On May 13, 2019, the United States Supreme Court decided Cochise Consultancy, Inc. v. United States ex rel. Hunt, unanimously affirming the Eleventh Circuit’s holding (887 F.3d 1081) that the 31 U.S.C. § 3731(b)(2) tolling provision applies to False Claims Act (“FCA”) qui tam actions regardless of whether the Government intervenes.
What this means is the time frame in which relators can bring an FCA action is considerably expanded—§ 3731(b)(2)’s three-year clock starts ticking when the Government, not the relator, learns of the alleged fraud and can extend up to 10 years, which may require an organization to defend old conduct with potentially stale evidence.
The relator intending to take advantage of the extended statute of limitations will still need to overcome a number of potential hurdles including:
- Government knowledge of the purported fraud. The three (3) year tolling begins to run when the government knows, or should have known, of the alleged wrongdoing. Therefore, FCA defendants are encouraged to reach out to the government as soon as possible to determine the exact date the government learned about the purported conduct.
- The first-to-file bar. The FCA’s first-to-file bar only allows the first relator to pursue a qui tam action to discourage opportunistic relators that file needless and duplicative litigation against the same defendant based on the same facts. If a relator waits too long to initiate his or her FCA action, though such an action may be timely, the relator may not be the first to file.
- The public disclosure bar. The FCA’s public disclosure bar also prohibits a relator from bringing an FCA lawsuit based on a fraud that has already been disclosed through certain public sources, unless the relator is an “original source. The more time that passes, the more likely it is that the facts on which the relator relies may become public, which could potentially lead to the dismissal of the action.
In summary, while the Cochise decision may be viewed as a new challenge for FCA defendants, there are still defenses available when faced with a qui tam complaint alleging long ago fraud.
Always consult a competent attorney that has expertise with FCA matters!
I welcome your thoughts and comments.
Jonathan T. Marks, CPA, CFE
National Law Review