Supreme Court Resolves Statute of Limitations for Qui Tam Suits Which the Government Declines
By Christopher Byrd
A unanimous U.S. Supreme Court ruled in Cochise Consultancy, Inc. v. United States ex rel. Hunt that private relators with knowledge of False Claims Act (FCA) violations may have up to 10 years to bring a lawsuit. The Court’s opinion, authored by Justice Clarence Thomas, provides a definitive interpretation of the applicability of the FCA statute of limitations, found in 31 U.S.C.S. § 3731(b) , to FCA actions that the Department of Justice (DOJ) declines to litigate. The Court’s ruling clarifies a split between several Federal appellate courts on how long qui tam relators have to file a lawsuit after learning about an FCA violation.
31 U.S.C.S. § 3731(b) has two prongs for computing the statute of limitations. The first prong, § 3731(b)(1), allows six years “after the date on which the violation of [Title 31] section 3729 is committed” to file an FCA action. The second prong, § 3731(b)(2) or “the discovery rule,” prohibits the filing of an FCA action more than three years after the violations “are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed” (emphasis added).
Background and Lower Court Decisions
On November 30, 2010, Billy Joe Hunt disclosed to federal agents that two defense contractors (collectively referred to by the Court as “Cochise”) defrauded the Government in 2006 and 2007. Hunt filed a qui tam action against Cochise in Federal district court on November 27, 2013. Hunt proceeded with litigating the action notwithstanding that the DOJ declined to intervene.
Cochise moved to dismiss Hunt’s action on the basis that the statute of limitations barred him from filing his qui tam action. Hunt countered that, although section 3731(b)(1) would limit him to filing a suit within six years after the violation occurred, he timely filed his lawsuit pursuant to section 3731(b)(2) since he filed his action less than three years after he reported an FCA violation to Federal agents and within 10 years after the violation occurred.
The Court summarized the circuit split on how to apply the statute of limitations to non-intervened qui tam lawsuits by reviewing three different interpretations of section 3731(b). Under the first approach, adopted by the Fourth and Tenth Circuits, section 3731(b)’s second prong never applies to a non-intervened qui tam action, and the relator must always file within six years of the FCA violation. (See United States ex rel. Sanders v. N. Am. Bus Indus (4th Cir. 2008); United States ex rel. Sikkenga v. Regence Bluecross Blueshield (10th Cir. 2006)).
Under the second interpretation, embraced by the Ninth Circuit, the second prong allows relators to file an action within three years after the date the relator knew or should have known about the FCA violation, but not more than 10 years after the violation occurred. (See United States ex rel. Hyatt v. Northrop Corp. (9th Cir. 1996)). The third interpretation, adapted by the Eleventh Circuit in the case at hand, triggers the second prong’s three-year time limit when “the official of the United States charged with responsibility to act in the circumstances” knew or should have known the FCA violation. (See United States ex rel. Hunt v. Cochise Consultancy, Inc. (11th Cir. 2018)).
The District Court in Hunt’s case rejected the third approach and declined to choose between the first two interpretations, ruling that Hunt did not meet the requirements of either. Notwithstanding that Hunt filed his lawsuit more than six years after the alleged fraud occurred, the Eleventh Circuit reversed, finding instead that Hunt filed his case within three years of making FCA disclosures to a United States official in accordance with 3731(b)(2). In other words, the Eleventh Circuit adopted the third interpretation, which the District Court considered, but rejected, in favor of the other two extant interpretations.
The Supreme Court’s Decision
The Court contemplated two legal questions: (1) whether the three-year “discovery rule” of section 3731(b)(2) was available at all to relators in qui tam actions; and, if so, (2) whether the relator should be deemed “the official of the United States” whose knowledge triggers the running of the three-year limitations period.
The Court, agreeing with the Eleventh Circuit, found that the plain language and context of the statute required that the discovery rule applies to non-intervened lawsuits; not just actions where the DOJ decides to intervene. The governing provision reads: “A civil action under section 3730 may not be brought,” and then it lists both prongs, i.e., the straight six-year limitation period and the three-year discovery rule. In short, section 3731(b)(2), not just section 3731(b)(1), applies to “‘civil action[s] under section 3730,’” which applies to both Government-initiated and relator-initiated lawsuits. The Court thus rejected Cochise’s contention that a DOJ-initiated FCA lawsuit was an “action under Section 3730,” but a relator-filed suit was not, given the interpretive principle that a single use of a statutory phrase must have a fixed meaning.
The Court then examined Cochise’s fallback argument; a relator, when pursuing a non-intervened case, should be considered “the official of the United States charged with responsibility to act in the circumstances.” The Court rejected this argument, reasoning that a relator is neither appointed to an office in, nor employed by, the Government (See U.S. Constitution, art. II,§ 2, cl. 2.). Similarly, the title of the enabling statutory provision for qui tam actions is “Actions by Private Persons,” thus negating that a relator and government official are interchangeable. In closing, the Court concluded that section 3731(b)’s text neither expressly deemed relators nor demonstrated that Congress intended relators to be “the official of the United States.”
The Court’s opinion appears to be favorable for relators in lawsuits where the DOJ declines to intervene. As long as the relator initiates the case within three years of DOJ learning of the fraud, and does not raise FCA violations more than 10 years old, the suit will be deemed timely. In cases where the DOJ is unaware of the FCA violations until the relator puts them on notice, the statute of limitations is effectively stretched to permit a relator to file a qui tam action up to 10 years after the violation.