The U.S. Supreme Court today resolved two important questions
under the False Claims Act (FCA), holding that (1) the Wartime
Suspension of Limitations Act (WSLA), 18 U.S.C. § 3287,
applies only to criminal cases, and (2) the FCA's first-to-file
bar, 31 U.S.C. § 3730(b)(5), ceases to apply once the
earlier-filed action that might have created the bar has been
dismissed.1
Background
In Kellogg Brown & Root Services, Inc. v. United States ex
rel. Carter, a relator filed a qui tam action
alleging that Kellogg Brown & Root Services (KBR) fraudulently
billed the government for water purification services performed in
Iraq in 2005. The relator filed his original qui tam
complaint in 2006, and the government declined to intervene. In
2010, the government informed the parties about an earlier filed
qui tam complaint asserting similar claims, leading the
district court to dismiss Carter's suit. After a series of
dismissals and filings, Carter refiled his complaint in 2011. Two
other relators had filed related cases by this time, however, and
the district court dismissed Carter's suit with prejudice on
first-to-file grounds.2 The district court also ruled
that the WSLA applied only to criminal cases and therefore did not
suspend the running of the limitations period for civil FCA claims,
rendering all but one of Carter's claims
time-barred.3
The Fourth Circuit reversed, holding that the FCA's
first-to-file bar does not block qui tam suits filed after
the first-filed action is no longer pending and that the WSLA tolls
the FCA's statute of limitations for civil as well as criminal
claims. The Fourth Circuit found that the suit should not have been
dismissed with prejudice and Carter should have been permitted to
refile because the previously pending actions that supported
dismissal had been dismissed.
The Supreme Court's Decision
The Supreme Court reversed the Fourth Circuit's WSLA holding.
"The text, structure, and history of the WSLA," the Court
concluded, "show that the Act applies only to criminal
offenses."4 The Court held that the term
"offense" as used in Title 18 refers to criminal
violations, and that any ambiguity must be resolved in favor of a
narrower definition.5 Accordingly, the Court found all
but one of Carter's claims to be time-barred. The Court's
reasoning and holding drew no distinction between qui tam
suits and civil FCA claims instituted by the government.
As to the first-to-file bar, the Court held that a qui
tam suit ceases to be "pending" once it has been
dismissed.6 The Court rejected KBR's interpretation
of the bar "as short-hand for the first filed
action,"7 concluding that under that
interpretation, a first-filed suit, even if it was not dismissed on
the merits, would bar all subsequent suits based on the same
underlying facts, a result that Congress likely did not
intend.8 The Supreme Court also suggested that KBR's
interpretation would create practical difficulties for defendants
attempting to settle first-filed actions due to the prospect of
future claims.9 The Court held that Carter's
remaining live claim was not barred by the first-to-file bar as the
related suits had been dismissed.10
Implications for Future FCA Cases
By limiting the application of the WSLA to criminal cases, the
Supreme Court's decision protects defendants from potentially
indefinite tolling of the Act's limitations period. The
Court's holding should provide defenses for FCA defendants on
time-barred civil claims in a host of areas, from defense
contracting to health care to financial services cases.
The Supreme Court's first-to-file decision, however, means
that defendants could be subjected to follow-on suits based on the
same underlying facts as earlier filed actions once those actions
have been dismissed. While defendants may raise other defenses to
follow-on suits—such as claim preclusion, depending on the
ground for dismissal, and the public-disclosure bar—the
potential for follow-on suits may increase uncertainty regarding
whether to settle first-filed qui tam suits, and if so,
for what amount.
1 Kellogg Brown & Root Services, Inc. v.
United States ex rel. Carter, Slip Op., No. 12-1497 (U.S. May
26, 2015).
2 See 31 U.S.C. § 3730(b)(5) ("When
a person brings an action under this subsection, no person other
than the Government may intervene or bring a related action based
on the facts underlying the pending action.").
3 See 18 U.S.C. § 3287 ("When the
United States is at war or Congress has enacted a specific
authorization for the use of the Armed Forces..., the running of
any statute of limitations applicable to any offense ... involving
fraud or attempted fraud against the United States ... shall be
suspended until 5 years after the termination of
hostilities[.]").
4 Kellogg Brown & Root Services, Inc.,
Slip Op. at 5.
5 Id. at 10.
6 Id. at 13.
7 Id. at 11.
8 Id. at 12.
9 Id. at 12.
10 Id. at 13.
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