United States v. Cochise Consultancy, Inc. , 887 F.3d 1081 ( 2018 )

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 16-12836
________________________
D.C. Docket No. 5:13-cv-02168-RDP
UNITED STATES OF AMERICA,
ex rel. Billy Joe Hunt,
Plaintiff - Appellant,
versus
COCHISE CONSULTANCY, INC.,
doing business as Cochise Security,
THE PARSONS CORPORATION,
doing business as Parsons Infrastructure & Technology,
Defendants - Appellees.
________________________
Appeal from the United States District Court
for the Northern District of Alabama
________________________
(April 11, 2018)
Before WILSON and JILL PRYOR, Circuit Judges, and BARTLE, * District Judge.
JILL PRYOR, Circuit Judge:
*
Honorable Harvey Bartle III, United States District Judge for the Eastern District of
Pennsylvania, sitting by designation.
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Relator Billy Joe Hunt filed a qui tam action alleging that his employer The
Parsons Corporation and another entity, Cochise Consultancy, Inc., violated the
False Claims Act (“FCA”), 31 U.S.C. §§ 3729-33, by submitting to the United
States false or fraudulent claims for payment. Hunt filed his action more than six
years after the alleged fraud occurred but within three years of when he disclosed
the fraud to the government. In this appeal, we are called upon to decide whether
Hunt’s FCA claim is time barred. To answer this question, we must construe the
FCA’s statutory provision that requires a civil action alleging an FCA violation to
be brought within the later of:
• “6 years after the date on which the violation . . . is committed,”
31 U.S.C. § 3731(b)(1), or
• “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,” id. § 3731(b)(2).
The question we answer today, which is one of first impression, is whether
§ 3731(b)(2)’s three year limitations period applies to a relator’s FCA claim when
the United States declines to intervene in the qui tam action.
The district court concluded that the limitations period in § 3731(b)(2) is
inapplicable in such cases and thus Hunt’s claim is time barred. After careful
consideration of the statutory scheme, we hold that § 3731(b)(2)’s three year
limitations period applies to an FCA claim brought by a relator even when the
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United States declines to intervene. Further, because the FCA provides that this
period begins to run when the relevant federal government official learns of the
facts giving rise to the claim, when the relator learned of the fraud is immaterial for
statute of limitations purposes. Here, it is not apparent from the face of Hunt’s
complaint that his claim is untimely because his allegations show that he filed suit
within three years of the date when he disclosed facts material to the right of action
to United States officials and within ten years of when the fraud occurred. The
district court therefore erred in dismissing his complaint. We reverse and remand
to the district court for further proceedings.
I. FACTUAL BACKGROUND
A. The Fraudulent Scheme
Hunt alleges that Parsons and Cochise (the “contractors”) defrauded the
United States Department of Defense for work they performed as defense
contractors in Iraq. 1 The Department of Defense awarded Parsons a $60 million
contract to clean up excess munitions in Iraq left behind by retreating or defeated
enemy forces. Hunt worked for Parsons in Iraq on the munitions clearing contract,
managing the project’s day-to-day operations. One facet of the contract required
Parsons to provide adequate security to its employees, its subcontractors, and
1
In deciding whether the district court erroneously dismissed the complaint as untimely,
we accept as true the well-pleaded allegations in the complaint. See Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009); La Grasta v. First Union Sec., Inc., 358 F.3d 840, 845 (11th Cir. 2004). We
thus recite the facts as Hunt has alleged them.
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others who were working on the munitions clearing project. Parsons relied on a
subcontractor to provide the security services.
After seeking bids for the security subcontract, a Parsons committee
awarded it to ArmorGroup. But an Army Corps of Engineers contracting officer in
Iraq whom Cochise had bribed with trips and gifts, Wayne Shaw, was determined
to override this decision and have the subcontract awarded to Cochise. Shaw
directed Hunt to have Hoyt Runnels, another Parsons employee who served on the
committee that selected ArmorGroup, issue a directive awarding Cochise the
subcontract. When Hunt did so, Runnels refused to issue the directive, explaining
that such a directive had to come from the Corps.
Shaw then created a forged directive rescinding the award to ArmorGroup
and awarding the subcontract to Cochise. The directive had to be signed by Steven
Hamilton, another Corps contracting officer. Hamilton, who was legally blind,
relied on Shaw to describe the document he was signing. Shaw did not disclose
that the directive rescinded the award to ArmorGroup so that the subcontract could
be awarded to Cochise.
After Hamilton signed the directive, Shaw directed Runnels to execute it.
Runnels again refused because he believed the award to Cochise had been made in
violation of government regulations. Shaw threated to have Runnels fired. Two
days later, Hamilton learned that the directive Shaw had him sign rescinded the
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award to ArmorGroup and awarded Cochise the subcontract. Hamilton
immediately rescinded his directive awarding the subcontract to Cochise.
After Runnels refused to follow Shaw’s directive to award the subcontract to
Cochise, another Parsons employee, Dwight Hill, replaced Runnels and was given
responsibility for awarding the security subcontract. Rather than give the
subcontract to ArmorGroup, Hill awarded it to Cochise through a no-bid process.
Hill justified using a no-bid process by claiming there was an urgent and
immediate need for convoy services and then defended the choice of Cochise to fill
this immediate need by asserting that Cochise had experience that other security
providers lacked. But Hunt alleges that Hill selected Cochise because he was its
partner in the fraudulent scheme.
From February through September 2006, Cochise provided security services
under the subcontract. Each month the United States government paid Cochise at
least $1 million more than it would have paid ArmorGroup had ArmorGroup been
awarded the subcontract. The government incurred other additional expenses as
well. For example, armored vehicles were needed to provide the security services,
and because Cochise had no such vehicles, the government paid more than $2.9
million to secure the vehicles. In contrast, ArmorGroup would have supplied its
own armored vehicles, saving the government millions of dollars. In September
5
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2006, when Shaw rotated out of Iraq, Parsons immediately reopened the
subcontract for bidding and awarded it to ArmorGroup.
