Case of the Month: U.S. Supreme Court Gives Whistleblowers Four More Years to Sue

Just as the tide seemed to be turning against whistleblower lawsuits (see "New DOJ Policy Targeting Whistleblowers with Weak Cases May Make Life Easier for Labs," (Lab Compliance Advisor,  March 4, 2019), the U.S. Supreme Court has effectively extended the statute of limitations for bringing qui tam lawsuits under the False Claims Act (FCA) from six to 10 years. Here's a look at the recent case and what it portends for labs and health providers.

What the FCA Says

Rule: Under Section 3731(b)(1) of the FCA, whistleblowers have six years from the date of the alleged violation to file a qui tam lawsuit. However, Section 3731(b)(2) creates an alternative statute of limitations of three years from the date an "official of the United States" knew or should have known the facts of the alleged fraud up to 10 years after the violation. In theory, the alternative limitation period could serve as an extender that gives a whistleblower three extra years to bring claims that first came to light over six years after they were committed. But until now, the belief has been that the alternative limitations period doesn't generally apply to whistleblower lawsuits.

The Question

The Section 3731(b)(2) alternative limitation applies when the government intervenes in the suit since, by definition, the government can't make that decision unless it has notice of the alleged fraud. But does the Section 3731(b)(2) limitation of up to 10 years also apply when the government doesn't intervene?

Three different federal circuits have tackled that question and each has given a different answer. So, when the issue came up again, the Supreme Court decided to accept the case, called Cochise Consultancy v. U.S. ex rel. Hunt, to resolve the conflict.

The Cochise Case

Although the case applies directly to health care, Cochise actually involved a qui tam lawsuit against defense contractors. The whistleblower, Mr. Hunt, filed the case in 2013 for fraud allegedly committed in 2006. Although Mr. Hunt had missed the six-year Section 3731(b)(1) window, he claimed that he first reported the fraud to the government in 2010. And even though the government had declined to intervene, he argued that having brought the matter to the DOJ's attention less than three years earlier, he still had time to sue under the Section 3731(b)(2) knowledge of an "official of the U.S." limitation.

The lower court rejected the argument. But the 11th Circuit reversed, ruling that the three-year extension isn't tied to government intervention but knowledge of the alleged violation. The U.S. Supreme Court then resolved the issue by unanimously affirming the 11th Circuit's ruling. Both FCA statutes of limitations apply to civil whistleblower lawsuits, said the Court, regardless of whether the government decides to intervene in the case.

Takeaway: Unless and until Congress amends the FCA, whistleblowers essentially have 10 rather than six years to bring a qui tam lawsuits against your lab. Some whistleblowers may seek to take advantage of this extra time granted by Cochise to dredge up old cases that are now back in play—assuming, of course, the alleged events happened within the past 10 years. Of greater concern are the risks going forward, namely, that whistleblowers will use the up to four years extra to hang onto their claims to increase the amount of fraud and thus potential damages they can recover.