This week, the United States Supreme Court ruled that the government’s 10-year deadline to file FCA actions could be extended to whistleblowers. The Court’s decision in Cochise Consultancy, Inc. et al. v. United States ex rel. Hunt resolved a circuit split that had dogged the courts, whistleblowers and defendants for decades. Health care providers should work closely with their counsel to ensure their policies and practices account for the need to defend against fraud claims stretching back more than 10 years.

Background

The FCA’s statute of limitations is triggered by one of two events. The first trigger is the submission of a claim. The FCA prohibits actions for claims more than six years after their submission. But the second trigger can extend the statute of limitations to 10 years from a submission of a claim if the action is brought within three years of the government learning of the alleged false claims.

Until last week, circuit courts disagreed on the application of these triggers. Some circuits held that whistleblowers proceeding without government intervention must bring claims within six years of submission—never 10 years—because the second trigger only applied when the government intervened in an action.The 11^th Circuit injected, on the other hand, applied the 10-year statute of limitations to whistleblowers proceeding without government intervention.

The Decision

In Cochise, a whistleblower filed an FCA action in Alabama seven years after the alleged fraud but less than three years after he reported the alleged fraud to the government. After the government declined intervention, the defendant moved to dismiss, arguing the six-year statute of limitations barred the whistleblower’s action on seven-year old claims. The district court dismissed the action, rejecting the whistleblower’s argument that because the action was filed within three years of the government learning of the alleged fraud, that the 10-year period applied. The whistleblower appealed to the 11^th Circuit.

On appeal, the 11^th Circuit reversed the district court and held that the whistleblower’s claims were subject to the 10-year statute of limitations. The court noted that the FCA does not tie the additional time to file to government intervention. While in most cases the plaintiff’s knowledge triggers a statute of limitations, in FCA cases, the government is the real party in interest and thus its knowledge is the measure—even for claims filed by whistleblowers. Defendants appealed to the Supreme Court, which granted review of the case.

The Supreme Court unanimously affirmed the 11^th Circuit’s decision. The Court applied “fundamental rules of statutory interpretation” and rejected the defendant’s argument that the 10-year period only applied if the government brought an action or intervened. The Court held that the FCA’s statute of limitations states clearly that both the six-year and ten-year bars apply to “civil actions” brought under the FCA. To accept the defendants argument would require two different meanings of that phrase—one for whistleblowers and one for the government. Rejecting this position, the Court ruled that “civil action” means the same thing at all times, in all cases and to all parties. Even in upholding the 11^th Circuit’s decision, the Court recognized this result would allow a whistleblower to delay filing up until 10 years after the claims by waiting to notify the government. But Justice Thomas, writing for the Court, noted that “a result that ‘may seem odd . . . is not absurd,’” can still be within the law. With no other “plausible interpretation of the text,” he wrote, “the ‘judicial inquiry is complete.’”

Takeaway

The Cochise case is the final word on the FCA’s statute of limitations, absent Congressional action. The FCA raises unique problems when it comes to the statute of limitations. While such statutes stop running when a case is filed, whistleblower cases are filed under seal. It may be years from the filing date before an FCA defendant even discovers they have been sued. The combination of the seal provision and the statute can mean an FCA defendant may be forced to answer to actions a decade or more before they first hear of a whistleblower’s lawsuit. With this decision, that time has grown even longer.

The prospect of answering allegations for claims more than a decade old presents unique challenges for health care providers. The evidence exonerating them may be destroyed, lost or inaccessible because of technological changes. In weighing proper policies for document retention and preservation, health care providers should analyze their practices, in light of this new decision, with counsel.

On April 11, 2018, the Eleventh Circuit Court of Appeals split from the Fourth and Tenth Circuits when it issued an order effectively granting relators in qui tam actions an additional three years to file. The court ruled that § 3731(b)(2)’s three-year limitation, which has traditionally only been applied when the United States is a party to the action, is equally applicable to relators when the government declines to intervene, thereby allowing “more fraud to be discovered, more litigation to be maintained, and more funds to flow back into the Treasury.”^[1]

Background

The relator brought a qui tam action against his former employer and another company alleging that the defendants violated the False Claims Act (“FCA”) when they fraudulently awarded subcontracts for work they performed as defense contractors in Iraq.^[2] The relator alleged that the two companies fraudulently induced the government to enter into a subcontract to purchase services by providing illegal gifts to individuals and that the defendants had violated their obligation to disclose credible evidence of improper conflicts of interests and illegal gratuities.^[3]

The defendants moved to dismiss these allegations, arguing that the claims were time barred under the six-year limitations period in 31 U.S.C. 3731(b)(1) and that the relator had filed his suit more than seven years after the fraud occurred.^[4] The district court dismissed the action, but the Eleventh Circuit reversed, ruling that subsection (b)(2) of the FCA’s statute of limitations applied to the relator, allowing him to bring his action within three years after notifying the United States of the fraudulent activity.^[5]

Analysis

The FCA’s statute of limitations prohibits relators from bringing an action more than six years after the date on which the fraud occurred. 31 U.S.C. 3731(b)(2) also prohibits actions filed “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…” This provision has traditionally only been applied when the U.S. intervenes in a relator’s qui tam action. However, the court entertained the relator’s argument that this provision is applicable even when the United States declines to intervene.

The Eleventh Circuit held that applying this provision to relators is consistent with the broad underlying purpose of the FCA—allowing more fraud to be discovered.^[6] The court ruled that the United States’ unique role as a real party in interest, even when it declines to intervene, overrides any potential absurd result that may occur due to the application of the statute of limitations.

The defendants also argued that if relators have three years from the date when the government learned of the fraud to file suit under § 3731(b)(2), relators will always delay telling the government about the fraud to increase the damages in the case. The court rejected this argument, stating that a relator who waits to file risks recovering nothing or having his share of damages decreased. The court also stated that a race to the courthouse encourages relators to file as quickly as possible.

Finally, the court rejected arguments that the statutory construction and legislative history pertinent to the statute of limitations suggests that § 3731(b)(2) should not be available to relators when the government declines to intervene. The court found that the legislative history does not squarely address Congress’ intent and does not lend credence to the defendants’ arguments.

Practical Takeaways

• Now, even in actions where the government has declined to intervene, relators have three years to bring a qui tam action once the government has been informed of fraudulent acts.

• The Eleventh Circuit’s split from the Fourth and Tenth Circuits will surely create some interesting case law, making the issue ripe for review by the Supreme Court.

If you have any questions, please contact:

• Matthew Schappa at (317) 429-3604 or mschappa@hallrender.com;

• David Honig at (317) 977-1447 or dhonig@hallrender.com; or
• Your regular Hall Render attorney.