutory matter, the FCA limitations provision is not an easy read but also is not written in Old English. 31 U.S.C. 3731(b) provides that:

(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. (emphasis supplied).

Section 3731(b)(2), often called the discovery exception or toll, has been construed to allow the government, not the relator, to have a longer limitations period than the six-year period in 3731(b)(1). The 10-year absolute bar on any FCA action is effective only when coupled with the three-year tolling period. For eons, many practitioners have suggested the far outside potential exposure in FCA cases is ten years when pursued by the government. Government subpoenas and civil investigative demands often by rote seek documents that go back ten years prior to any intervention decision by the government. In the declined qui tam context, the litigation may then proceed, years after it was filed under seal, unless there are jurisdictional or statutory bars or pleading deficiencies.

The statutory language reasonably suggests that the longer or tolled limitations period is intended only in those circumstances where the government originates the action or intervenes in the sealed FCA proceeding. The Fourth, Fifth, and Tenth Circuits have held this provision applies only when the government has intervened to pursue the action or filed its own direct action. United States ex rel. Sanders v. N. Am. Bus Indus., Inc., 546 F.3d 288, 293 (4th Cir. 2008); United States ex rel. Sik- kenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 726 (10th Cir. 2006); United States ex rel. Erksine v. Baker, 213 F.3d 638 (5th Cir. 2000)(per curiam). Another jurisdiction has held that the tolling provision does apply in declined qui tams with the knowledge requirements triggered by the relator’s knowledge, not the government’s knowledge. U.S. ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211 (9th Cir. 1996).

The Eleventh Circuit in Cochise, however, came to a different result from other Circuits, holding that the 3731(b)(2) longer limitations period may be relied upon by the relator when the United States has not intervened in the action, noting settled FCA precedent that the government remains the real party in interest in a declined qui tam action with significant control and rights over the proceedings including entitlement to the majority of any recovery.[3] The court also declined to recognize relators as government officials—a position for which there is substantial circuit court precedent—though that is where the reasoning may begin to fall off the rails since the government official status reads like an essential predicate in the FCA statutory toll provision. The court created new precedent, moreover, in further holding that the limitations period still remains triggered by the government’s knowledge of the alleged violation, not a relator’s knowledge. In the whistleblower context, however, the government’s knowledge often will be later unless the action is parasitic or opportunistic.

This different statutory construction in effect extends the limitations period significantly beyond six years to the 10-year statutory end point in government declined FCA cases. Given that many cases involve the threat of extrapolated damages that must be trebled, these extra years of damages can be highly consequential and, as a practical matter, can create undue leverage in resolving or litigating cases. More significantly, there is the increased risk of inadvertent evidence spoliation and the loss of reliable evidence, particularly where the relator’s complaint is delayed or remains under seal via ex-parte seal extensions for several years before a government intervention decision.

The interesting facts in Cochise illustrate the concerns of...