Opinion
No. C89-3550-FMS.
September 7, 1993
ORDER DENYING MOTION FOR SEPARATE TRIAL
Plaintiffs the United States and qui tam relator J. Thomas Condie sued Defendants Board of Regents of the University of Southern California at San Diego ("UCSD"), the University of Utah ("Utah"), and Dr. John L. Ninnemann under the False Claims Act ("FCA") alleging that Defendants made false statements on grant applications and status reports to the National Institute of Health ("NIH"). Defendants jointly move for a separate trial of their affirmative defenses of waiver and statute of limitations.
DISCUSSION
I. Standard for Separate Trial
Fed.R.Civ.P. 42(b) allows a federal district court to order a separate trial of an issue or issues to further convenience, to avoid prejudice, or for purposes of expedition and economy.
Considerations of economy include whether witness testimony would be duplicated in two trials or whether there is a likelihood of jury confusion. See, e.g., Miller v. Fairchild, 885 F.2d 498 (9th Cir. 1989), cert. denied, 494 U.S. 1056 (1990).
II. Notice and Waiver
The statute of limitations under the FCA is 6 years from the alleged violation or 3 years from when the Government knew or reasonably should have known of its claim, "whichever occurs last." 31 U.S.C. § 3731(b). Under the doctrine of waiver, actual or constructive knowledge is also a relevant factual inquiry.See General Bedding Corp. v. Echevarria, 947 F.2d 1395, 1398 (9th Cir. 1991); Hansen v. Western Greyhound Retirement Plan, 859 F.2d 779, 783 (9th Cir. 1988).
The central issue involving waiver and the tolling of the statute of limitations is which Government body has the authority to waive the claim and whose lack of knowledge tolls the statute of limitations. The Government asserts that the DOJ must know about FCA claims for them to be waived and for the statute of limitations to begin running. Defendants argue that only the NIH must be on notice and that the NIH has the authority to waive claims of scientific fraud.
A. Notice
The limitations provision of the FCA provides that an action may not be brought "more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances." 31 U.S.C. § 3731 (b)(2). This Court must determine who the responsible official is in the present situation.
A Senate report on the bill indicates that this phrase refers to the Attorney General. S. Rep. No. 345, 99th cong., 2d Sess. 30 (1986), reprinted in 1986 U.S. Code Cong. Admin. News 5266, 5295 ("the statute of limitations does not begin to run until the material facts are known by an official within the Department of Justice with authority to act in the circumstances"). The phrase "official within the Department of Justice" was changed, however, to "official of the United States" before the bill was enacted.
Two courts have found that the Department of Justice is the body that must have knowledge. U.S. v. Macomb Contracting Corp., 763 F. Supp. 272 (M.D. Tenn 1990) and U.S. v. Island Park, 791 F. Supp. 354 (E.D.N.Y 1992). In Island Park, after an extensive review of the legislative history, the court concluded that the "official" referred to is the responsible official in the DOJ. The court further found that the relevant question was when the DOJ "should have known" of the false claims. Island Park, 791 F.2d at 363.
In a somewhat baffling footnote, Defendants state that these decisions were made "without realizing that the version of the bill discussed in the report is different from the one ultimately enacted." In fact, both cases refer specifically to the revised language.
A third court, in a qui tam relator action in which the Government had declined to intervene, held that the appropriate official was not the attorney general but rather a "contracting officer." U.S. ex rel. Kreindler Kreindler v. United Technologies Corp., 777 F. Supp. 195, 204-205 (N.D.N.Y. 1991)aff'd on other grounds, 985 F.2d 1148 (2d Cir. 1993). The Second Circuit, in its opinion affirming the Kreindler decision on other grounds, specifically held that the district court should not have reached the limitations issue. Kreindler, 985 F.2d at 1155. Finally, in U.S. v. Kensington Hospital, 1993 U.S. Dist. Lexis 383 (E.D. Pa. 1993), the court rejected the contention that the responsible official was an attorney for the DOJ.
The Congressional record contains language stating that a finding of knowledge on the part of the Government should not be routinely found. "[C]ourts should be leery of finding that the Government had knowledge of the existence of a possible cause of action based merely upon the discovery of irregularities that fall short of a concrete suspicion that fraud has occurred." 132 Cong. Rec. S11244-45 (daily ed. Aug. 11, 1986). In light of this, the Court follows the reasoning of Island Park and holds that the statute of limitations was tolled until the DOJ became aware, or should have become aware, of the false claims. If there remains a controversy regarding when the DOJ knew or should have known of the claims and whether this has an effect on the statute of limitations, the parties are instructed to inform the Court. Further briefing may be necessary on this issue.
