The U.S. Supreme Court ruled last week that whistleblowers have as much time to bring False Claim Act suits as the government would if acting on its own or alongside a whistleblower.
In a unanimous May 13 decision, the court held that a private plaintiff can use the government’s three-year filing period under the FCA to sue a contractor. The plaintiff-friendly ruling in Cochise Consultancy v. U.S. ex rel Hunt resolves a circuit split that included the 10th Circuit Court of Appeals, and it expands the legal exposure companies potentially have from contractor fraud claims.
Private litigants under the FCA, who are referred to as relators, can blow the whistle on federal contractors by making a qui tam fraud claim against them with the U.S. Department of Justice. In fiscal year 2018, the Department of Justice recovered $2.1 billion in settlements and judgments from these qui tam cases. The DOJ investigates the sealed allegations and may choose to take over the case. More often, the government declines to intervene, leaving the relator to litigate the case on their own. It’s in the latter situation that the Supreme Court clarified how long the relator has to file their own FCA action.
The FCA requires relators to file within six years of when the alleged violation took place. If the government is taking over the case, it has 10 years to file, as long as it acted within three years of learning about the alleged fraud. But the Supreme Court ruled that relators can avail themselves of that same 10-year lookback period the government has. This overrules the 4th, 5th and 10th Circuits, which held FCA plaintiffs to the six-year period because they can’t be considered the government. The 3rd and 10th Circuits, however, gave plaintiffs the longer filing time.
In November 2013, Billy Joe Hunt sued his former employer, Parsons Corp., as well as subcontractor Cochise Consultancy, claiming the companies submitted false claims to the federal government during their $60 million contract work in Iraq. The defendants, collectively referred to as Cochise, engaged in fraud up until early 2007, according to Hunt. The FBI had interviewed Hunt almost three years earlier over a separate matter, and Hunt said he’d revealed to the agents Parsons’ and Cochise’s alleged contracting fraud at issue in his lawsuit.
But the federal government declined to intervene in Hunt’s claims. Cochise then tried to have Hunt’s claims dismissed, saying the six-year statute of limitations had run under Section 3731(b)(1). But Hunt pointed to Section 3731(b)(2) — which contains the more forgiving statute of limitations for the government — and said his claim was timely because he’d filed within three years of the FBI interview, so his fraud claim can reach back 10 years.
The federal district court dismissed Hunt’s case, but the Eleventh Circuit Court of Appeals remanded, saying that in actions where the government doesn’t intervene, filing period begins when “the official of the United States charged with responsibility to act in the circumstances.” In a unanimous decision written by Justice Clarence Thomas, the Supreme Court agreed.
Mike Theis, a partner at Hogan Lovells’ investigations, white-collar and fraud practice, said the Cochise decision is “important because of the Supreme Court expounding upon the meaning of the statute” but that it will “affect a relatively narrow band of cases.”
The Supreme Court essentially expanded the scope of the claims defendants might face when the government declines to intervene, Theis said. Plaintiffs’ 10-year reach-back rights will especially implicate companies that submit recurring claims, like health care organizations, or those with longstanding contracts.
But if the government learned about the alleged violations more than three years prior, relators are still stuck with the six-year period, and that can make a significant difference in the litigation, Theis added. “This gives defendants greater incentive to seek discovery of what the government knew and when it knew it.”
The Cochise decision should eliminate any forum shopping by plaintiffs who would otherwise try to avoid the more restrictive circuits, including the 10th, on the FCA filing period.
A concern that some defense counsel have with Cochise is whether it gives relators too long a filing period, so they can “play games” with the timing of the FCA suit, Theis said. He believes that concern is unrealistic, however, and that relators want to minimize their chances of having their case dismissed.
“I don’t see that, because it’s risky for relators to wait,” Theis said. “It’s still a race to the courthouse in these cases, so it’s perilous for anybody to play these kinds of games.”
—Doug Chartier