In a unanimous decision, the US Supreme Court held on Monday that the three-year False Claims Act (FCA) tolling provision applies in all FCA actions. In Cochise Consultancy, Inc. et al. v. United States ex rel. Hunt, the Court held that the three-year tolling provision would be allowed to benefit relators even when the government has declined to intervene in the case. This resolves conflicting precedent in FCA jurisprudence that generally did not apply the three-year toll for relator proceedings unless the government had intervened and means that qui tam cases may be brought by relators up to 10 years after the alleged wrongdoing.
A civil action brought to enforce the FCA must be brought within the longer of either (1) six years of the date of the FCA violation; or (2) within three years after “the official of the United States charged with responsibility to act in the circumstances” knew or reasonably should have known of the violation, but not more than 10 years after the date of the violation. 31 U.S.C. § 3731(b). There was a circuit split about whether relators could take advantage of the three-year tolling provision or if that provision was limited to cases in which the government had intervened.
The relator had been interviewed by government investigators regarding the alleged conduct at issue in the matter a little less than three years before he filed his action. However, relator conceded that he filed his action more than six years after the conduct at issue had occurred.
In allowing relator’s action to proceed, the Court applied longstanding precedent to hold that relators cannot be government officials under the statute, but that they are entitled to take advantage of this tolling period, even when the government declines to intervene. This results in potentially significant consequences for FCA defendants who now face longer damages periods. As noted in our prior Law Flash, there are negative consequences to extending the FCA limitations in declined FCA cases given the real world practicalities of excessive seal durations and relators pursing declined allegations in so-called partial intervention cases. The Cochise’s statutory construction approach may bode well, however, for challenging these controversial practices that are not authorized by the statute.
There are a few notable points to Justice Clarence Thomas’s crisp and clear opinion. First, in declining to limit the three-year tolling provision to the government only, the Court reasoned that the term “action” is used without qualification in the statute, creating no ambiguity on the limitations provision for purposes of pursuing a civil action. Civil actions initiated under the statute by the government under § 3730(a) or by a relator under § 3730(b) are both civil actions under 3730, the provision authorizing civil actions for violations of § 3729(a). Op. at 2. The Court reasoned that, as a result, the limitations provision in § 3731(b)(2) under False Claims Procedure by its plain language applies to a civil action under Section § 3730, regardless of who brings that action. Op. at 3-4.
While the opinion does not address other procedural circumstances – such as the time for filing appeals where the Court has found two different time periods for the United States and the private civil party – the jurisprudential confusion surrounding the FCA limitations issue is unambiguously resolved for at least the tolling period.
Another interesting item that is left open by the Court’s decision is who is “the official of the United States charged with responsibility to act in the circumstances”? Cochise argued that the relator’s action should be barred because the relator was aware of the alleged wrongdoing more than three years before he filed his qui tam complaint. However, the Court strongly reaffirmed that relators simply are not responsible government officials under the limitations provision or any other provisions of the statute. The Court explained that a private relator is not an official of the United States “in the ordinary sense of that phrase” and “[m]ore fundamentally, private relators are not ‘charged with responsibility to act’ in the sense contemplated by §3731(b), as they are not required to investigate or prosecute a False Claims Act action.” Op. at 8-9. The commercial status of the relator remains legally recognized as distinct from the government’s status as the principal actor for the United States and this has significance for other compelling issues in FCA practice. Nonetheless, the Court declined to adopt the government’s position that “the official charged to act in the circumstances” refers solely to the Attorney General or his designee. The court stated that, regardless of “precisely which official or officials the statute is referring to,” the definite article “the” suggests that Congress did not intend for it to include private relators. As a result, the question remains open whether “the official” recognized in the statute includes other government actors, such as law enforcement agents, auditors or government contractors. This could result in significant discovery from the government about when government employees were aware or should have been aware of the alleged conduct, which may now have implications both for purposes of statutory tolling as well as addressing the materiality standard under Universal Health Serv. Inc. v. United States ex rel. Escobar. This could create additional incentives for the government to seek the dismissal of non-intervened qui tam actions based on the principles outlined in the Granston memo.
In practice, FCA procedural equity and equipoise remain a significant policy concern simply beyond the ambit of the Court. Cochise leaves open the possibility that a relator could become aware of conduct, but wait just less than 10 years, allowing potential damages to accumulate, before filing an action. While the Court may reference the concept of actions in a static sense, the government often intervenes with its own complaint that is dramatically different from the original relator complaint, sometimes creating the so-called partial intervention situation. In recent years, some relators have argued that they may pursue any declined allegations in their separate complaint on behalf of the government even when the government intervenes to take over the action. The Court’s significant explanation on the meaning of “action” in the statute should repel this unauthorized practice of trying to pursue piecemeal declined allegations in intervened cases. However, the longer limitations period certainly does not help the excessive seal duration issue where government intervention decisions may take years at great cost to parties who have been actually sued under seal. A longer limitations period with longer seal durations and partial interventions means FCA matters remain a long and costly slog. Given the 80% declination averages, the gross inefficiencies in the statute may be compelling for legislative review if the government does not judiciously seek to dismiss qui tam complaints brought by relators who have waited a significant period of time to file their actions.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact the authors of this alert, Katie McDermott and Meredith Auten or any of the following Morgan Lewis lawyers:
Century City
Nathan J. Hochman
Chicago
Tinos Diamantatos
Houston
Gregory N. Etzel
B. Scott McBride
John W. Petrelli
Miami
Alison Tanchyk
New York
Kelly A. Moore
Martha B. Stolley
Philadelphia
Nathan J. Andrisani
Meredith S. Auten
John C. Dodds
Lisa C. Dykstra
Rebecca J. Hillyer
Ryan P. McCarthy
Zane David Memeger
John J. Pease, III
Brian W. Shaffer
Eric W. Sitarchuk
Washington, DC
Brad Fagg
Scott A. Memmott
Howard J. Young