United States: Supreme Court Clarifies the Limits Of The Civil False Claims Act

The Supreme Court in a unanimous decision has clarified the limits of the civil False Claims Act. The Court held that the Wartime Suspension of Limitations Act (WSLA) applies only to criminal charges, and does not apply to the civil False Claims Act (FCA). This decision clarifies the statute of limitations for civil FCA cases, making clear that the statute of limitations is not suspended during armed conflicts. The Court also clarified that a qui tam action will not be dismissed under the "first to file" rule if an earlier-filed action has been dismissed.

The 6-Year Statute of Limitations Is Not Tolled During Wartime

Under ordinary circumstances, a whistleblower must file a qui tam civil FCA suit within six years of the alleged violation, or within three years of the date on which the United States should have known about the violation. 31 U.S.C. § 3731(b). The WSLA creates an exemption to statutes of limitation, however, while the United States is at war or when Congress has enacted a specific authorization for the use of the Armed Forces. In part, the WSLA provides that "the running of any statute of limitations applicable to any offense . . . involving fraud or attempted fraud against the United States or any agency thereof in any manner" is suspended until 5 years after the end of hostilities. 18 U.S.C. § 3287. The primary question before the Court was whether the WSLA suspends the statute of limitations for civil FCA claims or is limited in application to only criminal charges.

Looking to the text, structure, and history of the WSLA, the Court held that it applied only to criminal charges, and not to the civil FCA. The arguments from the parties centered around the meaning of the word "offense" in the WSLA and whether that word encompassed both civil claims and criminal charges, or only the latter. The Court noted that "offense" is most often used to refer to a crime, and furthermore that there are no uses of the term "offense" to mean a civil violation in Title 18 of the U.S. Code, where the WSLA is located. The Court also found it "significant" that Congress placed the WSLA in Title 18 of the U.S. Code, which relates to criminal laws and procedures.

The Court further noted that earlier versions of the WSLA had applied to offenses "now indictable under any existing statutes," which indicated that the WSLA as originally drafted applied to criminal charges. Although the "now indictable" language was deleted when Congress amended the WSLA in 1942, the Court found that this was not because Congress intended to include civil claims within its scope. As the Court put it, "Fundamental changes in the scope of a statute are not typically accomplished with so subtle a move." Rather, the Court found that the reason for the change was more likely that Congress intended to make the WSLA prospective in application, rather than dealing solely with past fraud. Accordingly, the Court held that the WSLA does not suspend the statute of limitations for the civil FCA.

The "First to File" Bar Is Inapplicable if Earlier Claims Are Dismissed

In a secondary issue, the Court further held that the civil FCA's "first to file" rule operates to bar civil FCA suits only where an earlier suit based on the same underlying facts is pending in another court. If the earlier suit has been dismissed, the Court held, the "first to file" bar does not preclude a civil FCA suit based upon the same facts. The Court, however, did not decide whether other legal arguments, such as claim preclusion, could be successfully used to defend against subsequently filed claims. Thus, although government contractors are restricted from relying on the statutory "first to file" bar in some circumstances, some arguments still may be marshalled in their defense.

The Supreme Court's resolution of the WSLA issue resolves a significant uncertainty for Federal government contractors. If the Court had found that the WSLA applies to civil FCA suits, there effectively would be no statute of limitations for civil FCA claims. Contractors now have clarity that the six-year statute of limitations for civil FCA claims applies, regardless of the United States' armed conflict status.

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