In a False Claims Act qui tam action in which the United States government does not intervene, under what circumstances may the relator rely on the statute of limitations set forth in 31 U.S.C. § 3731(b)(2)?
This case asks whether relators can benefit from the longer of the False Claims Act’s two statutes of limitations. The False Claims Act (“FCA”) contains two statutes of limitations, and circuits are split as to whether both statutes of limitations apply to private individuals. Cochise Consultancy, Inc. and the Parsons Corporation contend that, based on a contextual interpretation of the FCA, only the Act’s six-year statute of limitations, from when the cause of action occurs, should apply to relators. Billy Joe Hunt, the relator in this suit, counters that the plain language of the statute permits relators to benefit from the FCA’s three-year statute of limitations, which begins when an official of the United States learns the materials facts of the action, even when the United States is not a party. This case will likely impact the number and costs of suits brought under the FCA.
Questions as Framed for the Court by the Parties
Whether a relator in a False Claims Act qui tam action may rely on the statute of limitations in 31 U.S.C. § 3731(b)(2) in a suit in which the United States has declined to intervene and, if so, whether the relator constitutes an “official of the United States” for purposes of Section 3731(b)(2).
In 2006, Respondent Billy Joe Hunt worked for the Parsons Corporation (“Parsons”) in Iraq to fulfill Parson’s $60 million munitions clean-up contract with the Department of Defense. Parsons sought bids from subcontractors and initially awarded a contract to ArmorGroup. Hunt alleges that Cochise Consultancy, Inc. (“Cochise”) bribed Wayne Shaw, an Army Corps of Engineers officer, into convincing Parsons to subsequently award the subcontract to Cochise.
Cochise provided Parsons with security services from February 2006 through September 2006. During that time, the United States government (“Government”) paid Cochise at least $1 million more per month and an additional $2.9 million above the projected cost of the contract with ArmorGroup. In September 2006, when Shaw rotated out of Iraq, Parsons reopened bidding for the security subcontract and awarded it to ArmorGroup.
On November 30, 2010, Hunt reported the fraudulent scheme to the Federal Bureau of Investigations (“FBI”) while being interviewed about his role in a separate fraudulent scheme. On November 27, 2013, after serving prison time for the unrelated fraud, Hunt filed a False Claims Act (“FCA”) complaint in federal district court against Parsons and Cochise, alleging that Parsons fraudulently awarded the security subcontract to Cochise.
The FCA prohibits fraudulent requests for payment from the United States. Section 3730(b) of the FCA provides that private individuals—called relators—may bring a qui tam action on behalf of the United States against a violator of the statute. The action remains under seal while the United States decides whether to intervene as a party—that is, take over control of the litigation from the relator. If the United States declines to intervene, the relator may proceed with the action on behalf of the Government. Relators receive between 15 and 30 percent of the recovery.
Section 3731 of the FCA sets out two statutes of limitations governing actions under Section 3730. The first, Section 3731(b)(1), states that a relator must bring a claim within six years after the alleged violation. In 1986, Congress amended the FCA to add a second limitations period, Section 3731(b)(2), allowing relators to bring a claim within three years of when an “official of the United States charged with responsibility to act” knows the facts material to the action, and not more than ten years after the alleged violation occurred.
The district court dismissed Hunt’s claim, concluding that Section 3731(b)(1) barred Hunt’s claim because Hunt filed it seven years after the alleged fraud. Furthermore, the district court rejected Hunt’s argument that his claim was timely under Section 3731(b)(2) because he filed it within three years of informing the FBI of the fraud and before ten years had passed. The district court held that Section 3731(b)(2) did not save Hunt’s claim because either Section 3731(b)(2) did not apply to Hunt because the United States chose not to intervene, or ten years had passed since Hunt learned of the fraud.
The United States Court of Appeals for the Eleventh Circuit reversed, holding that Section 3731(b)(2) applies when the United States declines to intervene because a non-intervened case still falls under Section 3730, and because nothing in Section 3731(b)(2) prohibits its application to non-intervened cases. The Eleventh Circuit also held that knowledge of a Government official, not that of the relator, triggers the running of the limitations period based on the Section’s plain language.
DOES 31 U.S.C. § 3731(B)(2)’S EXTENSION OF THE STATUTE OF LIMITATIONS APPLY TO RELATORS IN FCA SUITS IN WHICH THE UNITED STATES IS NOT A PARTY?
