Cochise Consultancy, Inc. v. United States ex rel. Hunt
The FCA contains two limitation periods. An FCA action may not be brought (1) “more than 6 years after the date on which the [FCA violation] is committed,”2 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,”3 whichever occurs last.
In Cochise, the relator conceded that his suit was untimely under the six-year limitations period in § 3731(b)(1), but argued his suit was timely under § 3731(b)(2) because he filed (1) within three years of an interview with federal agents, in which he disclosed the alleged fraud, and (2) within ten years of the violation’s occurrence.
Before Cochise, two circuits had held that § 3731(b)(2) did not apply to relator-initiated actions in which the United States elected not to intervene.4 Two other circuits had held that § 3731(b)(2) could apply in non-intervened actions, but those circuits disagreed about whether the relator in such actions should be considered “the official of the United States” whose knowledge triggers § 3731(b)(2)’s 3-year limitations period.5
The Supreme Court decision
Resolving this divide, the Supreme Court held that the statute’s “plain text” makes clear that relators in declined cases may take advantage of § 3731(b)(2)’s limitations period if they meet the requirements set forth in that subsection.6 The Court rejected Cochise’s “fallback argument” that a relator in a declined case is “the official of the United States charged with responsibility to act in the circumstances” whose knowledge or reasonable expectation of knowledge triggers the shorter three-year limitations period.7
Implications for defendants
Although Cochise involved alleged misconduct during a limited period seven years before the suit was filed, the decision’s consequences are potentially far greater for entities that submit claims on a recurring basis (for example, those in the health care sector and government contractors with long-term contracts). For those entities, the decision means that relators may be able to seek treble damages plus per-claim penalties for up to 10 years’ worth of false claims, even in declined cases.
Cochise provides an incentive for defendants to seek discovery of what the government knew and when, because a relator seeking to use 3731(b)(2)’s 10- year limitations period must file the complaint within three years of 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.” Defendants may expand their efforts to develop defenses showing the relator failed to meet this requirement. Notably, the United States argued in Cochise that “the official of the United States” referenced in § 3731(b)(2) must be the Attorney General (or his delegate), but the Court declined to define that term. As defendants seek to develop factual records showing the appropriate government official knew (or should have known) material facts, courts will likely need to decide what constitutes “material facts” and when government officials reasonably should have known them.
Roads not taken
The Supreme Court denied certiorari in numerous FCA cases in 2019.
In one significant example, Gilead Sciences v. United States ex rel. Campie, the Supreme Court passed on an opportunity to weigh in on whether the government’s continued payment of claims, despite knowledge of the alleged misrepresentations, precluded any viable claim of “material” falsehood under the FCA.8
In that case, the Ninth Circuit had allowed the claim against Gilead to proceed because the FDA’s actual knowledge of any misrepresentations remained in question.9 Given the uncertainty about “exactly what the government knew and when,” the government, as an amicus, recommended that the court deny certiorari because the case would be a poor vehicle for considering the question presented.10 The government also argued that the Ninth Circuit’s decision did not conflict with decisions of other courts of appeals because all agree that materiality is a “holistic” and highly fact-dependent inquiry.11 Significantly, the government promised to seek dismissal of the case upon remand to the district court, based on its “thorough investigation” of the merits, and a strong interest in shielding the FDA from burdensome discovery and Touhy requests.12 The Court denied certiorari, and - adhering to its promise - the government moved to dismiss the case in March 2019, with the district court granting the motion on November 5, 2019.13
The Supreme Court also denied certiorari in Brookdale Senior Living Communities, Inc. v. United States ex rel. Prather, which offered another opportunity for the Court to clarify the materiality (and scienter) standards it articulated three years ago in Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016).14 The relator alleged a home health provider’s claims for payment were false because they lacked physician certifications made “at the time the plan of care is established or as soon thereafter as possible,” as required by 42 C.F.R. § 424.22(a)(2). Reversing the district court’s dismissal of the complaint for failure to plead materiality, the Sixth Circuit held that (1) under a “holistic” materiality analysis, the relator could plead materiality without alleging any facts about the government’s past payment practices or efforts to enforce the timeliness requirement of the physician certification regulation;15 and (2) the relator adequately pled scienter by alleging the defendant was on notice that its practices may not be compliant with the regulation, even though she had not pled that the defendant knew such noncompliance was material to the government’s payment decision.16 The defendant asked the Supreme Court to review both holdings,17 but certiorari was denied.
