Supreme Court gives whistleblowers more time to bring false claims suits

The U.S. Supreme Court on Monday ruled that whistleblowers across the country will have up to four years of additional time to bring False Claims Act cases in healthcare and other industries.

The justices unanimously held in Cochise Consultancy v. U.S. ex rel. Hunt that FCA claimants can sue up to three years after the responsible federal official knew or should have known the relevant facts, but not more than 10 years after the alleged violation.

The longer statute of limitations applies in whistleblower-filed suits in which the federal government has declined to intervene. Up to now, due to different circuit court interpretations, the FCA statute of limitations has varied across the country in cases where the federal government has not intervened.

The decision may lead to an increase in the number of so-called qui tam cases, and make defending against them more complex, said Jonathan Feld, a former U.S. Justice Department attorney at the law firm Dykema who defends healthcare clients in FCA cases.

"I definitely expect to see more cases because whistleblowers will have expanded time in which they can file without government intervention," he said. "And companies will have to keep their records longer and do more thorough exit interviews with employees."

The U.S. Justice Department sided with the whistleblower's argument in the Supreme Court case, even though it issued two policy memos last year with the goal of dismissing more whistleblower cases and narrowing the types of federal policy documents whistleblowers can cite to support their claims.

"It's a little bit of mixed signals from Justice," Feld said.

The defense contractors that were the defendants in the underlying case argued that the original statute of limitations of six years from the time of the alleged violation should apply—not a second, more lenient statute of limitations passed by Congress in 1986 out of concern that frauds were not coming to light in time.

The 1986 statute permits suits up to three years after "the official of the United States charged with responsibility to act in the circumstances" learns about the alleged fraud but not more than 10 years after the events.

But the justices, citing fundamental rules of statutory interpretation, said whistleblowers, also known as relators, are not considered to be U.S. officials and are not limited by the original six-year statute of limitations that starts at the time of the alleged violation. Thus, they are subject to the same, longer statute of limitations as the government.

That's true even if the relator discovered the violation within six years—and before the government found out about it.

"But 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 the recovery," Justice Clarence Thomas wrote for the court.

Defense attorneys fear the decision will prompt whistleblowers to wait longer to file their claims in order to increase the amount of fraud and hence the value of their claims.

The ruling could have a particularly strong impact on the healthcare industry, since most False Claims Act settlements and judgments involve healthcare. Of the $2.8 billion in recoveries by the Justice Department last year, $2.5 billion involved the healthcare industry, including drug and medical-device manufacturers, managed-care providers, hospitals, pharmacies, hospice organizations, laboratories and physicians.

Of that $2.5 billion total, $2.1 billion resulted from cases filed by whistleblowers, who received $301 million from the settlements.

The number of healthcare cases grew to 506 in 2018 from 291 in 2008.

Whistleblower plaintiff attorneys applauded Monday's ruling.

"The Supreme Court's ruling means that more non-intervened qui tam cases and claims will survive defense efforts to stop them based on the timing of the potential whistleblower's knowledge of misconduct rather than on the knowledge of actual government officials," said Peter Chatfield, a whistleblower attorney and partner with Phillips & Cohen in Washington.

He added that defendants now could be held liable for more damages in cases in which the government does not intervene.

False Claims Act lawsuits can hit companies and individuals with damages up to three times the demonstrated losses to the government. Whistleblowers can pocket 15% to 30% of that recovery, with a higher percentage if the government does not intervene.