Several years later, Hunt reported the fraud to the United States government.
On November 30, 2010, FBI agents interviewed Hunt about his role in a separate
kickback scheme. During the interview, Hunt told the agents about the
contractors’ fraudulent scheme involving the subcontract for security services. For
his role in the separate kickback scheme, Hunt was charged with federal crimes,
pled guilty, and served ten months in federal prison.
B. Procedural History
After his release from prison, on November 27, 2013, Hunt filed under seal
in federal district court an FCA complaint against the contractors. Hunt set forth
two theories why the claims the contractors submitted for payment qualified as
false claims under the FCA. First, he alleged that Cochise fraudulently induced the
government to enter into the subcontract to purchase Cochise’s services by
providing illegal gifts to Shaw and his team. He alleged that Parsons, through Hill,
conspired with Cochise and Shaw to rig the bidding process for the subcontract.
Second, Hunt alleged that the contractors had a legal obligation to disclose credible
evidence of improper conflicts of interest and payment of illegal gratuities to the
United States but failed to do so.
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After the United States declined to intervene, Hunt’s complaint was
unsealed. The contractors moved to dismiss, arguing that the claim was time
barred under the six year limitations period in 31 U.S.C. § 3731(b)(1), and Hunt
had waited more than seven years after the fraud occurred to file suit. Hunt
responded that his claim was timely under the limitations period in § 3731(b)(2)
because he had filed suit within three years of when the government learned of the
fraud at his FBI interview and ten years of when the fraud occurred. The district
court disagreed, concluding that § 3731(b)(2)’s limitations period was either
(1) unavailable to Hunt because the United States had declined to intervene or
(2) expired because it began to run when Hunt learned of the fraud. The district
court then granted the motions to dismiss, finding Hunt’s claim untimely under
§ 3731(b)(1)’s limitation period because it was apparent from the face of Hunt’s
complaint that he failed to file suit within six years of when the fraud occurred.
This is Hunt’s appeal.
II. STANDARD OF REVIEW
We review de novo a district court’s dismissal of a complaint for failure to
state a claim upon which relief can be granted. Am. Dental Ass’n v. Cigna Corp.,
605 F.3d 1283, 1288 (11th Cir. 2010). A dismissal for failure to state a claim on
statute of limitations grounds is appropriate “only if it is apparent from the face of
the complaint that the claim is time-barred.” La Grasta v. First Union Sec., Inc.,
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358 F.3d 840, 845 (11th Cir. 2004) (internal quotation marks omitted). “We
review the district court’s interpretation and application of statutes of limitations de
novo.” Ctr. for Biological Diversity v. Hamilton, 453 F.3d 1331, 1334 (11th Cir.
2006).
III. BACKGROUND ON THE FCA
Before addressing whether Hunt’s claim is timely, we pause to provide some
necessary background information about the roles of the government and the
private plaintiff in a qui tam suit and to discuss the relevant FCA provisions. The
FCA was enacted in 1863 to “stop[] the massive frauds perpetrated by large
contractors during the Civil War.” Universal Health Servs., Inc. v. United States
ex rel. Escobar, 136 S. Ct. 1989, 1996 (2016) (internal quotation marks omitted).
These contractors billed the United States “for nonexistent or worthless goods,
charged exorbitant prices for goods delivered, and generally robbed in purchasing
the necessities of war.” Id. (internal quotation marks omitted). In response,
Congress passed the original FCA, which imposed civil and criminal liability for
fraud on the government, subjecting violators to double damages, forfeiture, and
imprisonment. Id.
Since 1863, Congress repeatedly has amended the FCA. Today, the FCA
continues to prohibit making false claims for payment to the United States. See
31 U.S.C. § 3729(a). But unlike the original FCA that provided for both civil and
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criminal liability, violators today face only civil liability, which subjects them to
treble damages and civil penalties.2 Id.
Section 3730 of the FCA sets forth three different enforcement mechanisms
for a violation of the Act. Section 3730(a) provides that the Attorney General may
sue a violator in a civil lawsuit. Section 3730(b) allows a private plaintiff, known
as a relator, to bring a qui tam action in the name of the United States against a
violator. Section 3730(h) creates a private right of action for an individual whose
employer retaliated against him for assisting an FCA investigation or proceeding.
This appeal concerns the second mechanism, a qui tam action brought by a
relator under § 3730(b). In a qui tam action, the relator “pursues the government’s
claim against the defendant, and asserts the injury in fact suffered by the
government.” Stalley ex rel. United States v. Orlando Reg’l Healthcare Sys., Inc.,
524 F.3d 1229, 1233 (11th Cir. 2008). 3 In bringing a qui tam action, the relator “in
effect, su[es] as a partial assignee of the United States.” Vt. Agency of Nat. Res. v.
United States ex rel. Stevens, 529 U.S. 765, 773 n.4 (2000) (emphasis omitted).
Special procedures apply when a relator brings an FCA action; these
procedures afford the government the opportunity to intervene and assume primary
2
The FCA imposes a civil penalty of up to $11,000 for each violation occurring on or
before November 2, 2015 and up to $21,563 for each violation occurring after that date. See
31 U.S.C. § 3729(a); 28 C.F.R. §§ 85.3(a)(9), 85.5.
3
The FCA is one of only a handful of federal laws still in effect that may be enforced
through a qui tam action. See Vt. Agency of Nat. Res. v. United States ex rel. Stevens, 529 U.S.
