Originally published June 29, 2010
Keywords: False Claims Act, United States ex rel Miller v. Bill Harbert International Construction, qui tam provisions, time-barred, statue to limitations,
On June 22, 2010, the US Court of Appeals for the DC Circuit ruled in United States ex rel Miller v. Bill Harbert International Construction, Inc., No. 08-5390 (D.C. Cir. June 22, 2010) (Harbert), that claims added in the amended complaint filed by the government at the time of its intervention in a lawsuit brought under the qui tam provisions of the False Claims Act (FCA) were time-barred under the FCA's statute of limitations. The court held that the allegations did not relate back to the relator's original complaint under a provision amending the FCA contained in the Fraud Enforcement and Recovery Act of 2009 (FERA), which permits the government's pleading to relate back to the filing date of the original complaint when "the claim of the Government arises out of the conduct, transactions, or occurrences set forth, or attempted to be set forth, in the prior complaint...."
In Harbert, the relator (Miller), a vice president of a construction company, filed a complaint alleging that the defendants had violated the FCA by conspiring in the late 1980s to rig bids on US Agency for International Development (AID) contracts to improve water and sewer systems in Egypt. Miller alleged that the defendants had formed a "club" of contractors qualified to perform AID contracts in Egypt, and that this club engaged in collusive agreements on prices for bids on contracts. Miller alleged the existence of one such agreement on one particular contract (Contract 20A) and asserted that discovery would reveal "that other AID contracts in Egypt were subject to related collusive agreements" resulting in false claims being submitted to the government.
After several years of investigation, the United States intervened in the lawsuit, filed its own complaint and, pursuant to Federal Rule of Civil Procedure (Rule) 15, added additional claims related to two other specific AID contracts in Egypt not alleged in the original suit (Contracts 07 and 29). At trial, the jury found defendants liable for the allegations in the amended complaint.
On appeal, defendants asserted that the claims added by the government were time-barred under the FCA's statute of limitations because the conduct at issue had occurred in excess of six years prior to the government's intervention and the filing of its own complaint. The DC Circuit dismissed the additional claims, holding that they did not relate back to the original complaint because they did not arise "out of the conduct, transactions, or occurrences" alleged in the original complaint. In particular, the court concluded that the government's claims concerning Contracts 07 and 29 had little to do with Miller's claims concerning Contract 20A. The court noted that cases concerning relation back under Rule 15 are useful in analyzing relation back under the FCA because the standards in the FCA and Rule 15 are substantively identical. In reaching its conclusion, the DC Circuit made rulings that will likely impact FCA litigation for years to come.
First, the DC Circuit recognized that the FCA's relation back provision added by FERA (FCA section 3731(c)) could be applied to the case even though the case had been instituted prior to the enactment of FERA. The court explained that FERA made the relation back provision expressly applicable to cases pending on the date of enactment. The DC Circuit also concluded that the application of the FERA amendment to the case did not violate the Ex Post Facto Clause to the Constitution because the FCA is not penal legislation.
Second, in examining whether the government's claims would relate back to the original complaint—because they had arisen out of the same "conduct, transactions, or occurrences" alleged by the relator—the DC Circuit employed the standard set forth in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) (Iqbal). Iqbal interprets Federal Rule of Civil Procedure 8(a)(2), which sets forth the standard that a complaint must satisfy to survive a motion to dismiss for failure to state a claim for relief. The government and relator argued that the use of the plural term "contracts" in the relator's complaint, together with the relator's claims that there was a club organized to control prices and that discovery would reveal other contracts, broadened the scope of the relator's complaint beyond Contract 20A. The DC Circuit rejected this argument. The court, citing Iqbal, held that the relator's allegations concerning any contracts beyond Contract 20A were "naked assertion[s] devoid of 'further factual enhancement,'" and did not satisfy the pleading standards established by Rule 8(a)(2).
The DC Circuit opinion provides some insight to areas ripe for future FCA litigation:
- The application of FERA provisions to lawsuits pending at the time of FERA's passage will continue to be contested by the government and defense bar.
- The application of the relation back doctrines under FERA and Rule 15 will continue to be an area contested by the parties when qui tam suits have remained under seal for a significant period of time, implicating both notice and statute-of-limitation-issues.
- An examination by the reviewing court of the substance of the relator's pleadings on a claim-by-claim basis pursuant not only to Rule 9(b) but also to Rule 8(a)(2). This could require the relator to have more direct knowledge of fraud at the time the relator initiates the qui tam complaint instead of relying on discovery of facts that may be within the parties' knowledge at the time the government intervenes.
- The DC Circuit's use of Iqbal to bar the government's efforts to have untimely claims relate back to the relator's complaint provides defendants in FCA cases with an additional way to use the standard in Iqbal – beyond the use of that standard in a motion to dismiss for failure to state a claim for relief under Rule 8(a)(2).
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