Cochise Consultancy, Inc. and Parsons Corporation (“Cochise and Parsons”) contend that Section 3731(b)(2) may only be used to extend the statute of limitations when the United States is a party to the case. Cochise and Parsons assert that when Section 3731(b)(2) is read in light of its history, purpose, and statutory structure, it is clear that Congress did not intend for relators to benefit from Section 3731(b)(2) when the United States is not a party in an FCA case. Any other reading of Section 3731(b)(2), Cochise and Parsons argue, is a hyper-literal approach that goes against the Court’s contextual interpretation of Section 3731(b)(1) in Graham Cty. Soil & Water Conservation Dist. v. United States ex rel. Wilson. Relying on historical context, Cochise and Parsons note that Congress copied Section 3731(b)(2)’s language from 28 U.S.C. § 2416(c), a provision that suspends the statute of limitations for claims filed by the United States. Additionally, they note that the primary purpose of the FCA’s 1986 amendments was to incentivize prompt reporting by relators, and a literal reading of Section 3731(b)(2) would have the opposite effect. Relying on the statutory structure of Section 3731, Cochise and Parsons further argue that the Court in Graham has already held that for the purposes of Section 3731(d), the phrase “any action brought under Section 3730” in fact refers only to actions in which the United States is a party. Thus, in Graham, Cochise and Parsons note that the Court prioritized a contextual interpretation of Section 3731(b)(1) over a literal interpretation in Graham to avoid a counterintuitive result. For example, Cochise and Parsons assert that the Graham court affirmed the statutory interpretation that most closely aligns with the default rule on statutes of limitations. Cochise and Parson argue that the same approach should be used to interpret Section 3731(b)(2). A literal interpretation here, Cochise and Parsons caution, would result in Section 3731(b)(2) enabling relators to delay filing suit for up to ten years, thereby incentivizing relators to wait longer to report fraud against the United States given that a relator’s monetary reward under the FCA increases with the severity of the fraud reported. Cochise and Parsons further claim that in light of United States v. Texas, if Congress intends a statute to depart from a common-law principle, the statute must be written so that it directly addresses this departure. Cochise and Parsons highlight the default rule that statutes of limitations begin with the plaintiff’s knowledge. Given this rule, Cochise and Parsons argue that Congress did not intend for relators to use Section 3731(b)(2) in non-intervened cases because the statute of limitations would then be tied to the knowledge of the Government, a non-party. Furthermore, Cochise and Parsons emphasize the absence of language clearly allowing relators to rely on Section 3731(b)(2) in non-intervened cases.
Hunt counters that Section 3731(b)(2) always applies to relators, regardless of whether the United States is a party. Hunt argues that because the statute’s language is plain, the Court does not need to resort to a contextual interpretation of Section 3731(b)(2), and instead the Court is obligated to enforce the statute according to its literal text. To support this argument, Hunt first notes that FCA suits are always considered civil actions, regardless of whether they are brought by the Government or by a relator. Hunt then provides that the two statutes of limitations for civil actions are presented in the alternative, and thus both statutes of limitations must be available to relators, even though relators are not explicitly named in Section 3731(b)(2). Hunt asserts that Cochise and Parson’s reliance on Graham is improper, because that case dealt with statutory ambiguity, and neither party has asserted that Section 3731(b)(2) is ambiguous. Hunt contends that his reading of Section 3731(b)(2) conforms with default statute of limitations principles because only a plain language reading of Section 3731(b)(2) promotes predictability, transparency, and certainty regarding when the relevant statute of limitations would be triggered in an FCA suit. Hunt further explains that the Court should look beyond a statute’s plain meaning only when such a result would (1) make the statute unconstitutional, (2) lead to an absurd result, or (3) conflict with congressional intent. Hunt argues that the first concern is not implicated in this case, and the latter two concerns have extremely high bars that this statute does not meet. Hunt contends that Cochise and Parsons’ “counterintuitive results” do not rise to the level of an “absurd result” given that the Court has routinely held that a statute’s clear language applies even where undesirable or burdensome outcomes result. Hunt asserts that a contextual interpretation of the statute in fact would cut against Cochise and Parsons. He supports this assertion by arguing that the FCA’s structure places a relator and the Government on the same level. Hunt contends that his interpretation of Section 3731(b)(2) aligns with the purpose of the 1986 FCA amendments, which were intended to strengthen a private actor’s ability to reveal fraud against the Government. Hunt contends that increasing a relator’s ability to bring an FCA claim strengthens the Government’s ability to detect complex fraud only disclosable by a relator. Hunt argues that, at its worst, the legislative history of Section 3731(b)(2) is inconclusive to determine congressional intent as to whether relators and the Government should be placed on the same level in FCA suits. Hunt contends, however, that a literal interpretation of Section 3731(b)(2) cannot be considered irreconcilable with congressional intent where the legislative history of the statute is inconclusive.
SHOULD THE RELATOR’S KNOWLEDGE OF THE FRAUDULENT ACT TRIGGER § 3731(B)(2)’S THREE-YEAR STATUTE OF LIMITATIONS?
Cochise and Parsons contend that, if the Court holds that Section 3731(b)(2) applies even when the United States is not a party, the relator’s knowledge of the fraudulent act against the Government should trigger Section 3731(b)(2)’s three-year statute of limitations. When the United States is not a party, Cochise and Parsons assert, a relator protects the interests of the United States by filing an FCA claim and thereby functions as a designated agent of the United States. Cochise and Parsons cite dictionary definitions to note that the term “government official” includes individuals who have been authorized or appointed to serve as a proxy for the Government by carrying out the Government’s interests. Given this understanding of “government official,” Cochise and Parsons contend that a relator pursuing an FCA claim in a non-intervened case is necessarily a proxy, and therefore an official of the United States. In furtherance of their argument, Cochise and Parsons note that a default statute of limitations is not triggered by a non-party and thus, if the United States is not a party, only a relator may trigger Section 3731(b)(2)’s three-year statute of limitations.
