In a recent development having significant implications for False Claims Act (FCA) enforcement, the Fifth Circuit Court of Appeals drastically reduced an FCA award owing to the Department of Justice’s (DOJ) delayed intervention which collided with the statute of limitations. The case presented a situation where the DOJ’s eight-year delay resulted in forfeiture of over half the damages initially awarded at trial.
A divided panel within the Fifth Circuit maintained that the government’s claims did not relate back to the initial complaint, therefore leaving a significant part of the litigated conduct beyond the statute of limitations. This ruling hinged upon the finding that the DOJ did not carry out diligent investigation of the original allegations. A significant highlight of the judgment involved the court reprimanding the DOJ for exploitative use of the FCA’s seal provision.
To provide a brief backdrop, the FCA allows the government to penalise entities that defraud governmental programs, thereby acting as a legal remedy in cases involving governmental fraud. A unique characteristic feature of the FCA includes the seal provision, which mandates that the filed complaint be kept under seal for 60 days to permit the government to investigate claims. However, this period can be extended upon the government’s request.
In this case, however, the DOJ exploited this provision and kept the complaint sealed for eight years while it pondered over its intervention decision. With the DOJ ultimately not conducting an effective investigation of the allegations during this prolonged sealing period, the court declined to toll the government’s claims.
This development emphasises the courts acumen in scrutinising the government’s use of FCA provisions and the imperative of diligent investigation during sealing periods. Moreover, it alerts legal professionals and corporations to the potential implications of delays in decision-making and investigation, potentially defining new boundaries of interpretation for the False Claims Act.