765, 768 n.1 (2000) (identifying four federal statutes that authorize qui tam actions).
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control over the litigation. A relator who initiates an FCA action must file her
complaint under seal and serve it only on the United States. 31 U.S.C.
§ 3730(b)(2). While the lawsuit remains under seal, the United States has the
opportunity to investigate and decide whether to intervene as a party. 4 Id. During
this period, the United States may serve a civil investigative demand upon any
person believed to be in possession of documents or information relevant to an
investigation of false claims, requiring that person to produce documents, answer
interrogatories, or give oral testimony. Id. § 3733(a)(1). In addition, the United
States may meet with the relator and her attorney, giving the government an
opportunity to ask questions to assess the strengths and weaknesses of the case and
the relator a chance to assist the government’s investigation.5
4
The United States intervenes in approximately 25 percent of FCA qui tam actions.
David Freeman Engstrom, Public Regulation of Private Enforcement: Empirical Analysis of
DOJ Oversight of Qui Tam Litigation Under the False Claims Act, 107 Nw. U. L. Rev. 1689,
1719 (2013).
5
Relators often provide such assistance while the government is deciding whether to
intervene. See, e.g., United States ex rel. Shea v. Verizon Commc’ns, Inc., 844 F. Supp. 2d 78,
86-87 (D.D.C. 2012) (explaining that the relator worked closely with the government while the
case was under seal by identifying potential witnesses, proposing categories of documents to be
subpoenaed, and making presentations about the merits of the case); United States ex rel. Rille v.
Hewlett-Packard Co., 784 F. Supp. 2d 1097, 1099 (E.D. Ark. 2011) (discussing actions taken by
the relator while the case was under seal including meeting with government lawyers, reviewing
documents for the government, and maintaining a database of subpoenaed documents); United
States ex rel. Alderson v. Quorum Health Grp., Inc., 171 F. Supp. 2d 1323, 1326 (M.D. Fla.
2001) (explaining that while the complaint was under seal the relator was interviewed by the
government multiple times, identified categories of documents for the government to subpoena,
and reviewed subpoenaed documents for the government); see also Robert Fabrikant &
Nkechinyem Nwabuzor, In the Shadow of the False Claims Act: “Outsourcing” the
Investigation by Government Counsel to Relator Counsel During the Seal Period, 83 N.D. L.
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If the United States decides to intervene, the government acquires “primary
responsibility for prosecuting the action,” although the relator remains a party. Id.
§ 3730(c)(1). In contrast, if the United States declines to intervene, the relator may
proceed with the action alone on behalf of the government, but the United States is
not a party to the action. Id. § 3730(c)(3).
Although the United States is not a party to a non-intervened case, it
nevertheless retains a significant role in the litigation. The government may
request to be served with copies of all pleadings and deposition transcripts, seek to
stay discovery if it “would interfere with the Government’s investigation or
prosecution of a criminal or civil matter arising out of the same facts,” and veto a
relator’s decision to voluntarily dismiss the action. Id. § 3730(b)(1), (c)(3), (c)(4).
Additionally, the court may permit the government to intervene later “upon a
showing of good cause.” Id. § 3730(c)(3).
Any recovery obtained from a defendant in an FCA qui tam action belongs
to the United States, regardless of whether the government has intervened. The
relator is entitled to a portion of the recovery, however. Id. § 3730(d). Because
the relator receives a share of the government’s proceeds, he “is essentially a self-
appointed private attorney general, and his recovery is analogous to a lawyer’s
Rev. 837, 843 (2007) (summarizing the types of support a relator’s counsel may give to the
government while a complaint is under seal).
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contingent fee.” United States ex rel. Milam v. Univ. of Tex. M.D. Anderson
Cancer Ctr., 961 F.2d 46, 49 (4th Cir. 1992); see Cook Cty. v. United States ex rel.
Chandler, 538 U.S. 119, 122 (2003) (explaining that a relator sues in the name of
the government “with the hope of sharing in any recovery”). By allowing a relator
to bring a qui tam action and share in the government’s recovery, the FCA creates
an economic incentive to encourage “citizens to come forward with knowledge of
frauds against the government.” Milam, 961 F.2d at 49.
The size of the relator’s share depends upon whether the United States
intervenes. In an intervened case, the relator usually is entitled to between 15 and
25 percent of the proceeds, as well as reasonable expenses, attorney’s fees, and
costs. 31 U.S.C. § 3730(d)(1). In a non-intervened case, the relator’s share usually
is greater: between 25 and 30 percent of the proceeds, as well as reasonable
expenses, attorney’s fees, and costs. Id. § 3730(d)(2).
Even though the relator receives a smaller share in an intervened case,
relators generally try to persuade the United States to intervene because the
government’s intervention makes it far more likely that there will be a recovery.
When the United States elects to intervene, about 90 percent of the time the case
generates a recovery, either through settlement or a final judgment. But only about
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10 percent of non-intervened cases result in recovery. 6 See David Freeman
Engstrom, Public Regulation of Private Enforcement: Empirical Analysis of DOJ
Oversight of Qui Tam Litigation Under the False Claims Act, 107 Nw. U. L. Rev.
1689, 1720-21 (2013). Indeed, when the government declines to intervene, more
than 50 percent of the time the relator decides not to proceed and voluntarily
dismisses the action. See id. at 1717-18.
