Courts Split on False Claims Act Deadlines

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When does a private party need to file a qui tam action under the False Claims Act? Such a seemingly simple question has resulted in three different answers from six different courts.

On Nov. 16, the Supreme Court announced it would resolve that split by granting a request to review the Eleventh Circuit’s decision in United States ex rel. Hunt v. Cochise Consultancy, Inc. The case will merit close attention, as the outcome could help protect government contractors from intentional and prejudicial delay in litigation.

Under the False Claims Act, the United States can bring a suit against a defendant accused of submitting false claims. In addition, a private citizen — known as a “relator” — can bring a qui tam action against that defendant in the name of the United States (31 U.S.C. § 3730).

The act includes a statute of limitations provision, 31 U.S.C. § 3731(b), which states that a civil action may not be brought: (1) more than six years after the date on which the violation is committed; or (2) more than three years after the date when facts material to the right of action 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.

This provision has proven controversial. Imagine a relator who files a qui tam action more than six years after the alleged fraud — but the government only learned of the alleged facts two years ago. If the government declines to intervene in the case, can the relator nevertheless rely on the date that the government learned of the facts and argue that the action is timely?

The answer to this question has divided federal appellate courts and resulted in three distinct approaches. The first is that relators must file within six years. The Fourth Circuit, Tenth Circuit and Fifth Circuit have held that section 3731(b)(2) applies to the United States and not to relators. Therefore, relators must file their claims within six years of the alleged fraud.

As these courts have noted, the statutory language refers to the government’s knowledge of “facts material to the right of action,” and not the relator’s knowledge. Accordingly, it would be absurd to apply such a provision when the government is not even party to the suit.

Moreover, it would lead to troubling outcomes. If the longer statute of limitations applied to relators, then they would have an incentive to withhold material facts from the government for as long as possible so that their potential financial recovery could grow.

"Under the False Claims Act, the United States can bring a suit against a defendant accused of submitting false claims."

In light of the statutory text and policy concerns, these appellate courts have refused to allow relators to rely on section 3731(b)(2).

A second approach is that relators can wait until three years after the date when facts are known to the government. Last year, the Eleventh Circuit in United States ex rel. Hunt v. Cochise Consultancy, Inc., ruled that a qui tam action in which the government has not intervened still constitutes a “civil action under section 3730,” so relators can rely on the longer statute of limitations set forth in section 3731(b)(2).

This reading is difficult to square with the Supreme Court’s recent decision in Graham County Soil and Water Conservation District v. United States ex rel. Wilson, in which the court explained that “[s]tatutory language has meaning only in context” and that Congress “sometimes used the term to refer only to subset of § 3730 actions.” Thus, the court chose a more limited interpretation of the term.

A third approach is that relators can wait until three years after the date when facts are known to the relator. The Ninth Circuit and the Third Circuit have adopted an approach that falls somewhere in the middle. These courts are in agreement with the Eleventh Circuit that section 3731(b)(2) applies to qui tam actions. However, according to these courts, the relevant question is not when the government found out about the alleged fraud, but instead when the relator found out about the alleged fraud. Under this view, “because qui tam plaintiffs are merely agents suing on behalf of the government,” they can be treated as government officials in these situations. Therefore, the statute of limitations begins after the relator — and not the government — learns of the relevant facts.

The principal problem with the Ninth and Third Circuits’ approach is that there is nothing in the text of the False Claims Act that suggests relators can be treated as government officials for purposes of section 3731(b)(2), and it is not clear that the Supreme Court will be eager to read such an interpretation into the law.

Hopefully, the Supreme Court will soon resolve these questions in a manner that will provide consistency and predictability to False Claims Act litigation.

Andrew Guy is an associate, and Peter B. Hutt II and Mike Wagner are partners at Covington & Burling LLP.

Topics: Defense Contracting, Contracting, Government Contracting Insights, Government Policy