The U.S. Supreme Court's 9-0 decision in Cochise Consultancy Inc. v. United States ex rel. Hunt showed once again that, when False Claims Act relators push their cases to the highest level, the justices will remove the half-baked barriers that inevitably get thrown up by corporate defendants when federal prosecutors decline to intervene.
This expert analysis by TELG managing principal R. Scott Oswald was published by Law360 on May 13, 2019.
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By R. Scott Oswald
Whistleblowers who fail to win the buy-in of federal prosecutors for their complaints under the False Claims Act may feel pressured these days, as the U.S. Department of Justice flexes its dismissal prerogative in such cases.
But at least the U.S. Supreme Court still knows how to treat qui tam relators who are willing to go the distance.
For the third time in three years (or back even further, depending on how you keep score), the high court on Monday ruled unanimously against corporate defendants seeking dismissal of a non-intervened FCA whistleblower’s case on threadbare logic — in this case, holding that the FCA’s statute of limitations means (surprise!) exactly what it says.
Monday’s 9-0 decision in Cochise Consultancy, Inc. v. United States ex rel. Hunt showed again that the justices aren’t easily tempted to undermine the central purpose of the FCA since it was signed into law by President Abraham Lincoln in 1863: Holding fraudsters accountable when they pick the public pocket.
This series of wins arguably began in 2016, with a ruling that defendants can’t skirt liability under the FCA simply by avoiding bald-faced lies to the government: Misleading half-truths also are actionable, said Justice Clarence Thomas in an 8-0 decision.
The following term, but still in 2016, former Justice Anthony Kennedy said in another 8-0 decision that small-scale violations of the FCA’s seal requirement — a peculiarity of the statute, designed to protect government interests — won’t result in an automatic dismissal of claims.
And this term, on Monday, Justice Thomas again commanded unanimity with his view that whistleblowers get full access to the FCA’s statute of limitations as written, regardless of the government’s participation in their case, and that arguments to the contrary “cannot be correct.”
As usual, the opinion rested partly on a close reading of the FCA’s text and partly on the justices’ comfort in resolving such matters for the benefit of taxpayers, who are “the party harmed by the false claim and will receive the bulk of any recovery.”
The FCA makes it illegal to deceive the federal government for financial gain. The statute includes a “qui tam” provision that allows whistleblowers, known as relators, to file a legal complaint on behalf of taxpayers and, if they prevail, to receive a share of the proceeds.
The government may choose to take over a qui tam case after it’s filed — or may allow the relator to proceed without prosecutorial support, but still on behalf of the United States.
Taken together, the three recent cases show the unique law-making role enjoyed by relators who proceed without government intervention. Because a DOJ takeover generally leads to speedy settlement of FCA complaints, it’s mostly non-intervened cases that bubble up to appellate levels. The government often will weigh in as an amicus curiae — and may formally advise the Supreme Court on which cases to take, if it is asked — but it’s persistent relators who drive the high court’s FCA docket, and who deliver valuable precedents for fraud-fighters at lower levels.
Monday’s decision concerned two defense contractors accused of defrauding the U.S. government in the provision of security services in Iraq. The relator, Billy Joe Hunt, filed his qui tam complaint outside the FCA’s typical six-year limitations period, relying instead on an alternative provision that allows filing within three years of “the date when facts material to the right of action are known … by the official of the United States charged with responsibility to act.”
The clock started ticking, he said, when he was interviewed by federal agents in an unrelated probe — and his eventual complaint squeaked in with a few days to spare. (The FCA allows a maximum of 10 years to elapse after the wrongdoing before a complaint is filed, but that outer limit wasn’t in play here.)
After federal prosecutors declined to intervene in the case, the contractors moved to dismiss Mr. Hunt’s complaint, arguing that the alternative tolling provision isn’t available to relators who proceed without the government’s support.
The defendants’ logic was convoluted and had faced significant resistance during oral arguments. In Justice Thomas’ portrayal, it relied on the premise either that the nature of the action changed when the government intervened — when in fact, according to the opinion, “it simply has one additional party” — or that the meaning of a phrase in the FCA could vary when applied to different sections of the law, a result that Justice Thomas also rejected.
Instead, the opinion insisted, “there is nothing illogical about reading [the relevant section] in accordance with its plain terms.” In other words, a relator may avail of the alternative tolling provision — just as the law says.
Justice Thomas at least entertained the defendants’ core argument. By contrast, he took only a single page to destroy their fallback argument that, in such cases, a relator is “the official of the United States” whose knowledge starts the clock ticking.
First, of course, relators simply aren’t government officials in any normal sense. But beyond that, observed Justice Thomas, as individuals they also aren’t “charged with responsibility to act” under the FCA — unlike, say, a federal prosecutor.
The entire exercise took just nine pages, half the length of Justice Thomas’ prior FCA opinion, which itself was quite brisk. And Monday’s Cochise opinion arrived only eight weeks after arguments, indicating little debate between the justices.
Justice Kennedy’s 2016 opinion, meanwhile, was just ten pages and arrived even faster: Five weeks after arguments.
The common thread in these decisions: Common sense, once an issue has been presented. The FCA is designed for the benefit of the tax-paying public, on whose behalf all relators file. It’s unsurprising that the Supreme Court would reject a reading of the law that would make it significantly harder to reap that benefit — doubly so when the reading is tortured, as was the case here.
Nonetheless, defendants will always see an opening when the government declines to lend its heft to a relator’s complaint. Because corporations generally have deep pockets — and because FCA liability can be so substantial — they’ll test any dismissal strategy that’s even vaguely colorable.
It remains to the Supreme Court to knock down these theories, one by one, as it has been doing lately — and to persistent relators, and their counsel, to bring each matter to a head.
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R. Scott Oswald is managing principal of The Employment Law Group, P.C.
(Note: This version has been edited slightly from the version published by Law360.)