IV. ANALYSIS
With this general background in mind, we now turn to the issue in this case:
whether it is apparent from the face of Hunt’s complaint that his FCA claim is time
barred. To answer this question, we must interpret the FCA’s statute of limitations
provision, which creates two limitations periods that potentially apply:
(b) A civil action under section 3730 may not be brought—
(1) more than 6 years after the date on which the violation of
section 3729 is committed, or
6
To be clear, we do not take the dramatically different success rates for intervened cases
and non-intervened cases to mean that if the government declines to intervene, the case
necessarily is meritless. The government may decline to intervene based on its evaluation of
factors other than the merits of the claim, such as the likely size of the recovery, available agency
resources, or whether the relator and his counsel have resources to prosecute the action on their
own. See Engstrom, supra, at 1714. Conversely, the fact that most intervened cases generate a
recovery does not necessarily mean that every intervened case has merit. The involvement of the
Department of Justice in an intervened case may create a strong incentive for a defendant to
settle an FCA claim regardless of its relative merit to avoid things like increased publicity of the
fraud because the defendant cannot cast the litigation solely as the product of an overzealous
relator; the disadvantages of litigating against the government with its considerable resources and
ability to coordinate with officials at the affected agency; or the risk that the defendant may be
barred from federal contracting, a sanction that is unavailable in non-intervened cases. Id. at
1713.
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(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,
whichever occurs last.
31 U.S.C. § 3731(b). Because it is apparent from the face of Hunt’s complaint that
he failed to file his action within the six year limitations period of § 3731(b)(1),
this case turns on whether Hunt can avail himself of § 3731(b)(2). To determine
whether § 3731(b)(2) applies, we must address whether its limitations period is
available when the United States declines to intervene and, if so, whether the
limitations period is triggered when the relator knew or should have known facts
material to his claim.
A. Section 3731(b)(2) Applies When the United States Declines to
Intervene.
The primary question before us is whether Congress intended to allow
relators in non-intervened cases to rely on § 3731(b)(2)’s limitations period. We
must begin “where courts should always begin the process of legislative
interpretation, and where they often should end it as well, which is with the words
of the statutory provision.” Harris v. Garner, 216 F.3d 970, 972 (11th Cir. 2000)
(en banc). In considering the text, we bear in mind that “[a] provision that may
seem ambiguous in isolation is often clarified by the remainder of the statutory
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scheme.” Koons Buick Pontiac GMC, Inc. v. Nigh, 543 U.S. 50, 60 (2004)
(internal quotation marks omitted). We look to “the whole statutory text,
considering the purpose and context of the statute, and consulting any precedents
or authorities that inform the analysis.” Dolan v. U.S. Postal Serv., 546 U.S. 481,
486 (2006). As part of this inquiry, we also consider the canons of statutory
construction. CBS Inc. v. PrimeTime 24 Joint Venture, 245 F.3d 1217, 1225 (11th
Cir. 2001). Legislative history may prove helpful when the statutory language
remains ambiguous after considering “the language itself, the specific context in
which that language is used, and the broader context of the statute as a whole.”
Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997).
We conclude that the phrase “civil action under section 3730” in § 3731(b)
refers to civil actions brought under § 3730 that have as an element a violation of
§ 3729, which includes § 3730(b) qui tam actions when the government declines to
intervene. Section § 3731(b) begins by providing that its limitations periods apply
to “[a] civil action under section 3730.” 31 U.S.C. § 3731(b). A non-intervened
cases is a type of civil action under § 3730. See id. § 3730(b)(1) (permitting any
person to bring a civil action alleging a violation of § 3729); id. § 3730(c)(3)
(allowing a relator to continue to conduct a qui tam action after the United States
declines to intervene). And nothing in § 3731(b)(2) says that its limitations period
is unavailable to relators when the government declines to intervene. In the
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absence of such language, we conclude that the text supports allowing relators in
non-intervened cases to rely on § 3731(b)(2)’s limitations period.
To ascertain its meaning, we must, of course, view § 3731(b)(2) in the
broader statutory context. Looking to the statutory context, the Supreme Court has
recognized that the phrase “[a] civil action under section 3730” did not refer to all
types of § 3730 civil actions because it excluded retaliation actions brought under
§ 3730(h). Graham Cty. Soil & Water Conservation Dist. v. United States ex rel.
Wilson, 545 U.S. 409, 415 (2005).7 In Graham County, the Supreme Court
considered whether § 3731(b)(1)’s six year limitations period—which begins to
run when the defendant submits a false claim—applied to an employee’s § 3730(h)
retaliation claim alleging that her employer forced her to resign after she assisted
federal officials investigating her employer for submitting false claims to the
United States. Id. at 413-14. On its face, § 3731(b) appeared to apply to § 3730(h)
retaliation actions, which were a type of civil action under § 3730. Id. at 415.
Relying on statutory context, the Court nonetheless concluded that § 3731(b)’s
literal text was ambiguous as to whether the phrase “[a] civil action under section
7
Section 3730(h) creates a cause of action for an employee, contractor, or agent who “is
discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated
against in the terms and condition of employment because of lawful acts done by the employee,
contractor, agent or associated others in furtherance of an action under this section or other
efforts to stop 1 or more violations of this subchapter.” 31 U.S.C. § 3730(h)(1). Although the
FCA now expressly provides a three year statute of limitations for retaliation claims, id.
§ 3730(h)(3), this provision was added after the Supreme Court decided Graham County. See
Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203,
§ 1079A(c), 124 Stat. 1376, 2079 (2010).
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3730” included § 3730(h) retaliation actions. Id. at 417. The Court observed that
§ 3731(b)(1)’s limitations period was triggered by the defendant’s submission of a
false claim. Id. at 415. But a plaintiff bringing a retaliation claim under § 3730(h)
did not need to allege or prove that the defendant actually submitted a false claim
because an employer can be liable for retaliating against an employee who assists
with an investigation or civil action even if the employer is innocent. Id. at 416.
This tension in applying § 3731(b)(1)’s limitation period to retaliation actions led
the Court to find the statute ambiguous as to whether “action under section 3730”
referred to “all actions under § 3730, or only §§ 3730(a) and (b) actions.” Id.
