SCOTUS Gives Whistleblowers Longer to Sue Under the False Claims ActPDF
On May 13, the U.S. Supreme Court unanimously held that whistleblowers (known as "relators") may have up to 10 years to bring lawsuits under the False Claims Act. In its ruling in Cochise Consultancy, Inc. v. United States ex rel. Hunt, the Court rejected an alternative rule that would have limited the time period to six years.
Although the ruling will in some cases lengthen the time in which a relator can bring an FCA suit, its impact may be limited by other incentives relators have to file claims promptly. In addition, government knowledge remains a double-edged sword for relators because such knowledge can provide defendants the ammunition necessary to defeat FCA claims on the merits.
Below, we explain the Court's holding and consider its possible implications.
The FCA imposes steep penalties and damages on defendants that knowingly present, or cause to be presented, a false or fraudulent claim for payment or approval to the federal government. Suits can be initiated by the government itself or by relators suing on behalf of the government. If the relator brings the suit, the government has the right (but not the obligation) to "intervene" and take over prosecution of the suit. The FCA incentivizes relators to sue by rewarding them with a share of any proceeds recovered in the action. In most FCA cases filed each year, the government does not intervene, meaning the relator both files and prosecutes the lawsuit.
Two Statutes of Limitations
The basic question in Cochise was what the statute of limitations is for an FCA action brought by a relator when the government does not intervene. That question lacked an obvious answer because the FCA has not one but two statute of limitations provisions.
First, Section 3731(b)(1) says an FCA action must be brought within six years after the violation occurred. 31 U.S.C. § 3731(b)(1).
Second, Section 3731(b)(2) says the action must be brought within three years of when "the official of the United States charged with responsibility to act" knew or should have known of the facts material to the violation but "in no event" more than 10 years after the violation occurred. 31 U.S.C. § 3731(b)(2). This second provision is sometimes referred to as the "government-knowledge" statute of limitations.
The limitations provision also says that, between the six-year and three-year dates above, the one that "occurs last" controls. 31 U.S.C. § 3731(b). This is important because it means that the government-knowledge limitations period in Section 3731(b)(2) can breathe life into suits that otherwise would be barred under the six-year period contained in Section 3731(b)(1).
That was exactly the situation in Cochise. The relator there alleged that defense contractors committed fraud by submitting false payment claims for providing security services in Iraq through early 2007. The relator claims that he revealed the alleged scheme in an interview with federal officials on Nov. 30, 2010. He then filed suit on Nov. 27, 2013 – more than six years after the alleged violation occurred, but just under three years after he told the government about the alleged fraud.
The relator conceded that his suit would be untimely if it were governed by the six-year period in Section 3731(b)(1). But he argued that the government-knowledge period of Section 3731(b)(2) should apply, and that his suit is timely under that provision.
The Supreme Court Sides with the Relator
In a unanimous opinion written by Justice Thomas, the Supreme Court ruled in favor of the relator. The Court held that the government-knowledge limitations period of Section 3731(b)(2) applies in suits brought by relators, even when the government does not intervene.
The Court explained that lower courts have taken three different approaches to deciding whether the government-knowledge limitations period applies in non-intervened suits:
- Section 3731(b)(2) does not apply at all, and therefore any such action must be filed within six years after the violation occurred.
- Section 3731(b)(2) applies, and the three-year period commences when the relator knew or should have known the relevant facts.
- Section 3731(b)(2) applies, and the three-year period commences when the relevant government official knew or should have known the relevant facts.
The Supreme Court adopted the third approach. According to the Court, this approach is compelled by the plain language of the FCA. In particular, Section 3731(b) – which houses both the six-year limitations period in subsection (b)(1) and the three-year government-knowledge period in subsection (b)(2) – says that it applies to a "civil action under section 3730." In turn, Section 3730 encompasses lawsuits brought both by the government and by relators. The Supreme Court concluded that both the six-year and three-year limitations periods in Section 3731(b) therefore apply to relator-initiated suits, even when the government does not intervene. The Court rejected the defendant's argument that the relator – rather than a government official – should be considered "the official of the United States" whose knowledge triggers the three-year limitations period in Section 3731(b)(2).
After Cochise, relators in non-intervened suits can claim the benefit of the government-knowledge limitations period in Section 3731(b)(2).
Cochise will be significant in cases where the government learns of the alleged fraud years after the fraud occurred. Then, as Cochise shows, a relator may have up to 10 years to file the FCA suit rather than the six years authorized by Section 3731(b)(1).
It seems unlikely, however, that Cochise would encourage relators to delay bringing suit. Such a delay increases the risk that the suit may be blocked by the FCA's first-to-file bar if another whistleblower files first. There is also a greater chance that the alleged fraud will be publicly disclosed, and the relator's future FCA suit would be blocked by the FCA's public disclosure bar.
In addition, although government knowledge of alleged fraud may extend a relator's time to file suit (as it did in Cochise), such knowledge may also arm defendants with a merits defense. Depending on how the government reacted after learning of the alleged fraud – including, especially, whether the government continued paying the claims the defendant submitted – government knowledge of the fraud may help negate the scienter or materiality requirements of an FCA claim, or both. See, e.g., United States ex rel. Spay v. CVS Caremark Corp., 875 F.3d 746 (3d Cir. 2017). Relators therefore need to be thoughtful – and defendants, attentive – to what relators allege or what the evidence shows about government knowledge of any wrongdoing. Of course, government knowledge may also show that a relator's non-intervened suit is untimely, even under the three-year period contained in Section 3731(b)(2).
For more information regarding the Court's ruling and its potential effect on FCA claims, please contact a member of Robinson Bradshaw's Governmental and Internal Investigations Practice Group.