Third Circuit: Dodd-Frank Statute of Limitations under False Claims Act Not Retroactive | Practical Law

Third Circuit: Dodd-Frank Statute of Limitations under False Claims Act Not Retroactive | Practical Law

In U.S. ex rel. Sefen v. Animas Corp., the US Court of Appeals for the Third Circuit affirmed the district court's grant of an employer's motion to dismiss a time-barred claim. The court held that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010's (the Dodd-Frank Act) amendment to the False Claims Act (FCA), which added a three-year statute of limitations (SOL) to retaliation claims, could not be applied retroactively.

Third Circuit: Dodd-Frank Statute of Limitations under False Claims Act Not Retroactive

by Practical Law Labor & Employment
Published on 17 Apr 2015 • USA (National/Federal)
In U.S. ex rel. Sefen v. Animas Corp., the US Court of Appeals for the Third Circuit affirmed the district court's grant of an employer's motion to dismiss a time-barred claim. The court held that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010's (the Dodd-Frank Act) amendment to the False Claims Act (FCA), which added a three-year statute of limitations (SOL) to retaliation claims, could not be applied retroactively.
On April 13, 2015, in U.S. ex rel. Sefen v. Animas Corp., the US Court of Appeals for the Third Circuit affirmed the district court's grant of an employer's motion to dismiss a time-barred claim. The court held that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010's (the Dodd-Frank Act) amendment to the False Claims Act (FCA), which added a three-year statute of limitations (SOL) to retaliation claims, could not be applied retroactively. (No. 14-3205, (3d Cir. Apr. 13, 2015).)
Sefen brought a retaliation claim against Animas Corp. under Section 3730(h) of the FCA. Prior to the Dodd-Frank Act, the FCA had no set statute of limitations period for Section 3730(h) retaliation claims. The US Supreme Court held that analogous state SOLs could be applied (Graham Cnty. Soil & Water Conservation Dist. v. U.S. ex rel. Wilson, 545 U.S. 409, 125 S. Ct. 2444, 162 L. Ed. 2d 390 (2005)). In two different FCA retaliation cases, a Pennsylvania district court applied the state whistleblower law's 180-day SOL and the state personal injury statute's two-year SOL.
Sefen's retaliation claim against Animas Corp. was untimely under each of those timeframes, whether the court used the November 2010 date he filed his claim or the June 2010 date he filed his initial complaint. His claim would be timely under the Dodd-Frank Act, which passed in July 2010, and amended the FCA to add a three-year SOL for Section 3730(h) retaliation claims. However, the Dodd-Frank Act did not mention retroactive application. Sefen argued that Dodd-Frank should be retroactively applied to his FCA claim.
The Third Circuit noted that there is a presumption against retroactive legislation and that conduct should be assessed under the law that existed at the time it was performed. The court applied the two-part Landgraf test which looked at whether:
  • Congress provided clear and unambiguous guidance concerning retroactivity.
  • Imposing a longer SOL would increase the defendant's liability for past actions.
(Landgraf v. USI Film Products, 511 U.S. 244, 114 S. Ct. 1483, 128 L. Ed. 2d 229 (1994).)
The Third Circuit found that:
  • Congress did not provide clear and unambiguous guidance concerning retroactivity.
  • Imposing a longer SOL would increase Animas's liability for past actions.
In addition, the Third Circuit:
  • Rejected Sefen's argument that the presumption against retroactivity was inapplicable because the Dodd-Frank Act implemented a procedural, rather than substantive change.
  • Noted that Sefen is analogous to Hughes Aircraft Co. v. U.S. ex rel. Schumer, in which the US Supreme Court explicitly rejected this argument.
(520 U.S. 939, 117 S. Ct. 1871, 138 L. Ed. 2d 135 (1997).)

Practical Implications

There has been a sharp increase in government enforcement of the FCA and corresponding whistleblowing activity in recent years. Employers should note that the decision in Sefen is not binding precedent in the Third Circuit and other jurisdictions may apply a different statute of limitations.