What is the Statute of Limitations on False Claims Act Lawsuits?

Statute of Limitations on False Claims Act Lawsuits

The False Claims Act is a federal law that imposes liability on any person or company who knowingly submits false claims to the government in order to obtain federal funds. It allows private citizens to file lawsuits on behalf of the government against entities that engage in this type of fraud, known as qui tam lawsuits.

Like any legal claim, False Claims Act lawsuits must be brought within a certain period of time after the alleged fraud occurs. This time limit is called the statute of limitations. Understanding the statute of limitations for False Claims Act claims is important for both plaintiffs (also called relators or whistleblowers) and defendants in these cases.

The Statute of Limitations for False Claims Act Lawsuits

Under the federal False Claims Act statute (31 U.S.C. § 3729 et seq.), civil claims must be brought within 6 years of the date on which the alleged violation occurred. However, the clock does not start running on the statute of limitations until the fraud is discovered or should have been discovered with reasonable diligence.

This means relators can’t sit on information about fraud indefinitely before bringing a qui tam lawsuit. But it also provides flexibility to bring claims many years after the actual fraudulent activity if it took time for the misconduct to be uncovered.

When Does the Clock Start Running?

Because the limitations period under the False Claims Act runs from the date the alleged fraud is discovered, the key question is often: When should the plaintiff have known about the misconduct?

Courts have developed some guidelines on determining when the clock starts ticking:

• The statute of limitations begins running when the plaintiff has inquiry notice of the fraud. In other words, when the plaintiff becomes aware of information that would lead a reasonable person to investigate whether fraud was occurring.
• The clock starts even if the plaintiff does not have enough information to file a lawsuit right away, as long as they are on notice to start investigating.
• However, mere suspicion that something is amiss is generally not enough to trigger the statute of limitations.

The analysis focuses on when the plaintiff knew or should have known the essential facts underlying the False Claims Act allegations, even if the full scope of the misconduct was not yet clear. But the clock does not start running until the plaintiff has reason to believe an actual false claim was submitted, not just that something improper occurred.

Tolling Provisions

In some cases, it’s appropriate to “toll” or pause the statute of limitations under the False Claims Act. This stops the clock running on the time limit. Three potential tolling provisions can apply:

1. Wartime Suspension – The statute of limitations is suspended for any claim of fraud against the government that occurred during wartime or any period when U.S. armed forces are engaged in conflict outside the U.S.
2. Fraudulent Concealment – If the defendant actively concealed the fraud, the statute of limitations does not begin running until the concealment is discovered.
3. Relation Back – If the government elects to intervene in a qui tam lawsuit after the statute of limitations has expired, the government’s complaint relates back to the filing of the original complaint.

In addition, amendments made to the False Claims Act in 2009 clarified that the statute of limitations can be tolled if the government initiates an alternate remedy proceeding, such as an administrative action seeking exclusion from federal health care programs.

State False Claims Acts

Many states have their own false claims statutes that are similar to the federal False Claims Act. However, some states have different statute of limitations provisions. For example, some states allow up to 10 years to bring a false claims lawsuit.

When analyzing the timeliness of a state law claim, the applicable state law statute of limitations must be examined. Lawyers need to be aware of any differences between federal and state limitations periods for false claims allegations.

Strategies Based on the Statute of Limitations

The statute of limitations often plays a key role in False Claims Act litigation strategy for both plaintiffs and defendants:

• Relators may try to argue the statute of limitations period should be tolled based on fraudulent concealment or other reasons.
• Defendants frequently seek dismissal of False Claims Act lawsuits because the statute of limitations has expired. They argue the plaintiff was on inquiry notice of the essential facts underlying the allegations more than 6 years before filing.
• Plaintiffs sometimes proactively file their complaints under seal near the end of the limitations period, even if the government investigation is still ongoing. This stops the clock on the statute of limitations while the government decides whether to intervene.
• The dates of alleged false claims and the plaintiff’s knowledge are often the subject of extensive fact discovery and disputes in False Claims Act cases.

In short, understanding the statute of limitations under the False Claims Act is crucial. This time limit can determine whether a qui tam lawsuit may proceed or can be defeated at the outset. Experienced attorneys are key to navigating statute of limitations issues in these complex cases involving fraud against the government.

References

False Claims Act Statute (31 U.S.C. § 3729 et seq.)

U.S. Department of Justice, Civil Division, Fraud Section, “The False Claims Act: A Primer”

American Bar Association, “Statute of Limitations in Cases Under the False Claims Act”