Supreme Court Rules On False Claims Act Limitations Period

Supreme Court Rules On False Claims Act Limitations Period

Regulatory
October 24, 2019

Should relators rejoice? The Supreme Court may have put to rest the vast uncertainty surrounding the applicable statute of limitations in False Claim Act (“FCA”) suits where the government declines to intervene with its recent ruling in Conchise v. U.S. ex rel. Hunt. After the Eleventh Circuit’s holding deepened an already existing circuit split as to applicable statute of limitations under the FCA, the Supreme Court granted certiorari. The Whistleblower Wire blog previously discussed the Eleventh Circuit’s holding here and the Supreme Court’s decision to grant certiorari here. In its May 13, 2019 opinion, the Court unanimously affirmed the Eleventh Circuit and held that:

  1. The 3-year limitations period under 31 U.S.C. § 3731(b)(2) applies to relator-initiated suits, even when the government declines to intervene; and
  2. The relator is not “the official of the United States” whose knowledge triggers the 3-year limitations period.

Brief Summary of the Case

Relator Hunt became aware of the alleged fraud in 2006 and notified the government on November 30, 2010. Hunt did not file his FCA suit until November 27, 2013 - more than 6 years after becoming aware of the alleged conduct, but less than 3 years from the date he informed the government. The government declined to intervene, and the defendants moved to dismiss, citing Section 3731(b), which states that a civil action under the FCA may not be brought:

(1) more than 6 years after the date on which the violation . . . 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.

The defendants argued that because the government declined to intervene, the 6-year limitation should apply, barring Hunt’s claim.

Eleventh Circuit’s Holding

The Eleventh Circuit disagreed with the defendants’ argument, holding that Congress intended the limitations period under (b)(2) to be available, even when the government declines to intervene. Accordingly, the court found that when the relator learned of the fraud is immaterial for statute of limitations purposes. In so holding, the Eleventh Circuit acknowledged a circuit split with the Fourth and Tenth Circuits, each of which has held that the 3-year limitations period under (b)(2) only applies when the government intervenes. The Court also acknowledged that its holding diverged from Ninth Circuit precedent, which held that a relator becomes a government agent when filing suit under the FCA, and thus Section 3731(b)(2) imposes a 3-year statute of limitations based on when the relator has knowledge of the alleged fraud.

Oral Argument

On March 19, 2019, the parties were greeted with a “hot bench,” in what one commentator noted was a “relatively lively argument.” During oral argument, some justices acknowledged that the FCA limitations provision was poorly drafted, with Justice Alito stating that the limitations provision is “a terribly-drafted statute.” Other justices, however, expressed the view that the statute contains no ambiguity. For example, Justice Kavanaugh stated: “Why is [the statute] imprecise? It seems very clear. Now you then argue it doesn’t make a ton of sense in terms of the policy objectives, tolling principles, I get all that, but it -- it seems very clear as written.”

One argument set forth by counsel was that, if the limitations period were to be extended, relators could potentially “lie in the weeds” and conceal alleged fraud from the government. However, Chief Justice Roberts rejected this argument as “more of an academic concern.” The Chief Justice reiterated his point by stating: “The theory of a relator . . . waiting in the weeds I think is not a realistic one.” Justice Sotomayor also noted that there is a “direct incentive” to timely filing considering that, in 1996, Congress made one of the factors relevant to how much a relator recovers whether they were dilatory in bringing the action.

Court’s Opinion

First, the Court addressed whether Section 3731(b)(2) applies only when the government intervenes or if it also applies to relator-initiated suits. The Court held that Section 3731(b)(2) applies even when the government does not intervene. The Court concluded that the plain text of the statute makes both limitations periods set forth in Section 3731(b) applicable no matter who initiates the suit.

Based on this finding, the Court was forced to address whose knowledge of the alleged fraud triggers the limitations period – the relator’s or the government’s. On this front, the Court held that the relator is not “the official of the United States” whose knowledge triggers the 3-year statute of limitations, finding that the statute does not support such a reading. The Court noted that a relator is not appointed as an officer of the United States nor employed by the United States. Additionally, relators are not “charged with responsibility to act” as that term is used under the statute. Therefore, in Conchise, the fact that Relator Hunt had knowledge of the alleged fraud more than 3 years before filing was not dispositive because it was the government’s knowledge that counted.

The Court’s decision resolved disagreement among several circuit courts while also expanding significantly the period in which relators can bring FCA claims.

 

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