INSIGHT: Defendants May Seek To Use Discovery To Soften Impact Of SCOTUS Decision

Author:Ms Jessica L. Ellsworth, Jonathan L. Diesenhaus, Justin P. O'Brien and Sarah C. Marberg
Profession:Hogan Lovells

Defendants in False Claims Act cases may be able to limit the impact of a recent Supreme Court decision, Hogan Lovells attorneys say. The court clarified application of the law's statute of limitations, potentially expanding the number of claims and penalties for which defendants can be liable in FCA litigation.

The Supreme Court's May 13 decision in Cochise Consultancy Inc. v. United States ex rel. Hunt clarified application of the False Claims Act's two-part statute of limitations.

The opinion has the potential to expand the number of claims and penalties for which defendants can be liable in declined whistleblower litigation. However, the unanimous opinion by Justice Clarence Thomas leaves open several avenues for defendants to try to limit the impact of court's holding.

In short, the court held that a relator can file a whistleblower action—or qui tam—up to 10 years after a violation of the FCA occurs as long as the whistleblower, also called a relator, files suit within three years of a responsible government official learning of the alleged fraud.

Two Limitations Periods

An FCA action may not be brought (1) more than six years after the date on which the FCA violation is committed, 31 U.S.C. § 3731(b)(1), 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," id. § 3731(b)(2), whichever occurs last.

The court explained that the "plain text" of the statute, which applies the limitations periods to "civil action[s] under section 3730," makes the two limitations periods applicable in both government-initiated and relator-initiated suits. Slip. op. 5.

The court dismissed Cochise's arguments that § 3731(b)(2) should only apply when the government is a party as "at odds with fundamental rules of statutory interpretation." Slip. op. 5. By holding that relators in declined cases can take advantage of the 10-year limit in § 3731(b)(2), the Supreme Court rejected the view held by the three other courts of appeals to have addressed this question (the Fourth, Ninth, and Tenth Circuits), which had all held that relators in declined cases were confined to the six-year statute of limitations in § 3731(b)(1).

The Supreme Court also rejected Cochise's argument that the relator in a declined case...

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