Argument preview: Justices to determine relevant statute of limitations for whistleblower suits under the False Claims Act
on Mar 12, 2019 at 3:01 pm
Liza Starr, a student at Stanford Law School and a member of Stanford’s Supreme Court Clinic, co-authored this post.
On March 19, the Supreme Court will hear argument in Cochise Consultancy Inc. v. United States, ex rel. Hunt. The justices will consider how two statutes of limitations under the False Claims Act apply to whistleblower (also known as “qui tam”) suits when the government has not intervened in the case.
Enacted in 1863 amidst rampant fraud by Civil War contractors, the FCA has grown into the federal government’s main tool for combating contract fraud. The FCA imposes civil liability on people who make false or fraudulent claims for payment to the U.S. government, with suits brought either by the U.S. attorney general or a private person (known as a relator). When a relator brings suit, the federal government can intervene in the case and take over, or at least substantially guide, its prosecution. It elects to do so in roughly one-quarter of cases. When the government does not intervene, the relator can choose to go it alone. Importantly, this hybrid public-private enforcement regime regularly produces annual recoveries topping $3 billion — in some years more than securities class actions, among other fixtures of federal litigation. So it is no surprise that the Supreme Court has heard a steady parade of cases interpreting FCA provisions.
The FCA originally had a single statute of limitations, Section 3731(b)(1), which requires lawsuits to be filed within six years of the alleged fraud. But, by 1986, Congress had grown concerned that frauds were not coming to light in time. Congress added a second statute of limitations, Section 3731(b)(2), which permits suits up to three years after “the official of the United States charged with responsibility to act in the circumstances” learns the “facts material to the right of action,” but in no event more than 10 years after the alleged fraud. Both statutes of limitations apply to a “civil action under section 3730,” and “whichever occurs last” governs the case.
Although most FCA cases concern health-care fraud, Cochise arises from another common species of whistleblower suit: alleged contract fraud relating to the U.S. military deployments in Afghanistan and Iraq. Whistleblower Billy Joe Hunt alleges that two defense contractors — Parsons Corporation and Cochise Consultancy — defrauded the United States in a contract to clean up munitions left by retreating and defeated Iraqi forces. Hunt alleges that Cochise bribed a contracting officer in the Army Corps of Engineers to compel Parsons to award a subcontract to Cochise.
Hunt filed an FCA suit against the defense contractors in 2013. But because the alleged fraud took place between 2006 and early 2007, his case fell outside Section 3731(b)(1)’s six-year window. Instead, Hunt argued that his case qualified for Section 3731(b)(2)’s alternative statute of limitations because he filed suit less than three years after the relevant “official of the United States” learned of the alleged fraud in 2010.
Had the federal government intervened in Hunt’s suit, the alternative statute of limitations plainly would have applied. But because the government did not intervene, Hunt found himself in the teeth of a circuit split. Three courts of appeals had held that Section 3731(b)(2) only applies in cases filed by the government or in which the government intervenes. Two other circuits had instead held that relators can rely on Section 3731(b)(2) to toll, or suspend, the six-year limitations period, but that it is triggered by the relator’s knowledge of the alleged fraud.
The district court dismissed the case. It explained that Section 3731(b)(2) did not apply because Hunt’s complaint was time-barred under either of the circuits’ existing interpretations: Tolling was unavailable either because the government declined to intervene, or because the limitations period expired three years after Hunt discovered the alleged fraud in 2006.
The U.S. Court of Appeals for the 11th Circuit reversed, taking yet a third position among circuits. It held that relators like Hunt can invoke Section 3731(b)(2) in suits in which the United States itself is not a party. Moreover, Section 3731(b)(2)’s three-year limitations period does not begin until the U.S. government learns of the alleged fraud, no matter when the relator discovers it.
Parsons and Cochise — the two defense contractors — appealed to the Supreme Court. They now argue that Section 3731(b)(2) applies only to actions brought by the government and to the roughly one-quarter of qui tam actions in which the government intervenes. They rely heavily on Graham County Soil & Water Conservation District v. United States, ex rel. Wilson, a 2005 case in which the Supreme Court concluded that the six-year statute of limitations did not apply to actions brought under an FCA provision governing retaliation. As the contractors explain, the Graham court considered it ambiguous whether a retaliation action was a “civil action under section 3730,” relying instead on two interpretive guideposts — statutory context and default statute-of-limitation rules — to decide the case.