B. Waiver
Defendants argue that the NIH could and did waive its rights under the FCA. It is undisputed, however, that the DOJ controls all litigation dealing with the FCA. 49 Fed. Reg. 8889, 8896-97 (Mar. 9, 1984). Because the DOJ's lack of knowledge tolls the statute of limitations, only the DOJ can waive its rights to sue. Just as the DOJ is the body whose notice is necessary to begin the running of the statute of limitations, the DOJ is the only agency that can waive prosecution of FCA claims.
III. Statute of Limitations for Unjust Enrichment
Defendants argue that a claim for unjust enrichment based on an allegedly false statement sounds in tort and, thus, should be governed by a three year statute of limitations. Two Courts in the Southern District of New York have found the three year statute to apply. Blusal Meats, Inc. v. U.S., 638 F. Supp. 824, 831 (S.D.N.Y. 1986), aff'd, 817 F.2d 1007 (2d Cir. 1987); U.S. v. Vicon Constr. Co., 575 F. Supp. 1578, 1579 (S.D.N.Y. 1983). The Seventh Circuit has expressly rejected these holdings, U.S. v. First National Bank of Cicero, 957 F.2d 1362, 1371 (7th Cir. 1992).
The Ninth Circuit has held that the six year statute of limitations should apply to claims of unjust enrichment. U.S. v. Dae Rim Fishery Co., 794 F.2d 1392, 1394 (9th Cir. 1986); U.S. v. Neidorf, 522 F.2d 916, 918-919 (9th Cir. 1975), cert. denied, 423 U.S. 1087 (1986). Accordingly, the statute of limitations for the Government's unjust enrichment claim is six years.
Defendants argue, in the alternative, that they had, in their prior pleadings, assumed that the six year statute of limitations applied and that a separate trial on this issue is necessary. They assert that the NIH was on notice of the claims raised in this lawsuit in September 1983, more than six years before the action was filed. The Government asserts that only three limited communications took place by September 30, 1983, and that these communications were insufficient to establish notice.
Notice to the DOJ is necessary for the statute of limitations to begin running on this claim as it is for the FCA claims. See infra.
IV. Accrual of the Claims Against Utah
The Government asserts that the FCA claims are not time-barred because they accrued in 1984 when Utah submitted its final grant reconciliation statements. Defendants argue that the operative date is when the claims were initially made.
There is a split of authority on this issue. Some courts have held that a violation of the FCA includes, for purposes of determining the running of the statute, both the submission of a false claim and the Government's payment of that claim. See Blusal Meats, Inc. v. U.S., 638 F. Supp 824, 829 (S.D.N.Y. 1986) ("The six-year limitations period under the FCA begins to run on the date the claim is made or, if the claim is paid, on the date of the payment."); U.S. v. Klein, 230 F. Supp. 426, 441 (W.D. Pa. 1964), aff'd, 356 F.2d 983 (3d Cir. 1966) (statute of limitations "becomes operative not when payment is first begun to be made on such false claims by the Government, but upon final payment.")
Other Courts have held that the statute begins to run once a claim is submitted to the Government. See e.g., U.S. v. Entin, 750 F. Supp. 512, 517 (S.D. Fla. 1988) ("the statute of limitations began to run once a claim for payment was submitted ot the United States."); U.S. v. Ettrick Wood Products, Inc., 683 F. Supp. 1262, 1263 (W.D. Wis. 1988) ("The statute begins to run when a demand has been made upon the Government for [payment]"); U.S. v. Stillwater Community Bank, 645 F. Supp. 18, 19 (W.D. Okla. 1986) ("the majority of cases hold that the presentation of the claim to the United States is the act which triggers the statute.").
The latter line of cases is more recent and more compelling. Accordingly, the operative date for the statute to run is when the initial claims were filed.
V. Retroactivity of 1986 Amendments
There is a split of authority as to whether or not the 1986 amendments to the FCA are retroactive. The Supreme Court is currently considering this issue in Landgraf v. USI Film Products, 968 F.2d 427 (5th Cir. 1992), cert. granted, ___ U.S. ___, 113 S.Ct. 1250 (1993). Accordingly, because determination of the motion to sever does not necessitate resolution of this issue, it is appropriate to abstain from a decision pending the Supreme Court's opinion.
CONCLUSION
For the reasons stated above, the Court finds that the DOJ must have had notice of the claims for the statute of limitations to begin to run. Further, only the DOJ can waive a claim under the FCA. The statute of limitations for unjust enrichment is six years. The claims against Utah accrued when the initial grant applications were filed. Finally, this Court will not rule on the retroactivity of the 1986 amendments to the FCA pending decision of this issue by the Supreme Court.
Because this Order substantially narrows the issues Defendants sought to present at an initial trial on their affirmative defenses, it would not be in the interests of justice to order a separate trial. Should the parties be unable to resolve the issue of when the DOJ knew or should have known of the claims at issue in this case, they are instructed to inform the Court. Further briefing may be necessary at that time.
SO ORDERED.