Resolving a circuit split, the United States Supreme Court in Cochise Consultancy, Inc. v. U.S. ex rel. Hunt held that False Claims Act (FCA) whistleblowers are able to take advantage of an expanded statute of limitations, depending on the timing of government officials’ knowledge of material facts.
Under the FCA, suits must be filed within six years of a purported violation or three years after “the official of the United States charged with responsibility to act in the circumstances” becomes or should have been aware of material facts upon which the violation is based, whichever is later. In the latter alternative, there is a further limitation that, regardless of when the U.S. official becomes aware, cases must be filed within 10 years of the date of violation.
In Cochise, former defense contractor employee Hunt alleged that his employer submitted false claims under a subcontract for security services in Iraq. The purported violations began prior to January 2006, with the last claims at issue submitted in early 2007. Although Hunt disclosed the alleged misdeeds to the government in 2010, he did not file suit until November 27, 2013, more than six years after the violations. The government chose not to intervene in the qui tam suit.
To survive a motion to dismiss, Hunt argued that he filed within three years of disclosing the misdeeds to the government, so his claims were covered by the three-year government-knowledge statute of limitations. The district court disagreed, holding that the claims were untimely—either because the knowledge-based statute of limitations did not apply to a non-intervened suit or because, if it did apply, it applied to the time of the relator’s knowledge, not the government’s knowledge. The Eleventh Circuit reversed, holding that the knowledge-based statute of limitations applied in non-intervened actions, and the limitations period began when the government knew or should have known the relevant facts.
On appeal to the Supreme Court, Justice Thomas delivered the opinion affirming the Eleventh Circuit’s application of the expanded statute of limitations to non-intervened cases. Specifically, because a relator-initiated, non-intervened suit is still a “civil action under section 3730” under the plain definition of the words in the FCA, the three-year knowledge-based statute of limitations is available regardless of whether the government is an active participant in the case.
Prior to yesterday’s ruling, several courts prohibited whistleblowers from using the knowledge-based statute of limitations. The Fourth and Tenth Circuits, for example, restricted application of the expanded statute of limitations to cases in which the government intervened (see U.S. ex rel. Sanders v. N. Am. Bus Indus., Inc., 546 F.3d 288 (4th Cir. 2008); U.S. ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702 (10th Cir. 2006)). The Ninth Circuit had created its own standard, running the knowledge-based statute of limitations from the point of the relator’s knowledge of material facts, rather than the government’s knowledge (U.S. ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211 (9th Cir. 1996)). In Cochise, the Supreme Court expressly rejected both approaches.
The Supreme Court’s ruling has the potential to increase defendants’ exposure in FCA cases by expanding the number of years for which whistleblowers can claim treble damages. To best resist such claims and limit the statute of limitations to six years, defendants in both intervened and non-intervened cases should be prepared to seek discovery from the government or third parties to determine the point in time when the government should have known facts material to the allegations in the suit.