The Supreme Court resolved this ambiguity by concluding that
§ 3731(b)(1)’s limitations period did not apply to retaliation claims under
§ 3730(h). The Court recognized that Congress generally drafted statutes of
limitations to begin to run when a cause of action accrues. Id. at 418. Applying
§ 3731(b)(1)’s limitations period to an FCA retaliation action would violate this
general rule because the limitations period would begin to run when the employer
committed the actual or suspected FCA violation, not when it retaliated against the
employee. This interpretation could lead to the odd result that a plaintiff’s
retaliation claim was time barred before the employer took any retaliatory action.
Id. at 420-21. To “avoid[] these counterintuitive results,” the Court construed
“civil action under section 3730” to “mean[] only those civil actions under § 3730
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that have as an element a violation of section 3729, that is, §§3730(a) and (b)
actions.” Id. at 421-22 (internal quotation marks omitted).8 Graham County thus
made clear that to determine whether § 3731(b)(2) includes qui tam actions where
the United States declines to intervene, we must consider the text of § 3731(b)(2)
in the relevant statutory context. But nothing in Graham County directly addressed
whether the statutory context shows that § 3731(b)(2)’s limitations period is
available only when the government is a party.
Here, the contractors raise several arguments contending that the statutory
context and the canons of statutory construction show that Congress intended for
§ 3731(b)(2) to be unavailable to relators in non-intervened cases. They claim that
allowing a relator in a non-intervened action to rely on a limitations period that is
triggered by a government official’s knowledge would lead to absurd results and
8
The Court also considered that Congress used the phrase “action under section 3730”
imprecisely throughout § 3731 “to refer only to a subset of § 3730 actions.” Graham Cty.,
545 U.S. at 417-18. In § 3731(d), Congress used similar language to provide that “[i]n any
action brought under section 3730, the United States shall be required to prove all essential
elements of the cause of action, including damages, by a preponderance of the evidence.”
31 U.S.C. § 3731(d). Despite the broad reference to civil actions under § 3730, the Court
explained that Congress intended for this provision to apply only to § 3730(a) actions brought by
the United States or § 3730(b) actions when the United States intervened because Congress could
not have intended for the United States to bear the burden of proof when it was not participating
in the action. Graham Cty., 545 U.S. at 417-18.
Acknowledging that imprecision permeates § 3731, the Court in Graham County
accepted that the similar language in § 3731(b) and § 3731(d) referred to different categories of
§ 3730 actions. That is, the phrase “[a] civil action under section 3730” as used in § 3731(b)
referred to any civil action that has an element a violation of § 3729, including non-intervened
actions brought under § 3730(b), while the phrase “action brought under section 3730” as used in
§ 3731(d) referred only to those civil actions where the United States was a party. Id. at 421-22.
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render a portion of § 3731(b) superfluous. We reject each of these arguments. The
text of § 3731(b)(2), when viewed in context, shows that § 3731(b)(2) is available
to relators when the government declines to intervene. But even if we were to
conclude that § 3731(b)(2) is ambiguous making it appropriate to consider
legislative history, as the contractors urge us to do, we still would conclude that
§ 3731(b)(2) is available to relators when the government declines to intervene.
1. We Reject that Allowing a Relator in a Non-Intervened Case to
Rely on § 3731(b)(2)’s Limitations Period Is Absurd.
The contractors’ primary argument is that the statutory context shows that
§ 3731(b)(2) is available only when the United States is a party to the case because
the limitations period is triggered by a federal official’s knowledge. They argue
that Congress must have intended such a limitations period to be available only
when the government is a party to the case because to apply a limitations period
triggered by a federal official’s knowledge when the United States is not a party
would create a “bizarre scenario.” Parsons’ Br. at 12 (quoting United States ex rel.
Sanders v. N. Am. Bus Indus., Inc., 546 F.3d 288, 293 (4th Cir. 2008)). Put
differently, they argue that reading § 3731(b)(2) to apply to non-intervened actions
would lead to an absurd result. Of course, we should refrain from interpreting a
statute in a way that “produces a result that is not just unwise but is clearly
absurd.” CBS, 245 F.3d at 1228 (internal quotation marks omitted). But we have
cautioned that the absurdity doctrine is “rarely applied” to avoid having “clearly
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expressed legislative decisions . . . be subject to the policy predilections of judges.”
Id. (internal quotation marks omitted).
This case presents no such rare instance when the absurdity doctrine applies.
Certainly, it is generally the case that a discovery-based limitations period begins
to run when a party—the plaintiff—knew or should have known about the fraud or
claim. See, e.g., Merck & Co. v. Reynolds, 559 U.S. 633, 637 (2010) (recognizing
that a securities fraud claim accrued when the plaintiff knew or should have known
the facts constituting the violation); see also Restatement (Second) of Torts
§ 899(e) (statute of limitations begins to run when “the injured person has
knowledge or reason to know of the facts”). We cannot say that in the unique
context of an FCA qui tam action,9 however, it would be absurd to peg a
limitations period to a federal official’s knowledge unless the United States brings
the action or chooses to intervene. We reject the contractors’ absurdity argument
because even though the United States is not a party to a non-intervened qui tam
action, the United States remains the real party in interest and retains significant
control over the case.
Even in a non-intervened case, the relator brings the suit as the partial
assignee of the United States and asserts a claim based on injury suffered by the
United States as the victim of the fraud. United States ex rel. Eisenstein v. City of
9
See Stevens, 529 U.S. at 768 n.1 (explaining that the FCA is one of only four statutes
authorizing qui tam action that remain in effect).
