Tolling the False Claims Act’s Statute of Limitations Under the Wartime Suspension of Limitations Act

Highlights:

• In April 2013, the United States Court of Appeals for the Fourth Circuit held in United States ex rel. Carter v. Halliburton that under the Wartime Suspension of Limitations Act (“WSLA”), the armed conflict in Iraq suspended the statute of limitations in False Claims Act (“FCA”) cases in which the United States was not a party. The effect of the Fourth Circuit’s decision was to allow civil, relator-initiated FCA claims that otherwise would have been time-barred to proceed. ¹
• Critics of Carter argued that if the Fourth Circuit’s reasoning were to be broadly applied by other courts, the FCA’s statute of limitations could be extended for a period of a decade or more, thereby creating an incentive for relators to delay in proving information to the United States about potential fraud.
• On July 27, 2013, the United States District Court for the Western District of Pennsylvania rejected the Fourth Circuit’s approach, holding that the WSLA does not toll the FCA’s six-year limitations period in relator-initiated actions where the United States is not a party. ²
• Given the relatively sparse case law addressing tolling under the WSLA in FCA cases, providers facing FCA claims with potential statute of limitations defenses should be encouraged by the district court’s decision in United States ex rel. Emanuele v. Medicor Associates and its break from the Fourth Circuit’s holding.

United States ex rel. Carter v. Halliburton

In April 2013, the Fourth Circuit considered, in pertinent part, whether Relator’s allegations of fraudulent billing of the United States for services provided to military forces serving in Iraq was barred by the FCA’s six-year limitations period. Finding that Relator’s claims were not time-barred, the Fourth Circuit held that the FCA limitations period can be tolled by the WSLA for “a specified and bounded time while the country is at war” even in relator-initiated, non-intervened qui tam cases. The Fourth Circuit reasoned:

• The WSLA suspends statutes of limitations in actions involving fraud against the United States during times of war and for a period of three years after the termination of hostilities;
• For purposes of the WSLA the United States has been “at war” with Iraq since October, 11, 2002, the effective date of the Authorization for the Use of Military Force against Iraq, meaning that Defendant’s 2005 conduct was during a time of war for purposes of the WSLA;
• The WSLA applies to both criminal and civil claims;
• The WSLA applies to actions where the United States is not a party and;
• The WSLA does not exclude relator-initiated claims.

The Fourth Circuit’s holding was not without a strong, thoughtful dissent. Judge Agee argued in dissent that extending the application of the WSLA to suits brought by private relators is both inconsistent with the legislative history of the WSLA and contrary to the goals of the FCA — to encourage whistleblowers to promptly provide information to the government in order to “combat fraud quickly and efficiently.”

United States ex. rel Emanuele v. Medicor Associates

In Emanuele, the United States District Court for the Western District of Pennsylvania considered whether certain of the relator’s claims were time-barred in light of the Fourth Circuit’s Carter decision – the district court considered “whether the tolling provisions of the WSLA are applicable to FCA actions instituted by private parties in which the United States declines to intervene.” Defendants filed a motion to dismiss based on failure to state a claim and the passing of the statute of limitations.

The district court ruled that claims relating to conduct that occurred on or before October 8, 2004, were time-barred based on the applicable statute of limitations and that the remaining claims were not pleaded with sufficient specificity as required by Federal Rule of Civil Procedure 9(b). The relator was granted the opportunity to amend his complaint and cure the deficiencies with respect to the non-time-barred claims. The relator also filed a Supplemental Opposition to the Defendants’ Motion to Dismiss, which requested consideration of applying the WSLA to his claims based on the holding in Carter.

Rejecting the majority approach in Carter, the district court held that the WSLA did not operate to toll the FCA’s statute of limitations in civil cases where the United States was not a party and that claims occurring outside of the limitations period remain time-barred.

Relying heavily on Judge Agee’s dissent in Carter, the district court explained that the legislative history and congressional intent “behind both the WSLA and the FCA caution against application of the WSLA’s tolling provisions to private FCA claims.” Again citing to the Carter dissent, the district court also noted that the policies underlying the FCA would be “directly thwarted by allowing private relators to take advantage of the WSLA’s tolling provisions” by giving relators a “strong financial incentive” to allow claims to build up over time in order to maximize potential recovery.

Conclusion:

While it remains to be seen how other courts will rule on this issue, the district court’s decision in Emanuele will serve as a reminder to other courts of the FCA’s purpose – “to combat fraud quickly and efficiently by encouraging relators to bring actions that the government cannot or will not.” That purpose is potentially undermined when courts hold that the WSLA suspends the limitations period in private FCA cases. The district court’s opinion in Emanuele provides an important check against the application of the WSLA’s tolling provisions and the resulting significant expansion of FCA liability.

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¹ United States ex rel. Carter v. Halliburton Co., 710 F.3d 171 (4th Cir. 2013).

² United States ex rel. Emanuele v. Medicor Assocs., 2013 U.S. Dist. LEXIS 104650 (W.D. Penn. 2013).