EDPA rules against relator on application of False Claims Act’s tolling provision

by bvernia | December 14th, 2009

On December 1, Judge Savage of the Eastern District of Pennsylvania issued an opinion in US ex rel Bauchwitz c. Holloman, holding that the False Claims Act’s tolling provision (31 U.S.C. § 3731(b)(2)) does not apply to a qui tam relator when the government has not intervened and that the statute of limitations period is triggered by the actual filing of a claim, rather than the payment of the claim by the government.

The relator filed a claim against several individuals and universities, claiming that they had misrepresented findings of DNA research when they applied for research grants from the National Institute of Health. The applications were made beginning in the early 1990s, but the relator did not file his claim until 2004. Under the FCA, actions may not be brought more than six years after the date on which the violation of the FCA is committed, or more than three years after the date when an official of the United States should have known facts material to the right of action. The court proceeded to examine two questions in its opinion: (1) when did the violation occur with respect to each grant to trigger the statute of limitations, and (2) does Section 3731(b)(2) (the tolling provision) apply to private relators when the government has not intervened.

The court determined that because liability “arises from the use of fraudulent submissions intended to cause the government to issue payment,” the actual violation of the FCA that triggers the statute of limitations is the filing of the claim for government payment itself, not when the government actually pays the claim. Additionally, the court held that progress reports and financial status reports do not constitute false claims under the FCA, so the relator could not rely on those reports for purposes of triggering the statute of limitations at a later date than the initial submission of the grant application.

Furthermore, the court also determined that the tolling provision does not apply to relators where the government has not intervened. Although there is a split in the circuit courts regarding this issue, the court found that the United States Supreme Court’s holding in United States ex rel. Eisenstein v. City of New York, which held that a relator cannot invoke the sixty-day deadline applicable to the government for filing a notice of appeal, prevented the court from finding that a relator could “take advantage of a tolling provision applicable only to the government.”

Because the relator had first learned of the potential fraud as early as December 1994, the court found that he had missed the statute of limitations for all but one grant.

This case reaffirms the majority view that the statute of limitations for a FCA action will begin to run when the false claim on government funds occurs, not when the government pays a claim, and that relators in declined qui tams face the risk that they will not be able to be covered by the FCA’s tolling provision.

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