While not rocket science, or even particle physics, the FCA was complicated enough without introducing yet a new circuit split. Yet, in United States ex rel. Hunt v. Cochise Consultancy, Inc., the Eleventh Circuit has disagreed with at least two other circuits (the Fourth and the Tenth) in holding that relators in non-intervened qui tam actions can rely on a statutory exception to the otherwise-applicable six-year statute of limitations that allows suit to be brought within three years of when the government learns of the potential fraud. The court parted ways with the majority view that only the government can rely on this alternative provision, a rule grounded in the sensible position that the government itself is only a party when it decides to intervene. The Supreme Court in U.S. ex rel. Eisenstein v. City of New York, 556 U.S. 928 (2009), recognized as much when it held that a relator in a non-intervened case could not take advantage of the government’s sixty-day appeal period and instead had only the usual thirty days available to an ordinary party. This was because, as the Court recognized, the United States itself is not a party to the appeal in a non-intervened case. Id. at 937. Without much analysis, the Eleventh Circuit simply found Eisenstein’s reasoning inapplicable and held there was no textual basis in the FCA to prevent relators from taking advantage of the three-year alternative found in 31 U.S.C. § 3731(b)(2). Again, without much reasoning or discussion, it simply found the Fourth and Tenth Circuits unpersuasive (never mind the multiple district courts that have sided with the majority rule).
Only the Ninth Circuit thus far had found that a relator could take advantage of the three-year rule, but that court also had held that the three years begins to run from the relator’s knowledge of the fraud. United States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211, 1217 (9th Cir. 1996). Once again, the Eleventh Circuit disagreed, holding instead that even in a non-intervened case, the three years begins to run from an appropriate “government official’s” knowledge of the fraud. Accordingly, even if the relator himself was a perpetrator of the alleged underlying fraud and therefore had knowledge of it from its inception, the selfsame relator can take advantage of the three-year exception based on the government’s ignorance of his fraudulent scheme. This was close to the case in Cochise as the relator had knowledge of an alleged kickback scheme but only divulged it years later when investigated by the FBI for his own offenses. He later brought suit under the FCA after he was released from prison, seven years after the alleged violation. Under this decision, he may still take advantage of the three-year provision.
The Eleventh Circuit now has become the first and only court of appeals to hold that the FCA’s alternative limitations period is available in non-intervened qui tam actions and runs based on the government’s knowledge — not the relator’s. This creates the very real possibility that relators may allow alleged losses — and their eventual recovery — to mount, knowing that they can ripen otherwise stale claims by lying in wait and informing the government at the last possible second before the ten-year statute of repose would be triggered.
We at LLB of course hope the decision (and split) will not stand, and this issue has joined the growing pile of thorny FCA questions that the Supreme Court may one day be called upon to resolve. Stay tuned.