In an unanimous decision in Cochise Consultancy, Inc. v. United States ex rel. Hunt, the U.S. Supreme Court settled a circuit split and gave qui tam relators more time to file actions alleging violations of the False Claims Act (FCA).1 Now, a relator may have up to 10 years to file an FCA claim, leaving companies to defend long ago conduct with potentially stale evidence.
Statute of Limitations Under the FCA
The FCA statute of limitations requires that a qui tam action be brought within the later of (1) six years from when the violation occurred or (2) three years after the government knew, or should have known, about the material facts, but not more than 10 years after the violation. 31 U.S.C. § 3731(b). The question in Cochise was whether a private relator can bring an action more than six years after the purported violation, but still within three years after the government learned about the violation. The Supreme Court answered yes, giving relators up to 10 years to file a complaint.
The Supreme Court’s Interpretation
On November 27, 2013, relator Billy Joe Hunt filed an FCA action against two defense contractors (collectively “Cochise”), alleging that both contractors defrauded the government by submitting false claims for payment under a subcontract to provide security services in Iraq “from some time prior to January 2006 until 2007.” The government declined to intervene.
Cochise moved to dismiss Hunt’s complaint for failing to file within the six-year limitations period under 31 U.S.C. § 3731(b)(1). There was no question that the alleged violation took place more than six years before the case was filed. The relator argued, however, that his claims were timely under 31 U.S.C. § 3731(b)(2). The relator claimed that he informed the government of Cochise’s allegedly fraudulent scheme during a November 30, 2010 interview with federal agents regarding an unrelated contracting fraud. According to Hunt, his action therefore fell within the three-year limitations period (and within 10 years after the violation occurred) and should not be barred.
The district court granted Cochise’s motion to dismiss,2 but the Eleventh Circuit reversed.3 Noting a circuit split over the interpretation of § 3731(b)(2), the Supreme Court granted certiorari. The Supreme Court considered three possible ways of applying § 3731(b)(2) in a non-intervened qui tam action: (1) the three-year limitations period does not apply; (2) the three-year limitations period applies and is triggered when the relator knows of the alleged fraud; or (3) the three-year limitations period applies and is triggered when a governmental official knows of the alleged fraud. Rejecting the first and second interpretations offered by Cochise, the Court adopted the third and affirmed the Eleventh Circuit’s decision.
The Court looked at the plain language of the statute and held that there is no textual basis to limit the application of § 3731(b)(2) to government-intervened cases only. Regardless of whether the government intervened or not, a relator-initiated action remains a “civil action under Section 3730(b)” to which the three-year limitations period is always available. The Court reasoned that there is “nothing unusual about extending the limitations period” for a relator to 10 years “when the Government official did not know and should not reasonably have known the relevant facts, given that the Government is the party harmed by the false claims and will receive the bulk of any recovery.” Lastly, finding no support either in the ordinary meaning of the phrase or the statute, the Court rejected Cochise’s argument that “the official of the United States” includes “relators” and thus the three-year statute of limitations starts to run when the relator knew or should have known about the fraud.
Implications of the Cochise Decision
The Cochise decision potentially extends the statute of limitations for a relator-initiated qui tam action to 10 years, depending on the government’s knowledge of the alleged fraud. Consequently, qui tam defendants may be exposed to greater FCA liabilities and face heavier defense burdens. Some otherwise time-barred claims could be revived, and FCA defendants may need to defend stale claims using evidence that may be difficult to locate and witnesses who may have difficulty recalling what occurred a decade earlier.
It is equally important to keep in mind, however, that a relator intending to take advantage of the extended statute of limitations will still need to overcome a number of potential hurdles, including:
Government knowledge of the purported fraud. The three-year tolling begins to run when the government knows, or should have known, of the alleged wrongdoing. Therefore, FCA defendants are encouraged to reach out to the government as soon as possible to determine the exact date the government learned about the purported conduct.
The first-to-file bar. The FCA’s first-to-file bar only allows the first relator to pursue a qui tam action to discourage opportunistic relators that file needless and duplicative litigation against the same defendant based on the same facts.4 If a relator waits too long to initiate his or her FCA action, though such an action may be timely, the relator may not be the first to file.5
The public disclosure bar. The FCA’s public disclosure bar also prohibits a relator from bringing an FCA lawsuit based on a fraud that has already been disclosed through certain public sources, unless the relator is an “original source.”6 The more time that passes, the more likely it is that the facts on which the relator relies may become public, which could potentially lead to the dismissal of the action.7
In summary, while the Cochise decision may be viewed as a new challenge for FCA defendants, there are still defenses available when faced with a qui tam complaint alleging long ago fraud.
1 Cochise Consultancy, Inc. v. United States ex rel. Hunt, No. 18-351 (U.S. May 13, 2019).2 United States ex rel. Hunt v. Cochise Consultancy, Inc., No. 5:13-cv-02168, 2016 U.S. Dist. LEXIS 56518 (N.D. Ala. Apr. 28, 2016).
3 United States ex rel. Hunt v. Cochise Consultancy, Inc., 887 F.3d 1081 (11th Cir. 2018).
4 See 31 U.S.C. § 3730(b)(5).
5 See, e.g., United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1187 (9th Cir. 2001) (holding that the FCA’s first-to-file bar is a jurisdictional rule that is “exception free”).
6 See 31 U.S.C. § 3730(e)(4)(A).
7 See, e.g., United States ex rel. Mateski v. Raytheon Co., 816 F.3d 565, 569 (9th Cir. 2016) (holding that the public disclosure bar “deprives federal courts of subject matter jurisdiction when a Relator alleges fraud that already had been publicly disclosed”).
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