One of the
most frequently overlooked defenses to a
qui tam action under the False
Claims Act, 31 U.S.C. §§
3729 et seq. (“FCA”),
is the differing statute of limitations
provisions that apply when the
government is a party and when only the
relator is litigating the case. Defense
counsel should not assume that both
provisions of § 3731(b)
are applicable in a qui tam
situation. In actuality, defense counsel
should assert, should a statute of
limitations issue arise, that
application of §
3731(b)(2)’s more generous provision is
foreclosed when the government has
declined intervention.
In any
action alleging violations of the FCA,
the statute of limitations provision
contained within the FCA controls.
See 31 U.S.C. §
3731(b). Under §
3731(b)(1), a six year statute of
limitations provision is mandated.1
For FCA purposes, the statute of
limitations begins to run once the claim
for payment is submitted to the
government. SeeUnited States v.
Entin, 750 F. Supp. 512, 517-18
(S.D. Fla. 1990).
In 1986,
the FCA was amended to include a second
statute of limitations provision,
§ 3731(b)(2).
2 It is this
second provision which has generated the
confusion that relators have attempted
to exploit by arguing that this
alternative provision, including the 10
year maximum, is equally applicable to
them as well.
The FCA’s
statute of limitations, however, does
not allow relators to extend the six
year period specified by §
(b)(1). By its very language (“by an
official of the United States”), it is
evident that this provision is not meant
to be applicable in qui tam
cases where the government has declined
to intervene. The clear majority of
district courts that have considered the
issue of whether §
(b)(2) is applicable to relators have
rejected its applicability to qui
tam law suits where the government
has declined to intervene. See,
e.g., United States ex rel. Capella v.
Norden Systems, Inc., No.
3:94-cv-2063 (EBB), 2000 U.S. Dist LEXIS
13352 at *35 (D. Conn. August 24, 2000);
United States ex rel. El-Amin v.
George Washington Univ., 26 F.
Supp. 2d 162, 170 (D.D.C. 1998)3;
United States ex rel. Thistlethwaite
v. Dowty Woodville Polymer, Ltd., 6
F. Supp. 2d 263, 265 (S.D.N.Y. 1998).4
The Second Circuit has concurred in this
interpretation. Manning v. Utilities
Mutual Insurance Co., 254 F.3d 387,
397 (2d Cir. 2001) (six year limit is
applicable “to private claims brought
pursuant to the FCA”).
The
limited contrary decisions applying this
section to cases where a relator alone
is pursuing the action are highly
unpersuasive, especially given the
pertinent legislative history and the
explicit language of the provision. For
example, in United States ex rel.
Hyatt v. Northrop Corp., 91 F.3d
1211, 1214-16 (9 th Cir. 1996), despite
conceding that the legislative history,
as exemplified in the House and Senate
Judiciary Committee reports, exclusively
refers to “the government” in discussing
§ (b)(2), the Ninth
Circuit nonetheless concluded that the
section was applicable to relators as
well. The Circuit thus ignored the
better reasoned district court decision
which had reached far more accurate
conclusions after its exhaustive review
of the legislative history. Hyatt,
Relator v. Northrop Corp., 883 F.
Supp. 484, 486-88 (C.D. Cal. 1995).
Similar deficiencies in analysis also
afflict United States ex rel. Bidani
v. Lewis, No. 97 C 6502, 1999 U.S.
Dist. LEXIS 3530 (N.D. Ill. March 12,
1999); and United States ex rel.
Downy v. Corning, 118 F. Supp. 2d
1160 (D.N.M. 2000).5
Moreover,
there is authority holding that even if
relators could place reliance upon
§ (b)(2), they would
still be required to allege and prove
that a defendant Afraudulently concealed
a false claim. @ United States ex
rel. Sanders v. East Alabama Healthcare
Authority, 953 F. Supp. 1404, 1413
(M.D. Ala. 1996).
It is
important to recognize that the Ninth
Circuit held in Hyatt, under
§ (b)(2), the three
year statute of limitations period
begins to run once a relator has
knowledge of the alleged false claims.
“Once the qui tam plaintiff has the
requisite information, he cannot sleep
on his rights. He is charged with the
responsibility to act under the
circumstances. Thus, as to the qui tam
plaintiff, the three-year extension of
the statute of limitations begins to run
once [the] qui tam plaintiff knows or
reasonably should have known the facts
material to his right of action.” 91
F.3d at 1216-17.
The Ninth
Circuit specifically rejected the
argument that relators, in effect, have
a 10 year statute of limitations period
which begins to run from the date the
government learns of the alleged fraud
through service of the complaint. As
that Court recognized ( id. at
1218):
[Relator=s] interpretation of the
tolling provision would permit qui
tam relators to control the length
of their own limitations period by
withholding their allegations until
they are prepared to sue. Under this
theory, qui tam relators could wait
a full ten years after learning of
the deceit before suing. This would
frustrate the purposes of the
limitation period and the purposes
of the Act. Granting qui tam
relators the power to wait nearly
ten years to sue would allow fraud
to continue and losses to mount.
Furthermore, allowing a qui tam
plaintiff to wait ten years might
interfere with law enforcement ....
Rather,
stressed the Circuit, the three years
begins to run when the relator, not the
government, has knowledge of the
purported false claims. Id. at
1218.
In
conclusion, any effort by a relator to
assert that its action is governed by
§ (b)(2)’s more
expansive statute of limitations
provision should be resisted vigorously.
In this way, the potential liability of
the defendant can be kept with the
appropriate boundaries specified by
Congress..
Footnotes
1
Sec. 3731(b)(1) reads: A civil action
under section 3730 may not be brought
(1) more than 6 years after the date on
which the violation of section 3729 is
committed, or...
2
A civil action under section 3730 may
not be brought B
(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.
3
The El Amin holding recently
was reaffirmed in United States ex
rel. Fisher v. Network Software
Associates, No. 99-3095 (PLF), 2002
U.S. Dist. LEXIS 369 at *2-*7 (D.D.C.
Jan. 14, 2002).
4
See alsoUnited States ex rel. Koch
v. Koch Industries, 188 F.R.D. 617,
623 (N.D. Okla. 1999), where the
district court expressed agreement with
those decisions denying the
applicability of §
(b)(2) to relators, although holding it
did not have to reach that point.
5
A third position on the issue has gained
no support whatsoever from other courts.
See United States ex rel. Colunga v.
Hercules, Inc., 1998 U.S. Dist.
LEXIS 21811 (D. Utah 1998).