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New York, 556 U.S. 928, 934-35 (2009). Importantly, as the victim of the fraud,
the United States—not the relator—is entitled to the bulk of the recovery. See
31 U.S.C. § 3730(d)(2). Given the government’s primary interest in a non-
intervened qui tam action, Congress carved out for it a formal role, allowing it to
intervene at any time upon a showing of good cause, request service of pleadings
and deposition transcripts, seek to stay discovery if it “would interfere with the
Government’s investigation or prosecution of a criminal or civil matter arising out
of the same facts,” and veto a relator’s decision to voluntarily dismiss the action.
Id. § 3730(b)(1), (c)(3), (c)(4). Given this unique role, we cannot say that it would
be absurd for Congress to peg the start of the limitations period to the knowledge
of a government official even when the United States declines to intervene.
The contractors argue that allowing a relator in a non-intervened case to rely
on § 3731(b)(2)’s limitations period conflicts with the Supreme Court’s decision in
Eisenstein. In Eisenstein, the relators in a non-intervened case filed a notice of
appeal 54 days after the district court entered a final judgment dismissing their
claims. 556 U.S. at 930. Although parties normally have 30 days to file a notice
of appeal, the relators argued that they could avail themselves of the 60 day
deadline that applies when the United States is a party to the action. Id. at 930-31.
The Supreme Court rejected this argument and affirmed the dismissal of the
appeal, holding that the United States is not a party to a qui tam action when it
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declines to intervene. Id. at 937. But our decision today in no way relies on the
United States being a party to the non-intervened case, and nothing in Eisenstein
addressed whether the United States’ non-party status means that the limitations
period in § 3731(b)(2) is unavailable to relators in non-intervened cases.
We recognize that our decision to reject the absurdity doctrine is at odds
with the published decisions of two other circuits. See Sanders, 546 F.3d at 293
(“Congress intended Section 3731(b)(2) to extend the FCA’s default six-year
period only in cases in which the government is a party, rather than to produce the
bizarre scenario in which the limitations period in a relator’s action depends on the
knowledge of a nonparty to the action.”); United States ex rel. Sikkenga v. Regence
Bluecross Blueshield of Utah, 472 F.3d 702, 726 (10th Cir. 2006) (“Surely,
Congress could not have intended to base a statute of limitations on the knowledge
of a non-party.”).
These cases do not persuade us. They reflexively applied the general rule
that a limitations period is triggered by the knowledge of a party. They failed to
consider the unique role that the United States plays even in a non-intervened qui
tam case. In light of this role, we cannot say that it would be absurd or “bizarre” to
peg the limitations period to the knowledge of a government official when the
government declines to intervene. We disagree that Congress, by specifying that
§ 3731(b)(2)’s limitations period is triggered by the knowledge of a United States
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official, necessarily intended that this limitations period be available only in § 3730
civil actions where the United States is a party and not in non-intervened qui tam
actions. 10 We thus cannot say that the statutory context shows that § 3731(b)(2)’s
limitations period is unavailable to relators in non-intervened qui tam actions.
2. Our Interpretation Does Not Render a Portion of § 3731(b)
Superfluous.
The contractors, relying on a canon of construction, next argue that to give
meaning to the entirety of § 3731(b), we must construe § 3731(b)(2) to exclude
non-intervened cases. Certainly, “a statute ought, upon the whole, to be so
10
In Sanders, the Fourth Circuit also asserted that allowing a relator in a non-intervened
case to rely on the limitations period in § 3731(b)(2) would place an inappropriate burden on the
defendant and government by expanding the litigation into the issue of government knowledge.
546 F.3d at 295. The Fourth Circuit was concerned about allowing discovery into government
knowledge when the United States declined to intervene as a party. Id. We agree that allowing a
relator to rely on § 3731(b)(2)’s limitations period means that the parties may engage in
discovery about government knowledge, but we think the Fourth Circuit’s concerns about the
burden associated with this discovery were overstated because the court ignored that government
knowledge may be relevant to the merits of the relator’s FCA claim even in a non-intervened qui
tam action.
To prevail on the merits of her FCA claim, the relator must show, among other things,
that the defendant made a misstatement that was material and that the defendant “knowingly”
submitted a false claim. See 31 U.S.C. § 3729(a)(1); Universal Health, 136 S. Ct. at 2003. A
defendant may rely on evidence of government knowledge to negate both of these elements.
Government knowledge may disprove materiality because “if the Government pays a particular
claim in full despite its actual knowledge that certain requirements were violated, that is very
strong evidence that those requirements are not material.” Universal Health, 136 S. Ct. at 2003.
Evidence that the government knew the relevant facts at the time that the defendant submitted its
claim may also show that the defendant understood its conduct to be lawful. See Hooper v.
Lockheed Martin Corp., 688 F.3d 1037, 1051 (9th Cir. 2012) (“[T]he extent and the nature of
government knowledge may show that the defendant did not ‘knowingly’ submit a false claim
and so did not have the intent required by the . . . FCA.” (internal quotation marks omitted));
United States ex rel. Becker v. Westinghouse Savannah River Co., 305 F.3d 284, 289 (4th Cir.
2002) (“[T]he government’s knowledge of the facts underlying an allegedly false record or
statement can negate the scienter required for an FCA violation.”).
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construed that, if it can be prevented, no clause, sentence, or word shall be
superfluous, void, or insignificant.” TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001)
(internal quotation marks omitted). But this canon does not apply when a statutory
provision would remain operative under the interpretation in question in at least
some situations. See Black Warrior Riverkeeper, Inc. v. Black Warrior Minerals,
Inc., 734 F.3d 1297, 1304 (11th Cir. 2013).
The contractors assert that if relators have three years from the date when the
government learned of the fraud to file suit under § 3731(b)(2), relators will always
delay telling the government about the fraud to increase the damages in the case.
