In a recent order denying dismissal in United States v. NH Learning Solutions Corp. (NHLS), the U.S. District Court for the Eastern District of Michigan weighed in on a False Claims Act (FCA) issue that has divided courts, ruling that the FCA's three-year statute of limitations prong does not begin to run until a Department of Justice (DOJ) official is notified of the material facts.
The FCA Statute of Limitations
The FCA bars actions filed after the later of (1) six years after the violation or (2) three years after "the official of the United States charged with responsibility to act in the circumstances" knows or reasonably should have known of material facts. As we have discussed, the United States Supreme Court has held that a relator is not the United States official charged with responsibility to act under the FCA, but left open the question of "precisely which official or officials the statute is referring to." The NHLS court addressed that open question.
The Court's Government-Friendly Interpretation
NHLS arose from allegations that defendant NHLS, an educational institution, knowingly overcharged the Department of Veterans Affairs (VA) for the learning costs of student veterans. According to the government's FCA complaint the VA discovered this alleged scheme while conducting compliance surveys at NHLS between 2013 and 2019.
NHLS argued that the government's complaint, filed in December 2022, is time-barred because the statute of limitations began to run when the VA initiated its surveys. In other words, NHLS posited that the VA officials were "charged with responsibility to act" under the FCA.
In contrast, the government argued that the Attorney General of the United States (AG) is "the official of the United States charged with responsibility to act." Because the AG delegated its FCA authority to the Civil Division of the DOJ, the government asserted that the statutory clock begins to run only once allegations are discovered by a DOJ official in the Civil Division.
The court sided with the government, finding that the statute of limitations will not begin to run upon notice by a non-DOJ official. The court began by noting that district courts are "somewhat divided" on this issue and lack controlling guidance from the U.S. Court of Appeals for the Sixth Circuit or the U.S. Supreme Court. Yet looking to out-of-circuit opinions, the court found decisions in favor of the government's position more numerous and persuasive.
Conclusion
NHLS teaches that many courts consider notice by a non-DOJ official insufficient to start the FCA's three-year statute of limitations clock. As a practical matter, this interpretation of the FCA renders its time-bar less useful to potential FCA defendants. For example, investigation by non-DOJ officials charged with investigating fraud allegations, such as the Office of Inspector General for the U.S. Department of Health and Human Services, may not trigger the statute of limitations unless the DOJ receives notice.
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