Graham County Soil & Water Conservation Dist., et al. v. U.S., ex rel. Wilson, Karen (06/20/2005)

Question presented: Whether the six-year limitation period set out in 31 U.S.C. " 3731(b)should be applied to retaliatory discharge actions under the False Claims Act or whether courts should apply the most closely analogous state limitation period?

BY GILLIAN KOENIG, MEDILL NEWS SERVICE

On March 11, 1996, Karen Wilson was in Graham County's local library when she overheard a coworker's wife saying she was going to use a six-shooter to shoot Wilson's husband Dennis, and that she was going to scratch Wilson's eyes out.

Located in the mountains of western North Carolina, Graham County boasts fewer than 8,000 residents and is the only county in the state without a four-lane highway. Wilson was quickly becoming the target of gossip in the small community since speaking with federal authorities about some of her fellow employees.

Wilson began working for Graham County Soil and Water Conservation District in 1993 as a part-time secretary. Two years later, Wilson had reason to believe her coworkers were using federally-funded programs set aside for farmers and landowners to defraud the U.S. government.

In 1995, the Graham County Conservation District appointed employee Keith Orr as an inspector for a federally-funded, disaster relief program awarded to them after a storm damaged area streams and creeks. In order to secure federal funds for the relief effort, the grant required a bidding process among outside competitors. Orr requested four payments through the grant program, totaling more than $16,000 for outside work on the project.

Wilson reported her concerns in a letter to federal authorities and began speaking with federal representatives about the actions of her supervisors and coworkers at the Conservation District. Shortly thereafter, she overheard Keith Orr's wife speaking about her at the public library.

On the morning of Jan. 11, 1996, Wilson discovered a gun barrel on her desk left by coworkers in an attempt "to intimidate and scare her," she claimed.

At an April 1996 board meeting, Graham County Chairman Raymond Williams, "threatened to eliminate Wilson's job by closing the Water & Soil Conservation District office if she did not stop the federal investigation," according to Wilson.

Wilson also claimed that a cassette tape containing a conversation between Orr and other employees discussing plans to "get rid of Wilson by making false allegations against her," was left on her doorstep.

On March 7, 1997, Wilson resigned as secretary at the district.

Almost four years later, in the U.S. District Court for the Western District of North Carolina, Wilson filed a qui tam action on behalf of the United States, claiming that her coworkers had intentionally submitted false claims for reimbursement from the federal government.

Wilson's June 2002 complaint alleged the Conservation District knowingly requested federal funds in 1995 and 1996 to pay Orr, despite his conflict of interest as inspector, which made him ineligible to receive payment. Wilson further claimed no bidding process occurred as required under the Federal Emergency Watershed Protection Program, because Orr was splitting the proceeds with friends at the Conservation District.

Wilson's complaint outlined a pattern of similar payments made to Orr and other Soil & Water employees with federal money for contracts that did not exist and work that was never completed. Nevertheless, Wilson asserted she was ordered by her supervisor "to pay Keith Orr's claims whether or not Orr had done the work."

"It's a small community where a lot of people knew they were bending the rules in the grant," explained Wilson's attorney Mark Hurt. "But friends and neighbors were all benefiting from it so everyone thought it was OK."

Wilson's complaint further alleged that because she reported the false claims, her supervisors and coworkers made the workplace environment unbearable, forcing her to quit her job.

The district court in North Carolina dismissed the wrongful discharge claim as untimely, concluding Wilson's claim "should be controlled by North Carolina law," and applied the state's standard three-year limitation period for filing suit.

Recognizing whistleblowers like Karen Wilson needed protection, Congress had amended the False Claims Act in 1986 to add the right to bring retaliation claims, but had failed to specify whether the six-year limitation period for false claims also applied to retaliation actions.

Unsatisfied with the district court's decision, Wilson filed a motion for reconsideration of the statute of limitations issue, which U.S. District Judge Lacy H. Thornburg denied.

On April 29, 2004, the 4th Circuit Court of Appeals reversed in a sharply divided 2-1 decision, concluding that the six-year limitation period did apply to retaliation claims under the False Claims Act.

"Congress's stated intent in amending the False Claims Act was not only to provide the Government's law enforcers with more effective tools, but to encourage any individual knowing of Government fraud to bring that information forward," wrote Judge Allyson Duncan for the majority.

"Recourse to the generally shorter limitation periods provided by state law inherently affords employees less protection than the six-year limitations period of the FCA, as Karen Wilson's experience attests," Duncan reasoned. "An abbreviated limitations period may be too short for an employee to adequately marshal the evidence necessary to support a claim that her termination was predicated on protected activity."

Judge J. Harvie Wilkinson dissented. "North Carolina's three-year statute of limitations for wrongful discharge affords a whistle-blowing employee both adequate notice and a reasonable period of time to file anti-retaliation claims."

On Jan. 7, 2005, in response to North Carolina's petition seeking review, the U.S. Supreme Court accepted the case in order to resolve a split in the circuit courts on whistleblower retaliation cases.

The trial court in Wilson followed the 9th Circuit's approach in United States ex rel. Lujan V. Hughes Aircraft Co., which ruled the six-year limitation period did not apply to retaliation claims and "the most closely analogous statute of limitations" should be applied. However, in Neal v. Honeywell, Inc., the 7th Circuit ruled the revised provisions "reflected Congress's decision to prioritize simplicity of administration."

North Carolina's petition for review also stressed the importance of certainty in knowing when the statute of limitations begins. "In the absence of a ruling by this court, employers and employees will face uncertainty and inconsistent outcomes."

Finally, in requesting review, North Carolina highlighted all who are affected by the existing ambiguity of the limitation period for retaliation claims under the False Claims Act. "Given the breadth and magnitude of litigation arising under the False Claims Act, the resolution of this issue is important to the government, government contractors and employees throughout the country."

On June 20, 2005, the Court reversed 7-2, holding that the FTA's limitations period does not govern such retaliatory action. Writing for the majority, Justice Clarence Thomas concluded that because the FTA's language is ambiguous, the Court should adopt the construction that starts the time limit running when the cause of action for retaliation begins. The Court remanded the case to the 4th Circuit to determine which state statute should apply.

Justices Stephen Breyer and Ruth Bader Ginsburg dissented.