Supreme Court Rejects Plaintiff’s Timeliness Argument in False Claims Acts Case

May 28, 2015

By Douglas B. Farquhar

When plaintiffs’ attorneys seek to recover damages because of alleged frauds committed on the federal government – obtaining massive attorneys’ fees and whistleblower bounties for doing so – they frequently argue that no claim is untimely, because of the wars in Iraq and Afghanistan.  It’s like the character in the old Dick Tracy comic strip who shouts, “Hold everything,” and time stands still, so the requirement to file a lawsuit within three years or ten years never applies.  Earlier this week, the Supreme Court held that the “Hold everything” moment is as fictitious as the comics, if not as funny.

The decision was issued in a case with a complicated procedural history brought under the Federal False Claims Act (FCA), which we have previously blogged about here, here, and here.  Under the statute, a plaintiff with previously undisclosed relevant information can file a lawsuit, on behalf of the United States, against companies or individuals who have presented false or fraudulent claims for payment to the federal government, or who have caused those claims to be presented.  The statute applies gargantuan penalties against wrongdoers, and encourages whistleblowers – and their attorneys – to come forward and file the lawsuits (under seal, pending a government review and investigation) by offering attorneys’ fees and a huge percentage of the damages secured (between 15 and 30 percent, depending on the circumstances).  Claims filed under the FCA have netted the federal government tens of billions of dollars in the last decade, and have spawned a plaintiffs’ Bar that does nothing but represent whistleblowers, called “relators” or “qui tam” plaintiffs who sue on behalf of the federal government.

As with nearly all statutes that provide for a civil recovery of damages, the FCA contains a statute of limitations, which requires the lawsuit to be filed within six years of a violation, or within three years after the government should have known about the violation (but in no event longer than ten years).  So, when the plaintiffs’ Bar and the government attorneys come demanding, the defense Bar has generally tried to limit damages to six years prior to the suit being filed (if the conduct has continued into that period) or to argue that the claims are time-barred because the six- or ten-year period expired.

In response, we frequently hear from the plaintiffs’ Bar that claims are not so limited, or barred, because the United States has been at war with Iraq since 2002, and the hostilities have not been completed there.  They rely on the Wartime Suspension of Limitations Act (“WSLA”), originally enacted after World War I to enable the government to concentrate on battles during wars and worry about investigating and prosecuting fraud later.  In the case that led to this week’s Supreme Court decision, a plaintiff brought a case relating to alleged fraud and misrepresentation in the provision of water purification services for U.S. forces in Iraq.  The complicated procedural history of the case led to an argument from defendants that most of the claims were time-barred.  The district court agreed, but the Fourth Circuit reversed and held that the statute of limitations stopped running from 2002 to the point that the lawsuit was filed (2012) due to the ongoing hostilities. 

The Supreme Court agreed with the district court, in a brief and tantalizing unanimous opinion authored by Justice Alito.  (Among other things, Justice Alito wrote, in criticizing a party’s interpretation of the term “pending” in the FCA, that, its interpretation would mean that Marbury v. Madison, a seminal case decided in 1803, is still “pending,” and, “So is the trial of Socrates.”)  The Court held that the WSLA suspends – or tolls – the statute of limitations only for criminal offenses against the United States involving fraud or attempted fraud against the federal government.  Because the claims of fraud under the FCA were civil, the WSLA did not apply.

One arrow removed from the quiver of the plaintiffs’ Bar.

Categories: Enforcement