On May 13, 2019, the Supreme Court decided Cochise Consultancy, Inc. v. United States ex rel. Hunt, No. 18-315. The case has implications for all individuals and entities contracting with the government, including all health care providers who submit claims to the government for payment (e.g., Medicare, Medicaid, and other Federal healthcare programs). As explained below, the case expanded the time available under some circumstances for relators to bring qui tam (or “whistle-blower”) actions under the False Claims Act (“FCA”), and confirmed that relators (i.e., whistle-blowers) may take advantage of the FCA’s second (and lengthier) statute of limitations. The decision also clarifies the question of whose knowledge of the alleged fraud (the relator’s or the government’s) starts the clock ticking.
The False Claims Act
The FCA is one of the federal government’s principal enforcement tools in “fraud and abuse” cases, and it has been used to recover billions of dollars from health care providers. It imposes civil liability on any person who knowingly presents or causes to be presented false or fraudulent claims for payment by the government.[1] The FCA permits a private person, known as a “relator,” to bring a civil action for violations of the FCA (known as qui tam actions) against the alleged false claimant in the name of the United States.[2] If the United States intervenes, it assumes primary responsibility for prosecuting the case. If the United States declines to intervene, however, the relator can still pursue the action on the United States’ behalf.[3] Relators receive a percentage of the total recovery, ranging between 15% and 30% depending on whether the United States intervenes, plus attorney’s fees and costs.
FCA Statute of Limitations
There are two statutory limitation periods governing civil FCA actions. The first, §3731(b)(1), requires a case to be brought within six years of the date on which the FCA violation was allegedly committed. The second, §3731(b)(2), requires the case to be brought within three years after the date the United States official charged with responsibility to act in the circumstances knew or should have known the facts material to the right of action, but not more than ten years after the date on which the violation was allegedly committed. The later of these dates serves as the limitations period.
Cochise Consultancy, Inc. v. U.S. ex rel. Hunt
Cochise Consultancy, Inc. v. U.S. ex rel. Hunt In Cochise, a former defense contractor, Hunt, alleged that two other defense contractors (collectively, “Cochise”) submitted false claims for payment under a subcontract to provide security services in Iraq in 2006 and 2007. Hunt revealed the alleged fraud to government investigators in 2010 and, just shy of three years later, he filed a qui tam action against Cochise. The United States declined to intervene in Hunt’s action, and Cochise moved to dismiss the suit as barred by the statute of limitations. [4] Hunt conceded his suit was barred by § 3731(b)(1)’s six-year limitation period, but he argued it was timely under § 3731(b)(2) because he filed it within three years of disclosing the alleged fraud to the government.
The District Court disagreed, dismissing Hunt’s action as barred by the statute of limitations. On appeal, the Eleventh Circuit reversed and remanded, holding that § 3731(b)(2)’s limitation period applies tonon-intervened actions and that Hunt’s action was timely. Specifically, the Court found that Hunt’s knowledge of the alleged fraud did not trigger § 3731(b)(2)’s three-year limitation period because Hunt was not “the official of the United States charged with responsibility to act in the circumstances.” Rather, Hunt’s revelation of the alleged fraud to government officials in 2010 started the three-year limitation period.
Implications of Cochise
Cochise resolved a circuit court split on the application of the FCA’s statute of limitations, and is in line with the approach taken by the Ninth Circuit Court of Appeals (the Court with appellate jurisdiction over the District of Arizona), in applying §3731(b)(2) even when the United States has not intervened. However, contrary to Ninth Circuit precedent, Cochise provides that §3731(b)(2)’s three-year limitations period does not start to run when the relator knows of the material facts – it starts to run only when the “official of the United States charged with the responsibility to act in the circumstances” knew or should have known of the material facts. When a relator knows of alleged fraud, but the government does not, the relator can theoretically wait up to ten years to bring suit.
Those contracting with the government, including health care providers participating in Medicare and Medicaid programs, should be prepared to defend against fraud claims dating back for as many as ten years. In anticipation of a need to defend against such claims, providers should review and, if necessary, update their document retention policies and practices to preserve records for at least ten years.
[1] This includes certain third parties acting on behalf of the government. 31 U.S.C. § 3729(b)(2).
[2] 31 U.S.C. § 3730(b)(1)
[3] 31 U.S.C. §3730(c)(1)
[4] If the government had intervened in Hunt’s suit, § 3731(b)(2) plainly would have applied.
