In the majority of FCA cases, the statute of limitations is clear: suit must be brought within six years of the FCA violation pursuant to 31 U.S.C. § 3731(b)(1). In a minority of cases, however, the alternative limitations period of 31 U.S.C. § 3731(b)(2)—which can extend the limitations period to as long as ten years from the violation—is invoked. Until now, two of the three circuit courts to have reached the issue, along with the majority of lower courts, have held that the extended limitations period in Section 3731(b)(2) is available only where the government is a direct party to the FCA suit. With its decision in United States ex rel. Hunt v. Cochise Consultancy, Inc., No. 16-12836, 2018 WL 1736788 (11th Cir. Apr. 11, 2018), the Eleventh Circuit has balanced the circuit court split by finding that relators can take advantage of the limitations period in Section 3731(b)(2), even in qui tam cases in which the government declines to intervene. We discuss the case and its implications below.
The Statutory Language
Section 3731(b) of the FCA provides a standard six-year statute of limitations and the possibility, under certain circumstances, of an action extending beyond that:
A civil action under section 3730 may not be brought—
(1) more than 6 years after the date on which the violation of [the False Claims Act] is committed, or
(2) more than 3 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,
whichever occurs last.
The six-year limitations period found in Section 3731(b)(1) is considered the FCA’s default limitations period for substantive violations of the FCA, i.e., all violations except for “personal” retaliation claims brought by a qui tam relator under Section 3730(h). The limitations period is triggered exclusively and strictly by the underlying violation, without any exceptions for concealment or discovery and with no accounting for government or relator knowledge.
The limitations period in Section 3731(b)(2) also is triggered by the underlying substantive FCA violation. However, subject to a mandatory ten-year cap (or statute of repose), Section 3731(b)(2) allows the limitations period to be extended to three years beyond the date when the appropriate government official knew or should have known the material facts. For example, if the alleged violation occurred on January 1, 2010, but the government can establish that it did not know or reasonably should not have known the material facts of the violation until January 1, 2017, the action still would be timely if it was filed on or before January 1, 2020.
The Majority View and Reasoning
The majority of courts have held that Section 3731(b)(2) applies only to actions initiated or litigated directly by the United States—i.e., affirmative suits brought by the government and qui tam suits in which the government has intervened—and does not apply to qui tam relator suits in which the government has declined to intervene. This view largely is premised on the fact that the provision itself refers only to the United States, and thus its extension is restricted to actions brought by the government.
Both the United States Courts of Appeals for the Fourth and Tenth Circuits have observed that the text of Section 3731(b)(2) is nearly identical to the tolling provision in another federal statute, 28 U.S.C. § 2416(c), under which the generally applicable statute of limitations in actions brought by the United States—and only by the United States—is tolled until the material facts are known “by an official of the United States charged with responsibility to act in the circumstances.” These circuit courts agree that the FCA’s legislative history shows that Section 3731(b)(2) was adopted directly from 28 U.S.C. § 2416(c), and that this history supports the conclusion that Section 3721(b)(2) can be invoked only when the government is a party. See United States ex rel. Sanders v. N. Am. Bus Indus. Inc., 546 F.3d 288, 294 (4th Cir. 2008); United States ex rel. Sikkenga v. Regence BlueCross BlueShield of Utah, 472 F.3d 702, 724-25 (10th Cir. 2006).
According to this rationale, any other reading of Section 3721(b)(2) would be contrary to the statutory text and, in the words of the Fourth Circuit, result in the “bizarre scenario” in which the limitations period in a relator’s action depended on the knowledge of a nonparty to the action (i.e., the government in a nonintervened case):
The limitations period in Section 3731(b)(2) starts when the government knows or should know of “facts material to the right of action.” This language makes perfect sense when referring to an action brought by the government: the limitations period is based on the government’s knowledge of “facts material to the right of action” because that particular knowledge notifies the government that it has an actionable FCA claim. But applying the statute's language to a relator's action makes no sense whatsoever. The government's knowledge of “facts material to the right of action” does not notify the relator of anything, so that knowledge cannot reasonably begin the limitations period for a relator’s claims. Furthermore, once the material facts supporting a right of action are known to the United States, it is doubtful that the government official “charged with responsibility to act in the circumstances” could be charged with any responsibility other than to see that the government brings or joins an FCA action within the limitations period. After all, government officials are certainly not “charged with responsibility” to ensure that a relator brings a timely FCA action. All of these textual elements demonstrate that Section 3731(b)(2) makes sense only when read to extend the FCA’s limitations period in actions brought or joined by the United States.
546 F.3d at 293-94. The Fourth Circuit also concluded that reading the extension provision to allow relators to sit on their claims for up to ten years would render superfluous the six-year limitations provision. Id. at 295.