Therefore, they say, the limitations period in § 3731(b)(1), which expires six years
after the date when the violation occurred, will never apply, rendering the
provision meaningless. We disagree. The contractors overlook that other
provisions of the FCA create strong incentives to ensure that relators promptly
report fraud.
A relator who waits to report a fraud risks recovering nothing or having his
relator’s share decreased. The relator’s claim may be barred if another relator
beats him to the courthouse with an FCA claim based on the same facts, 31 U.S.C.
§ 3730(b)(5), or if the allegations or transactions are publicly disclosed either in a
federal hearing where the government was a party or in a news report, unless the
relator was the original source of the information, id. § 3730(e)(4). And because
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§ 3731(b)(2)’s limitations period begins to run when the relevant government
officials learns about the fraud from any source, a relator who delays reporting the
fraud to the government also runs the risk that the government will learn about the
fraud from another source and thus that § 3731(b)(2)’s three year period will expire
before the relator files suit. But even if there were no risk that the government
could learn of the fraud from another source, a relator still would have an incentive
to report fraud promptly because the court in setting the relator’s share may
consider whether he “substantially delayed in reporting the fraud or filing the
complaint.” United States ex rel. Shea v. Verizon Commc’ns, Inc., 844 F. Supp. 2d
78, 89 (D.D.C. 2012).
Looking at the FCA as a whole, we conclude that relators who can rely on
the limitations period in § 3731(b)(2) will still have sufficient incentive to report
fraud promptly. Because relators will continue to report fraud promptly and under
§ 3731(b)(2) suit must be filed within three years of the fraud being reported, there
will be cases in which § 3731(b)(1)’s six year limitations period will expire later.
We thus reject the contractors’ argument that our reading of the FCA would render
superfluous one of its provisions.
3. To the Extent that Legislative History is Relevant, It Bolsters Our
Conclusion.
The contractors argue that the legislative history shows that § 3731(b)(2)’s
limitations period is unavailable to a relator when the United States declines to
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intervene. Assuming that the statutory language, after viewing it in light of the
statutory context and the canons of construction, remains ambiguous such that a
resort to legislative history is appropriate, see United States v. Alabama, 778 F.3d
926, 939 (11th Cir. 2015), we cannot agree that the relevant Congressional records
undermine our interpretation of § 3731(b)(2).
Congress added the limitations period in § 3731(b)(2) to the FCA in 1986.
False Claims Amendments Act of 1986 (“1986 FCA Amendments”), Pub. L. No.
99-562, 100 Stat. 3153 (1986). The legislative history reveals that one of the broad
purposes of the 1986 FCA Amendments was to “encourage more private
enforcement suits.” S. Rep. No. 99-345 at 23-24 (1986). This purpose is
consistent with Congress’s historical use of qui tam rights of action to create
incentives for private individuals to help root out fraud against the government.
See United States ex rel. Williams v. NEC Corp., 931 F.2d 1493, 1497 (11th Cir.
1991). Allowing relators to continue to pursue FCA claims even after the
government declines to intervene is consistent with the broad underlying purpose
of the FCA because it creates the potential for “more fraud [to] be discovered,
more litigation [to] be maintained, and more funds [to] flow back into the
Treasury.” Milam, 961 F.2d at 49.
The contractors argue that we should not infer Congressional intent to
extend the limitations period for non-intervened cases because in the legislative
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history for the 1986 FCA Amendments Congress indicated that qui tam actions
must be brought shortly after the fraud occurred. To support their position, the
contractors point to the following portion of the Senate Committee Report, which
quotes from the reasoning in a Supreme Court decision:
[The FCA] is intended to protect the Treasury against the hungry and
unscrupulous host that encompasses it on every side, and should be
construed accordingly. It was passed upon the theory, based on
experience as old as modern civilization, that one of the least
expensive and most effective means of preventing frauds on the
Treasury is to make the perpetrators of them liable to actions by
private persons acting, if you please, under the strong stimulus of
personal ill will or the hope of gain. Prosecutions conducted by such
means compare with the ordinary methods as the enterprising
privateer does to the slow-going public vessel.
S. Rep. No. 99-345, at 11 (quoting Marcus v. Hess, 317 U.S. 537, 541 n.5 (1943)).
The contractors argue this language shows that Congress allowed relators to
bring qui tam actions under the FCA because relators are able to expose fraud
more rapidly than the United States can discover it, from which they infer that
Congress intended for a shorter limitations period to apply when the United States
was not a party to the case. But nothing in this statement addresses the length of
time that a relator should have to bring a qui tam action or whether the limitations
period should depend on the government’s decision to intervene. And so we fail to
see how this legislative history supports the contractors’ position that a shorter
limitations period should apply when the government declines to intervene.
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All told, there is little legislative history for § 3731(b)(2). And the few
references there are do not directly address the question before us. The contractors
point to a floor statement from Senator Charles Grassley and testimony from
Assistant Attorney General Richard K. Willard before a House subcommittee. But
neither piece of legislative history is particularly helpful.
Senator Grassley said in a floor statement that Congress borrowed the
language in § 3731(b)(2) from 28 U.S.C. § 2416, which sets forth the limitations
period that generally applies to other actions brought by the United States. See
132 Cong. Rec. 20,536 (1986) (statement of Sen. Grassley). Senator Grassley’s
statement reflects that Congress borrowed the language “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” from 28 U.S.C. § 2416. See
28 U.S.C. § 2416(c); 31 U.S.C. § 3731(b)(2). But we disagree with the inference
the contractors draw from this fact: that Congress intended to make the statute of
limitations in § 3731(b) available only when the United States was a party.
To understand 28 U.S.C. § 2416, we must also look to § 2415. Section 2415
establishes various limitations periods for certain categories of claims “brought by
the United States or an officer or agency thereof,” such as contract or tort claims.
