The False Claims Act
The FCA, 31 U.S.C. § 3729 et seq., imposes civil liability on “any person” — whether a company or an individual — who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” to the U.S. Government or to certain third parties acting on the Government’s behalf. FCA cases frequently include allegations of fraud concerning claims made to Medicare, the Federal Housing Administration mortgage insurance program, or any one of the many other federally-administered programs.
FCA cases may be investigated and brought by the U.S. Attorney General in the first instance, or, more commonly, may be initiated by private whistleblowers known as “relators,” who are empowered by the FCA statute to bring qui tam civil actions “in the name of the Government.” § 3730(a)-(b). If a relator initiates an action, his or her complaint is filed under seal and provided to the Government, which may choose either to intervene in the case, seek to dismiss it, or decline to intervene. In the latter scenario, the relator still has the right to pursue the case.
The Issue in Cochise Consultancy
The Cochise Consultancy decision concerns the FCA’s statute of limitations. Specifically, the FCA provides that a lawsuit must be brought either (a) within six years after the alleged statutory violation occurred, or (b) within three years after the “official of the United States charged with responsibility to act in the circumstances” knew or should have known material facts, but in any event not more than ten years after the violation — whichever period is later. 31 U.S.C. § 3731(b)(1)-(2).
In Cochise Consultancy, the relator filed suit against two defense contractors for allegedly submitting false claims for payment under a Department of Defense subcontract related to security services in Iraq. The relator alleged that the FCA violations occurred from some time prior to January 2006 until early 2007. The relator claimed that he informed the U.S. Government of the alleged violations on November 30, 2010. On November 27, 2013 — just shy of three years later — the relator filed a qui tam lawsuit against the defense contractors. The Government declined to intervene, and the defendants moved to dismiss the complaint as barred by the statute of limitations.
The relator conceded that he had not brought the action within the six-year limitations period under 31 U.S.C. § 3731(b)(1), but argued that the case was timely under § 3731(b)(2), because it was filed within three years of the time when he informed the Government about the alleged false claims. The defendants disagreed, arguing first that the three-year limitations period applies only to suits in which the U.S. Government intervenes, and second that even if § 3731(b)(2) applies in non-intervened cases, the relator should be considered the relevant “government official” whose knowledge triggers the running of the three-year limitations period.
The District Court dismissed the case on the grounds that, under either of the defendants’ proposed interpretations of the statute, the relator’s claim was time-barred. The Court of Appeals for the Eleventh Circuit disagreed, finding that § 3731(b)(2) applies in both intervened and non-intervened actions, and finding that it is the relevant U.S. Government official’s knowledge that kick-starts the three-year clock — not the relator’s knowledge.
The Court’s Decision
In its decision, authored by Justice Thomas, the Supreme Court unanimously agreed with the Eleventh Circuit and held that the case was not time-barred. First, the Court held that the “clear text of the statute” shows that the limitations period in § 3731(b)(2) applies to both intervened and non-intervened cases, rejecting the defendants’ argument that it applies only to intervened cases as having “no textual basis.” Second, the Court also rejected the defendants’ argument that the relator should be considered a Government official for purposes of triggering the three-year time limit in § 3731(b)(2), holding that “the statute provides no support for reading ‘the official of the United States’ to encompass a private relator.”
The Court acknowledged that its decision may, as a practical matter, give relators as long as ten years in which to file suit — the maximum limit under the FCA and significantly longer than the six-year limitation provided by § 3731(b)(1) — citing as an example the circumstance when a relator discovers the alleged fraud on the day it occurred but the Government does not discover it. In contrast, the Government could have only six years if it discovered the alleged fraud on the day it occurred. As the Court explained, extending the limitations period when the Government did not know, and should not reasonably have known, about the relevant facts is not “unusual,” because under the FCA, the Government (and not the relator) is the party that is actually harmed by the false claim(s) and that will receive the majority of any monetary recovery.
The Court’s ruling could create several additional years of uncertainty for defendants facing potential FCA lawsuits, many of which are initiated by relators. The Court did not, however, weigh in on “precisely which official or officials” are referred to in § 3731(b)(2), or on when the official at issue “should have known” of material facts in a particular case. The three-year statute will still bar any FCA lawsuit in which the defendant can demonstrate that the relevant official “should have known” material facts more than three years before the action is filed.