A number of lower courts within other circuits have adopted this interpretation as well. See, e.g., United States ex rel. Landis v. Tailwind Sports Corp., No. 1:10CV00976 (CRC), 2016 WL 3197550 (D.D.C. June 8, 2016); United States ex rel. Griffith v. Conn, 117 F. Supp. 3d 961 (E.D. Ky. 2015); United States ex rel. Finney v. Nextwave Telecom, Inc., 337 B.R. 479 (S.D.N.Y. 2006).
The Eleventh Circuit’s Interpretation in Hunt
In Hunt, however, the Eleventh Circuit rejected all of this reasoning and arrived at the opposite conclusion—that the three-year extension provision may apply to any action for a substantive FCA violation, including qui tam actions in which the government declines to intervene. Viewing the statutory language in Section 3731(b) as unambiguous, the Eleventh Circuit interpreted it to include declined relator actions since it did not explicitly exclude them: “nothing in § 3731(b)(2) says that its limitations period is unavailable to relators when the government declines to intervene.” Hunt, 2018 WL 1736788, at *6.
In rejecting the argument that, unless the United States brings the action or intervenes, it is bizarre or absurd to peg the limitations period to a federal official’s knowledge, the court criticized the circuits that have accepted this argument for applying the general rule—that a limitations period is triggered by the knowledge of a party—“reflexively,” and for failing to consider the government’s unique role as the real party in interest in declined qui tam cases as a sufficient basis for allowing the extended limitations period to apply to any relator actions. The Eleventh Circuit also rejected the notion that the six-year limitations provision was rendered superfluous, reasoning that other incentives/risks (such as the first-to-file rule and the public disclosure bar) encourage relators to report fraud promptly, which would trigger the three-year clock and thus would result in the six-year limitations period being the applicable “last occurring” period in those circumstances.
This decision brings the Eleventh Circuit in line with the Ninth Circuit on the question of whether relators, even in non-intervened cases, can take advantage of the limitations period in Section 3731(b)(2). See United States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211 (9th Cir. 1996). However, the Ninth Circuit and the Eleventh Circuit part ways on the natural follow-up question: whose knowledge—the relator’s or the government’s—triggers the three-year clock in such situations? See Hunt, 2018 WL 1736788, at *12 (rejecting the Ninth Circuit’s holding that the relator’s knowledge triggered the limitations clock and calling the Ninth Circuit’s justification that a relator acts as a government agent/official a “new legal fiction”).
Given its partial alignment with the Ninth Circuit’s decision in Hyatt, the Hunt decision results in a clear and stark circuit court split on this important issue. As a result, the issue of whether Section 3731(b)(2) may be invoked by relators in declined qui tam actions—and, if so, whose knowledge triggers the clock— is now ripe for resolution by the Supreme Court.
However, the Hunt case may not present the best vehicle for Supreme Court review. The relator in Hunt claims that the government did not learn of the alleged violation until he revealed it in the course of being interviewed by the FBI about another scheme (to which he ultimately pled guilty). The FBI interview took place several years after the alleged FCA violation. And the relator then waited until just three days shy of three years after the FBI interview to file his qui tam suit. This factual scenario weighs strongly against the Eleventh Circuit’s assumption that relators always are motivated to bring suit as promptly as possible.
Notably, in reaching this issue, the district court and the Eleventh Circuit both accepted that FBI interviewers met the “responsible government official” language in Section 3731(b)(2), an acceptance which is counter to prior Justice Department efforts to very narrowly construe who qualifies as a responsible government official for these purposes. See John T. Boese, Civil False Claims and Qui Tam Actions § 5.02[B][b] (Wolters Kluwer Law & Business) (4th ed. 2011 & Supp. 2018-1).
Regardless, the Eleventh Circuit’s conclusion that the government’s (and not the relator’s) knowledge triggers the three-year clock under Section 3731(b)(2) in declined qui tam cases is likely to be problematic for the government. As the Eleventh Circuit acknowledged, its ruling makes the factual basis for the government official’s knowledge an issue to be litigated in the qui tam action despite the government’s nonparty status. Hunt, 2018 WL 1736788, at *9 n.10. Defendants now have the right in such cases to take discovery on these issues even in declined qui tam cases, including written discovery, subpoenas (as necessary), and depositions of government personnel and investigators to develop evidence of when “government officials” knew or reasonably should have known of the material facts underlying the alleged violation. Combined with the “materiality” holding in the Supreme Court’s 2016 Escobar decision, see FraudMail Alert No. 16-06-17, this opens the government up to a host of early discovery, even in cases where the government has investigated and chosen not to intervene/litigate. In such cases, the Justice Department should consider dismissing non-meritorious claims pursuant to the 2018 “Granston Memo.”