28 U.S.C. § 2415(a), (b). Section 2416 tolls the limitations period for the United
States to bring such claims when “facts material to the right of action are not
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known and reasonably could not be known by an official of the United States
charged with the responsibility to act in the circumstances.” Id. § 2416(c). The
duplicate language in § 2416 is not what specifies that a limitations period in
§ 2415 applies only when the United States is a party. Instead, § 2415 itself
dictates that the United States must be a party for its limitations period to apply.
See id. § 2415(a), (b) (stating limitations period applies only to claims “brought by
the United States or an officer or agency thereof”). There is no similar language in
any FCA provision expressly restricting § 3731(b)(2)’s limitations period to
actions where the United States is a party. So we cannot say that by borrowing the
description of the trigger for the limitations period from § 2416 Congress evinced
an intent that the United States must be a party for the limitations period in
§ 3731(b)(2) to apply.
Turning to the committee testimony from Assistant Attorney General
Willard, he explained that the purpose of § 3731(b)(2)’s limitations period was to
give “us a little more flexibility in bringing some cases that otherwise would be
barred.” 11 The contractors construe Willard’s testimony to mean that § 3731(b)(2)
was intended to give the government—but not relators—more flexibility to bring
FCA claims. Certainly, Willard testified that § 3731(b)(2) would extend the time
11
False Claims Act Amendments: Hearings Before the Subcomm. on Admin. Law &
Governmental Relations of the Comm. on the Judiciary H.R., 99th Cong. 159 (1986) (statement
of Richard K. Willard, Assistant Att’y Gen.).
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period for the Attorney General to sue under the FCA. But Willard offered nothing
about the intended effect of § 3731(b)(2) on qui tam actions or, more specifically,
whether § 3731(b)(2) was intended to apply to qui tam actions when the
government declined to intervene. Willard’s testimony does not advance the ball
for the contractors. See also Regan v. Wald, 468 U.S. 222, 237 (1984) (discussing
limited usefulness of testimony of witnesses to ascertain meaning of statutory
language given the risk that relying on such colloquies “would open the door to the
inadvertent, or perhaps even planned, undermining of the language actually voted
on by Congress and signed into law by the President”). Because the legislative
history does not squarely address whether Congress intended to make
§ 3731(b)(2)’s limitations period available to relators in non-intervened cases, we
cannot agree with the contractors that the legislative history undermines our
interpretation.
To wrap up, we conclude that Congress intended for § 3731(b)(2)’s
limitations period to be available to relators even when the United States declines
to intervene. The statutory text reflects that this limitations period applies to “[a]
civil action under section 3730,” and nothing in § 3731(b)(2) makes the limitations
period unavailable in qui tam actions under § 3730 simply because the United
States decides not to intervene. The contractors argue that because § 3731(b)(2)’s
limitations period is triggered by government knowledge, Congress must have
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intended for it to apply only when the United States is a party to avoid absurd
results. But in the unique context of a non-intervened qui tam action, we cannot
say that it is absurd to apply a limitations period triggered by government
knowledge. And even if the contractors are correct that we may consider
legislative history, the legislative history provides no convincing support for their
position.
B. The Statute of Limitations in § 3731(b)(2) Depends on the
Government’s Knowledge, Not the Relator’s Knowledge.
Having concluded that the statute of limitations in § 3731(b)(2) is available
to a relator in a non-intervened case, we must now address whether that limitations
period is triggered by the knowledge of a government official or of the relator. We
hold that it is the knowledge of a government official, not the relator, that triggers
the limitations period.
Section 3731(b)(2) is clear that the time period begins to run when “the
official of the United States charged with responsibility to act in the
circumstances” knew or reasonably should have known the material facts about the
fraud. 31 U.S.C. § 3731(b)(2). Nothing in the statutory text or broader context
suggests that the limitations period is triggered by the relator’s knowledge. Given
that the language is plain, we cannot rewrite the statute to say that the limitations
period is triggered when the relator knew or should have known about the facts
material to the fraud.
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The Ninth Circuit nonetheless adopted such an approach, concluding that the
statute of limitations is triggered by the relator’s knowledge. See United States ex
rel. Hyatt v. Northrop Corp., 91 F.3d 1211, 1217 (9th Cir. 1996). The Ninth
Circuit created a new legal fiction that because the relator “sue[d] on behalf of the
government,” the relator became a government agent and the government official
charged with responsibility to act. Id. at 1217 n.8. Again, we find nothing in the
text of § 3731(b)(2) or the statutory context to support this legal fiction. Because
the text unambiguously identifies a particular official of the United States as the
relevant person whose knowledge causes the limitations period to begin to run, we
must reject the Ninth Circuit’s interpretation as inconsistent with that text.
Applying our conclusions that § 3731(b)(2) applies in non-intervened cases
and is triggered by the knowledge of a government official, not of the relator, we
hold that it is not apparent from the face of Hunt’s complaint that his FCA claim is
untimely. Hunt alleged that the relevant government official learned the material
facts on November 30, 2010 when he disclosed the fraudulent scheme to FBI
agents, and he filed suit within three years of this disclosure. 12 The district court
therefore erred in dismissing his complaint on statute of limitations grounds.
12
To be clear, if facts developed in discovery show that the relevant government official
knew or should have known the material facts about the fraud at an earlier date, Hunt’s claims
could still be barred by the statute of limitations. We hold only that at the motion to dismiss
stage it was error to dismiss the complaint on statute of limitations grounds.
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V. CONCLUSION
For the reasons set forth above, we reverse the district court’s order
dismissing Hunt’s FCA claim as time barred and remand the case for further
proceedings consistent with this opinion.
REVERSED AND REMANDED.
33