As most federal government contractors know, the False Claims Act (“FCA”), 31 U.S.C. §§ 3729–33, can be a trap for the unscrupulous. The penalties associated with FCA violations can be steep, and the myriad other consequences (including debarment) can create an existential crisis. Government contractors would do well to pay attention to the FCA’s latest developments.
The Supreme Court will soon rule on a very consequential aspect of the FCA. At the outset, a brief overview of how an FCA claim works is in order. There are three different ways that an FCA claim can be adjudicated. First, the federal government itself (by way of the Attorney General) can bring a suit against a violator. Second, a private plaintiff (known as a “relator”) may bring a qui tam lawsuit in the name of the United States against a violator. Third, an individual may bring an action against an employer who has retaliated against him for helping with an FCA investigation or case. The Supreme Court’s forthcoming ruling will pertain to the second adjudicative mechanism—the relator’s qui tam suit against the violator.
When a relator brings a qui tam action, he must do so by filing a complaint under seal (i.e., not available to the general public) and serving it on the United States (i.e., the Attorney General). While the suit is under seal, the United States may investigate and decide whether to intervene as a party. If the United States intervenes, then it assumes “primary responsibility for prosecuting the action.” 31 U.S.C. § 3730(c)(1). If the United States does not intervene, the relator may proceed with the action on behalf of the government. Id. § 3730(c)(3).
Importantly, the FCA has a statute of limitations for bringing a claim against a violator:
- (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). For several years, courts of appeal have been divided on key questions related to the application of these limitations periods in a qui tam action. First, does the limitations period of (b)(2) listed above apply when the United States decides not to intervene in a qui tam action? And second, if (b)(2) does apply even when the United States does not intervene, on whose knowledge does the limitations depend—the relator’s or a United States official’s? These are important questions because, as is clear from the law’s text, the answers could significantly extend the time a relator has to bring a qui tam action.
Not surprisingly, courts of appeal are split on these questions. The Fourth and Tenth Circuit Courts of Appeal have held that applying section (b)(2) to a case where the United States does not intervene would be absurd because otherwise the timeliness of the action would depend on the knowledge of a non-party. See United States ex rel. Sanders v. N. Am. Bus. Indus., Inc., 546 F.3d 288 (4th Cir. 2008); United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702 (10th Cir. 2006). In other words, those courts would not apply (b)(2) at all to a situation in which the United States declined to intervene.
The Third and Ninth Circuit Courts of Appeal have held that (b)(2) does apply to a case where the United States does not intervene—and, what is more, they have held that the 3-year limitations period depends on the relator’s knowledge of the material facts, not the United States’. See United States ex rel. Malloy v. Telephonics Corp., 68 F. App’x 270 (3d Cir. 2003); United States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211 (9th Cir. 1996).
This past year, the Eleventh Circuit Court of Appeal took a different tack than its sister circuits. In United States ex rel. Hunt v. Cochise Consultancy, Inc., 887 F.3d 1081 (11th Cir. 2018), the court held that (b)(2) does apply to a case where the United States does not intervene, but also held that the 3-year limitations period depends on when a United States official knew of the underlying material facts.
Needless to say, the current state of the law is in chaos. It is no surprise that in November 2018, the U.S. Supreme Court granted certiorari and will settle these important statute of limitations questions once and for all. Expect a decision sometime this summer.