Hunt rejects Cochise and Parsons’ argument that the knowledge of a private relator should trigger Section 3731(b)(2)’s statute of limitations. In support of this contention, Hunt asserts that, where the United States is not a party, the FCA essentially divides one plaintiff into two separate actors—the relator and the Government—and only the Government should be considered a “real party in interest” because only the Government’s substantive rights are at stake in an FCA suit. In other words, Hunt argues that in an FCA suit, only the Government is a victim and a relator may only bring a suit on behalf of the Government. Due to this reasoning, Hunt purports, only the Government’s knowledge should be considered relevant for the purposes of triggering Section 3731(b)(2)’s statute of limitations. Moreover, simply declining to join an FCA suit, Hunt claims, should not be considered an affirmative appointment of a relator as a proxy for the United States. Applying a plain-language interpretation of Section 3731(b)(2), Hunt contends that a relator cannot be considered a United States official when the United States is not a party because the statute’s plain language does not say anything to this effect.
THE GROWING NUMBER OF FALSE CLAIMS ACT LAWSUITS
The Coalition for Government Procurement (“Coalition”), in support of Cochise and Parsons, asserts that allowing relators to utilize a ten-year limitations period in non-intervened qui tam actions would subject defendants to three times the number of FCA suits with ten-year limitations periods. The Coalition notes that approximately 67 percent of all qui tam cases are non-intervened, and only 6.91 percent of FCA recoveries between 2014 and 2018 came from non-intervened cases. Thus, the Coalition contends, increasing the number of actions subject to a ten-year limitations period would expose defendants to a higher risk of meritless FCA claims. Furthermore, The Chamber of Commerce of the United States of America, et al., notes that the ten-year limitations period may incentivize relators to delay bringing FCA actions because allowing the fraud to continue will increase their potential recovery.
The United States, in support of Hunt, counters that applying Section 3731(b)(2)’s statute of limitations would cause relators to delay their lawsuits because the FCA contains multiple built-in incentives to suing as soon as possible. The United States contends that if relators delay bringing suit, their claims could be barred in numerous ways: a second relator or the Government could bring suit first, or a third-party could publicly disclose the alleged fraud. Similarly, the United States notes that because relators have the burden of proof, they are unlikely to delay suing as this could make obtaining the requisite evidence more difficult. Indiana and nineteen other states (collectively “Indiana”) also dispute that the longer limitations period would subject defendants to more meritless FCA claims, noting that the Government’s refusal to intervene in a case—for example, because of the Government’s limited resources—does not mean that the case has no merit. Indiana argues that Section 3731(b)(2)’s limitations period allows the Government to not intervene without fear that the relator’s suit will then be dismissed as untimely.
INCREASING THE COSTS OF FALSE CLAIMS ACT LITIGATION
DRI and the Professional Services Council (“DRI”), in support of Cochise and Parsons, argue that extending Section 3731(b)(2) to non-intervened cases will subject both defendants and the Government to increased evidentiary demands and discovery burdens. DRI maintains that the ten-year limitations period would force companies to either defend FCA claims with less evidence—due to common, legal-document destruction policies—or pay to retain such documents. Likewise, DRI argues that the longer limitations period will exacerbate the Government’s destruction of discoverable documents which already occurs due to document-retention policies. Additionally, DRI asserts that discovery burdens will increase because Section 3731(b)(2) is based on a third-party’s knowledge—that of a U.S. official—requiring further discovery of that individual’s identity and knowledge. It adds that the Government will also be subject to increased costs and disruption by responding to such discovery, despite attempting to avoid these costs by not intervening in the action. DRI also contends that the costs of increased discovery may lead defendants to settle meritless claims, which in turn could hurt defendants’ reputations. And it also notes that increased discovery requests will constrain agency resources as the Government must respond to or comply with such requests.
The Taxpayers Against Fraud Education Fund (“The Fund”), in support of Hunt, counter that any increased burden caused by requiring discovery of the Government’s knowledge would be minimal. The Fund notes that such discovery already occurs in intervened qui tam cases and in government suits relying on Section 3731(b)(2)’s limitations period. Furthermore, The Fund contends that such discovery also already commonly occurs in non-intervened cases because the Government’s knowledge may be relevant to the claim despite not being a party. Indiana adds that the Government can combat rising litigation costs by moving to stay discovery, settle the case, or dismiss the action, if it believes the relator cannot recover. Indeed, Indiana and the other states note that the U.S. Government’s internal policy is to consider using these procedural tools when expected costs of FCA litigation outweigh expected benefits.
- Erik A. Christiansen, Circuit Split Widens in Tolling False Claims Act Cases, American Bar Association (Jan. 29, 2019).
- David T. Fischer, Supreme Court to Address False Claims Act Statute of Limitations, National Law Review (Nov. 28, 2018).