On 19 March 2019 the Supreme Court heard an oral argument in Cochise Consultancy v United States ex rel Hunt, a case that appears likely to resolve a circuit split on a question of critical importance: in non-intervened False Claims Act cases (which comprise the vast majority of False Claim Act cases) are relators entitled to invoke the act's alternative 10-year statute of limitations set out in 31 USC Section 3731(b)(2)? That provision provides for a 10-year statute of limitations if the action is brought no more than three years after "the official of the United States charged with responsibility to act" knows, or should have known, the material facts of the violation. While an opinion is not expected until later in 2019, the tenor and content of the justices' questions suggest that the court's answer will likely be yes.
This case was brought by Billy Joe Hunt, a former employee of the Parsons Corporation.(1) The United States engaged Parsons as part of the Coalition Munitions Clearance Project to dispose of munitions abandoned or left behind by retreating enemy forces in the Iraq and Afghanistan wars. Parsons initially awarded the subcontract to ArmorGroup but ultimately gave it to Cochise Consultancy Inc, a security services contractor. Under the contract, Cochise provided security to:
- Parsons' employees;
- Parsons' subcontractors; and
- others working on the project.
As a part of the contract, Hunt managed the day-to-day operations in Iraq. He alleged that Parsons and Cochise had conspired to make false claims through a bid-rigging and bribery scheme that resulted in charging the United States grossly inflated rates, as well as for services that had not been provided.
Hunt filed a qui tam complaint on 27 November 2013, more than six years after the alleged fraud had occurred. However, the complaint was filed within three years of informing the United States of the alleged fraud. On 29 January 2016 the United States declined to intervene, and Parsons and Cochise moved to dismiss the complaint on the grounds that the action was barred by the six year statute of limitations. The district court dismissed the case and held that Hunt could not rely on the alternative 10-year statute of limitations in 31 USC Section 3731(b)(2) because:
- the United States had not intervened in the case; and
- Hunt had learned of the alleged fraud more than three years earlier.
On 11 April 2018 the Eleventh Circuit reversed and, using the plain meaning construction, concluded that the 10-year statute of limitations period applied and that the knowledge of the relevant government official – not the relator – had triggered the statute of limitations clock. This conclusion broke from two other lines of circuit court precedent. In contrast, the Fourth, Fifth and Tenth Circuits found that relators may not invoke the limitations period found in Section 3731(b)(2) and may rely only on the False Claims Act's alternative six-year statute of limitations under Section 3731(b)(1). However, the Third and Ninth Circuits have held that Section 3731(b)(2) applies even to non-intervened actions, but that the three-year limitation runs from when the relator learns of a violation.
Parsons and Cochise (collectively, the petitioners) appealed the case to the Supreme Court. During the oral argument on 20 March 2019, the petitioners argued that the Eleventh Circuit's holding could lead to absurd results and a cascade of congressionally unintended consequences, including allowing a relator to conceal the fraud for a decade. It also falls foul of the Supreme Court's holding in Graham County Soil & Water Conservation District v United States ex rel Wilson (545 US 409 (2005)). They also argued that relators' ability to invoke the 10-year statute of limitations when the United States has not intervened in the case is contrary to the statute's language, structure, purpose and history.
Additionally, the petitioners argued that even if the alternative 10-year statute of limitations provision is applied in non-intervened cases, the relevant inquiry for determining whether the case was brought in a timely fashion is whether it was brought within three years of the relator's knowledge of the fraud, rather than when a government official learned of the relevant facts. The petitioners argued that because relators essentially stand in the shoes of the government in qui tam cases, the phrase "official of the United States" should include relators. Otherwise, they argued, relators could sit on knowledge of an alleged fraud for years without consequence. In support of this argument, the petitioners noted that the court in Graham construed Section 3731(d) as being "limited to Section 3730(a) actions brought by the United States and 3830(b) actions in which the United States intervenes as a party". As such, because Section 3731(b)(2) contains nearly identical language, the petitioners argued that Section 3731(b)(2) should be given the same meaning.
Hunt argued that Section 3731(b)(2) applies to all False Claim Act cases, regardless of whether the United States intervenes. He further argued that the plain language of the statute clearly shows that:
- the 10-year statute of limitations provision is available for both the United States and relators in non-intervened cases; and
- the result is consistent with the congressional purpose of encouraging the recoupment of fraud proceeds with a government-relator relationship in mind.
Based on the Eleventh Circuit's interpretation, relators have the following two options:
- They can file an action within six years of the violation.
- If the government investigates but elects not to intervene, they have 10 years following the underlying violation to file an action, as long as the filing is made within three years of a government official's knowledge of the fraud.
A Department of Justice attorney also argued separately in support of the expansive view of the statute of limitations.
The justices' questions and comments seem to suggest that the statute's language is not ambiguous as the petitioners had suggested, with Justice Kavanaugh commenting that he did "not see ambiguity" and that the statute "seems clear as written". Justice Gorsuch appeared similarly troubled by the petitioners' favoured reading of the text, which may require the justices to interpret an "action under Section 3730" "in two different ways" within the statute. Although they appear to agree that the statute is poorly drafted, several justices, including Chief Justice Roberts, pushed back on the petitioners' "unintended consequences" as an "academic concern" in light of other False Claims Act provisions that encourage prompt action by relators. Several justices seemed equally concerned about the relevancy of Graham and whether a relator can be deemed as an "official of the United States".
Clarification of the circuit split on the availability of the 10-year statute of limitations will have a significant impact on False Claims Act cases throughout the country. A ruling by the court that the 10-year statute of limitations applies even in non-intervened cases would:
- effect a seismic change in how False Claim Act cases are investigated and litigated; and
- in many cases, result in significantly expanded discovery and greater financial liability.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.