The contractors reason that a similar analysis resolves Cochise. Read in context, Section 3731(b)(2) should not apply to non-intervened relator actions, in part because it uses language similar to other FCA provisions that do not cover non-intervened suits. The contractors further stress that their rule is consistent with default statute-of-limitation rules, which typically tie tolling provisions to the plaintiff’s knowledge. They contend that any other rule would lead to “counterintuitive results,” creating disincentives for relators to disclose fraud immediately, instead letting them keep the meter running in order to maximize their recovery. Finally, the contractors explain that Congress passed the 1986 amendment to address concerns about the ability of the government (but not necessarily of relators) to discover fraud in time.
Hunt, by contrast, asserts that the statutory text is clear: Section 3731(b) “unmistakably sets forth two limitations periods that apply to ‘civil action[s]’” under the FCA, and qui tam suits plainly qualify. In his eyes, this should end the inquiry, because there are no “rare and exceptional circumstances” demanding that the Supreme Court look beyond the unambiguous text. Nor should the Graham decision carry the day because it dealt with an ambiguous provision.
Even if the Supreme Court were to declare the statute ambiguous and move beyond the text, however, Hunt says he wins. Among other things, Hunt argues that putting relators on equal footing with the government advances the FCA’s “carefully calibrated approach whereby the Government and relators work in tandem.” He assures the court that Congress instituted other “deliberate, effective safeguards” such as a first-to-file bar, that make it risky for relators to delay filing. Finally, Hunt urges that “scraps of legislative history” from the 1986 amendment “cannot be used to manufacture congressional intent” and do not overcome Congress’ clear effort to do “everything possible to roll back rampant procurement fraud.”
The federal government has filed a “friend of the court” brief, agreeing with Hunt that relators can rely on Section 3731(b)(2) even when the government declines to intervene. The government describes how Sections 3731(b)(1) and (2) establish “distinct (though complementary) timing requirements” for civil actions, and how it would be contradictory for a non-intervened suit to “be a ‘civil action under section 3730’ for purposes of paragraph (1) but not (2).” The FCA’s structure, purpose and history confirm this textual reading, explains the government.
If the Supreme Court agrees that Section 3731(b)(2) applies, it will also need to decide whose knowledge of the alleged fraud — the relator’s or the government’s — starts the clock ticking. The contractors argue that the limitations period is triggered when Hunt discovered the alleged fraud. When the government does not intervene, a relator like Hunt stands “in the shoes of the United States” and acts as an “official of the United States.”
Hunt and the federal government take the opposite position: Although relators are partners in fighting fraud, they never become “official[s] of the United States,” and thus their knowledge of fraud does not trigger Section 3731(b)(2). The government puts a firmer stake in the ground: “[T]he relevant government official is an officer of the Department of Justice.” Because the private relator “does not hold an office, receive an appointment or commission, or otherwise exercise any delegated sovereign authority,” he is never an official.
Cochise may seem like a straightforward statutory interpretation case. But it may be of wider interest because it muddies traditional ideological divisions over statutory interpretation, thrusting champions of corporate regulation and robust private enforcement into the role of strict textualists — a role that typically resonates more with conservative and deregulatory causes (though some academics have begun to question that connection). Meanwhile, the contractors and their pro-business amici, like the Chamber of Commerce, caution against a hyper-textual reading. They instead emphasize the practical consequences of the 11th Circuit’s rule, which forces businesses to “expend significant costs to defend against allegations for which memories have faded and witnesses are less reliable.”
The justices may wrestle with this seeming shift in the usual alignment of ideological leanings and interpretive methodology, whether at oral argument or in the Supreme Court’s eventual decision. Whichever way the decision goes, though, it should provide clarity to litigants and courts of appeals about the time constraints for bringing FCA claims — clarity that will be welcome given the hundreds of FCA qui tam actions filed each year.
Past case linked to in this post:
Graham Cty. Soil Water Con. v. U.S. ex Rel. Wilson, 545 U.S. 409 (2005)