The False Claims Act (FCA) has two limitations periods: 1) within 6 years after the violation occurred, or 2) within “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” (the “government knowledge limitations period”). 31 U.S.C. § 3731(b). Whichever is longer serves as the limitations period.
Whether the government knowledge limitations period applied to cases brought by private relators split the federal courts of appeals. Three circuits ruled that the government knowledge limitations period applied only in cases initiated by, or intervened in, by the government. Some other circuits ruled that relators could use the government knowledge limitations period in non-intervened cases, but that the relator was an “official of the United States” whose knowledge could start the government knowledge limitations period. Finally, other circuits held that private relators could use the government knowledge limitations period in non-intervened cases, but were not an “official of the United States.” On Monday, the Supreme Court unanimously ended the circuit split.
The Court decided that the government knowledge limitations period applies in non-intervened suits and further ruled that the relator is not an “official of the United States.” Justice Thomas noted “the statute provides no support for reading ‘the official of the United States’ to encompass a private relator.” Further, he wrote, “We see nothing unusual about extending the limitations period when the government official did not know and should not reasonably have known the relevant facts, given that the government is the party harmed by the false claim and will receive the bulk of any recovery.”
The Court’s ruling allows a relator to extend the time to file suit until three years after the responsible government official knew or should have known of the alleged fraud, which could be many years after the relator learned of the alleged fraud, and up to 10 years after the alleged fraud occurred.
The government recovers billions of dollars annually through the hundreds of cases filed under the FCA. The Court’s ruling will now require all courts to apply the extended government knowledge limitations period to all cases, which could result in more money being recovered. This ruling will have direct and significant impacts on FCA litigation going forward.
First, there will be increased discovery on government knowledge. We will likely see a push toward requiring the government to preserve data and obtaining discovery from the government about its knowledge of the underlying facts giving rise to the alleged fraud – specifically when it knew the information and what it did in light of it. This is in addition to the already growing desire for discovery on government knowledge due to the Court’s ruling in Escobar, which held that government knowledge is a strong defense to materiality.
Second, the prolonged time to bring litigation will increase costs involved with tracking down witnesses – whose memories of the events, if they have any, have faded, and are less reliable – and locating records of events that may have occurred nearly a decade ago. It is imperative for companies that do business with the government to have strong record retention policies and policies around retaining termed employees’ data. This will aid in their defense and enable companies to refer back to correspondence and other data from the time surrounding the alleged fraud, rather than relying solely on the relator’s knowledge and hoping to find some witnesses who still have knowledge.
[View source.]
