FCA and Statute of Limitations: A Puzzle for the Supreme Court

Whether the government intervenes in a relator's case can determine if the case is time-barred. The FCA has two alternative statute of limitation periods: the case must be brought either 1) within six years of the violation; or 2) within 10 years of the violation and within three years after "the official of the United States charged with responsibility to act" knew or "should have … known" about the violation. 31 U.S.C. §3731(b). Congress added the second alternative limitations period in the False Claims Amendments Act of 1986 for qui tam suits in which the government intervenes. United States ex rel. Sikkenga v. Regence Bluecross Blueshield, 472 F.3d 702, 722-23 (10th Cir. 2006) (noting that courts have differed in how to interpret the statute of limitations for qui tam suits but all apply both limitations periods when the government does intervene). In FCA cases that the government either originally files or intervenes, the six-year standard limitations period is extended up to 10 years as long as the government was, or should have been, aware of the fraud within the three-year period before the suit was filed. However, U.S. Courts of Appeals have differed about applying this alternative, longer statute of limitations period to qui tam actions in which the government does not intervene.

The Three-Way Split

The Eleventh Circuit case, United States ex rel. Hunt v. Cochise Consultancy, to which the Supreme Court granted certiorari, involves a potentially time-barred qui tam action in which the government did not intervene. The relator worked for a defendant defense contractor in Iraq to "clean up excess munitions … left behind by retreating or defeated enemy forces." Hunt, 887 F.3d at 1083-84. According to the relator, a subcontractor defrauded the government into awarding a security services agreement by bribing a government official to forge a Department of Defense directive changing the award. Id. at 1084.

The relator did not bring his qui tam FCA suit until more than six years after the alleged fraud but within three years of when he informed the FBI. Id. at 1084-85. Furthermore, the relator had knowledge of the alleged fraud for more than three years before he filed suit. The Eleventh Circuit held that the longer, 10-year, limitations period does apply to qui tam suits where the government does not intervene. Id. at 1083. The court also held that the three-year period begins to run "when the relevant federal government official learns of the facts giving rise to the claim," not when the relator learns of them. Id.

Five federal U.S. Courts of Appeal disagreed with the Eleventh Circuit's holding. The Fourth, Fifth and Tenth Circuits have all held that the 10-year limitations period does not apply to qui tam suits where the government does not intervene. See, United States ex rel. Erskine v. Barker, No. 99-50034, 2000 U.S. App. LEXIS 40325, at 2-6 (5th Cir. Apr. 13, 2000); Sikkenga, 472 F.3d at 722-26; United States ex rel. Sanders v. N. Am. Bus Indus., 546 F.3d 288, 293 (5th Cir. 2008). Taking the middle position, the Third and Ninth Circuits have held that the 10-year limitations period does apply to qui tam suits where the government does not intervene, but that the three-year period begins when "the qui tam plaintiff … knew or reasonably should have known of the facts material to the right of action." United States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211, 1212-13 (9th Cir. 1996); see also, United States ex rel. Malloy v. Telephonics Corp., 68 F. App'x 270, 273 (3d Cir. 2003) ("The time at which [the qui tam plaintiff] became aware of the fraud … is important, because it determines whether we apply the six year statute of limitations … or the three year limitation ….").

This split among the circuit courts has major implications. The two prior approaches — the "six-years-max" approach and the "up to 10 years but only if within three years after the relator knows" approach — preclude a plaintiff who is aware of the alleged fraud for longer than three years from bringing an FCA suit after more than six years from when the violation occurred. Yet the Eleventh Circuit's new approach gives private qui tam plaintiffs the same expansive, alternative limitations period that the government has, extending FCA defendants' exposure to private suits for another four years, from six to 10 years.

How Will the Supreme Court Resolve the Split?

It is unclear with which of the three options the Supreme Court will agree, although there are three primary issues to address.

First, the "intolerable inconsistency" that the split "has generated in the outcomes of False Claims Act litigation," creating situations where the same private FCA suit is time-barred in some Circuits but not in others. Second, the potential forum shopping by FCA plaintiffs whose claims would have been time-barred in their "home" districts. Third, the evidence that this split impacts many FCA suits, including data showing the large number of FCA suits in which the government does not intervene. United States ex rel. Hunt v. Cochise Consultancy, 2018 U.S. S. Ct. Briefs LEXIS 3320 (Sept. 7, 2018).