The Court also declined to review United States ex rel. Silver v. Omnicare, Inc., in which the Third Circuit held that the “the FCA’s public disclosure bar is not triggered when a relator relies upon non-public information” - in that case, his own knowledge - “to make sense of publicly available information, where the public information - standing alone - could not have reasonably or plausibly supported an inference that the fraud was in fact occurring.”18 The defendant petitioned for a writ of certiorari,19 arguing that “every other circuit to consider the issue” has made clear that actual reliance on public disclosures is sufficient, on its own, to trigger the public disclosure bar and to require a relator to prove he is an original source of the information.20 In declining to take on the question, the Supreme Court leaves potential tension among the circuits surrounding the public disclosure bar.
Finally, in November, the Court declined review in a pair of cases that sought clarification regarding whether relators must have personal knowledge of the specific contents of the alleged falsely submitted claims in order to survive dismissal and satisfy the particularity requirement of Rule 9(b) of the Federal Rule of Civil Procedure.21
As of late November 2019, one FCA petition for certiorari remained pending, in the case of Estate of Robert Cunningham v. McGuire - in which petitioners have asked the Court to resolve a split among circuits on whether 31 U.S.C. § 3730(b)(5)’s “first to file bar” which, like the public disclosure bar at issue in Silver, is another important potential bar to FCA suits - is jurisdictional.22
More broadly, it remains to be seen whether (and when) the Court will choose to address differences among lower courts, and provide further guidance on these and other interpretive issues, including Rule 9(b)’s particularity requirement and materiality standards - fact-intensive inquiries that nevertheless can significantly impact the course of FCA litigation.
1. 139 S. Ct. 1507 (2019).
2. 31 U.S.C. § 3731(b)(1).
3. 31 U.S.C. § 3731(b)(2).
4. United States ex rel. Sanders v. N. Am. Bus Indus., Inc., 546 F. 3d 288, 293-294 (4th Cir. 2008); United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F. 3d702, 725-726 (10th Cir. 2006).
5. Compare United States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211, 1216-1218 (9th Cir. 1996) (limitations period began when relator knew or should have known of material facts) with United States ex rel. Hunt v. Cochise Consultancy, Inc., 887 F.3d 1081, 1089-1097 (11th Cir. 2018) (limitations period began when “official of the United States charged with responsibility to act in the circumstances” knew or should have known of material facts).
6. Cochise, 139 S. Ct. at 1512-1513.
7. Id. at 1513-1514.
8. See Gilead Scis., Inc. v. United States ex rel. Campie, No. 17-936, 2019 WL 113075, at *1 (U.S. Jan. 7, 2019).
9. United States ex rel. Campie v. Gilead Scis., Inc., 862 F.3d 890, 906-907 (9th Cir. 2017), cert. denied sub nom. Gilead Scis., Inc. v. United States ex rel. Campie, 139 S. Ct. 783, 202 L. Ed. 2d 566 (2019).
10. Brief for the United States as Amicus Curiae, Gilead Scis., Inc. v. United States ex rel. Campie, No. 17-936, 2018 WL 6305459, at *22 (U.S. Nov. 30, 2019).
11. Id. at *17.
12. Id. at *15.
13. See United States ex rel. Campie v. Gilead Scis., Inc., 11-cv-00941, Dkt. No. 183 (N.D. Cal. March 28, 2019); United States ex rel. Campie v. Gilead Scis., Inc., 11-cv-00941, Dkt. No. 246 (N.D. Cal. Nov. 5, 2019).
14. Brookdale Senior Living Communities, Inc. v. United States ex rel. Prather, 139 S. Ct. 1323, 1324, 203 L. Ed.2d 565 (2019), cert. denied Mar. 18, 2019.
15. United States ex rel. Prather v. Brookdale Senior Living Communities, 892 F.3d 822, 831-835 (6th Cir. 2018).
16. Id. at 837-838.
17. See Petition for Certiorari, Brookdale Senior Living Communities, Inc. v. United States, No. 18-699, 2018 WL 6242451 (U.S. Nov. 20, 2018).
18. 903 F.3d 78, 89 (3d Cir. 2018), cert. denied sub nom. Pharmerica Corp. v. United States ex rel. Silver, No. 18-1044, 2019 WL 4923459 (U.S. Oct. 7, 2019); see also id. at 85-86.
19. Petition for Certiorari, PharMerica Corp. v. United States ex rel. Silver, No. 18-1044, 2019 WL 524576 (U.S. Feb. 6, 2019).
20. Reply Brief, Pharmerica Corp. v. United States ex rel. Silver, No. 18-1044, 2019 WL 2549417, at *2 (U.S. June 17, 2019).
21. See United States ex rel. Strubbe v. Crawford County Memorial Hospital, No 19-225, 2019 WL 6257418 (Nov. 25, 2019); United States ex rel. Perry v. Hooker Creek Asphalt, No. 19-228, 2019 WL 6257420 (Nov. 25, 2019).
22. Petition for Certiorari, Estate of Robert Cunningham v. McGuire, No. 19-583, 2019 WL 5801813 (U.S. Oct. 25, 2019).