The Fourth, Fifth and Tenth Circuits have emphasized that the statutory language limits the alternative, longer limitations period to apply only when the government intervenes. Erskine, 2000 U.S. App. LEXIS 40325, at 2-4; Sikkenga, 472 F.3d at 723; Sanders, 546 F.3d at 293-94. The Ninth and Eleventh Circuits have emphasized that the statute of limitations' language plainly states that both limitations periods apply to suits brought either by relators or the government. Hyatt, 91 F.3d at 1214; Hunt, 887 F.3d at 1088-91. Several Circuits have also used statutory construction canons to buttress their conclusions. The Fourth and Tenth Circuits argued that allowing qui tam plaintiffs to use this longer, alternative limitations period renders the shorter six-year period largely superfluous (Sikkenga, 472 F.3d at 726; Sanders, 546 F.3d at 295), while the Ninth Circuit argued that Congress knew how to differentiate between the government and private plaintiffs — as it did throughout the FCA — but did not do so here. Hyatt, 91 F.3d at 1215.

Legislative history favors the 10-year limitations period applying only when the government intervenes (Erskine, 2000 U.S. App. LEXIS 40325, at 2-4 (5th Circuit); Sikkenga, 472 F.3d at 723-24 (10th Circuit)), but is inconclusive. The Fourth, Ninth, Tenth and Eleventh Circuits have also fashioned policy arguments favoring their conclusions. The Fourth, Ninth and Tenth Circuits assert that the longer limitations periods would incentivize private plaintiffs "to allow false claims to build up over time before they filed, thereby increasing their own potential recovery." Sanders, 546 F.3d at 295; see also, Sikkenga, 472 F.3d at 725-26 (refusing to allow relators to apply the 10-year period because "delay on bringing an FCA claim" might "allow increasing damages to accrue"); Hyatt, 91 F.3d at 1218 ("Granting qui tam relators the power to wait nearly ten years to sue would allow fraud to continue and losses to mount."). The Eleventh Circuit's Hunt decision rejected this argument. 887 F.3d at 1093-94. Alternatively, the Ninth Circuit also ruled that the policies behind the equitable doctrine of tolling indicate that this similar tolling must end when the relator — not the government — has the relevant knowledge. Hyatt, 91 F.3d at 1216-17.

The affirmance of the Eleventh Circuit decision raises the specter of litigating events that are over 10 years old. The result could also empower FCA plaintiffs to intentionally delay bringing suit in order to increase their damages. See, Sikkenga, 472 F.3d at 725-26; Sanders, 546 F.3d at 295; Hyatt, 91 F.3d at 1218. A reversal of the Eleventh Circuit would: 1) elevate the government's decision to intervene because it could resurrect time-barred claims; 2) insulate against stale relator actions; and 3) assure the six-year limitations period could no longer be avoided by forum shopping. If the Supreme Court takes the middle ground and agrees with the Third and Ninth Circuits, there will be fewer "delayed" relator actions once the government is aware of the alleged fraud because relators will then only have three years in which to file.

Analysis

In January 2018, the DOJ's Granston Memo advocated dismissing potentially meritless qui tam cases (see, The Tale of Two DOJ Memos and The False Claims Act). Recently, the DOJ moved to dismiss 11 FCA cases which asserted a novel kickback liability theory. However, the DOJ also recently filed an amicus brief arguing for the longer 10-year statute of limitations to be available for realtors when the government does not intervene. Brief for the United States as Amicus Curiae Supporting Respondent, United States ex rel. Hunt v. Cochise Consultancy (No. 18-315). While in the past the FCA plaintiffs' bar often looked forward to the government's involvement, recent events, including the confirmation of President Trump's choice for Attorney General, underscore the mixed signals regarding the future of the government's support for FCA qui tam actions. It may be that the peak of the government's intervention into private qui tam actions has passed.

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Jonathan S. Feld is the Leader of Dykema's Government Investigations and Corporate Compliance team. Eric Klein is a Member who focuses on representing clients in the health care sector with respect to corporate and regulatory issues. Andrew VanEgmond is an Associate in the Commercial Litigation Group whose practice includes health care litigation.