United States: Supreme Court Unanimously Upholds FCA Statute Of Limitation Defense And Clarifies Applicability Of The First-To-File Bar In KBR Case

Yesterday, the Supreme Court of the United States released a unanimous opinion in Kellogg Brown & Root Services Inc. v. United States ex rel. Carter, resolving a pair of open procedural questions that frequently arise in False Claims Act ("FCA") litigation. First, the Court held that the Wartime Suspension of Limitations Act ("WSLA") does not apply to civil actions, affirming the availability of a key statute of limitations defense for litigants in civil fraud cases. Second, the Court held that the FCA's first-to-file statutory bar only applies while related claims are still alive, leaving the door open for serial filings in some cases, but only when the first-filed suit is dismissed before the statute of limitations runs out. The Court noted that its construction of the first-to-file bar left many open questions, and defendants will need to think carefully about how motions practice, appeals, or settlement of a pending qui tam will interact with the first-to-file bar and expiration of the limitations period.

History of the Case

KBR's procedural history, like that of many cases brought under the FCA, is lengthy and complex, but only a few aspects are relevant to the Supreme Court's decision. The relator, an employee of a defense contractor providing logistical services to the U.S. military in Iraq, filed his first qui tam action in early 2006, alleging fraudulent billing practices. The Government declined to intervene, and the action was ultimately dismissed. The relator filed three subsequent complaints in the ensuing years, all on similar grounds, in order to avoid bars based on his own and other relators' similar complaints. 

By the time the fourth complaint was filed, two other relators had filed cases involving similar allegations: one each in federal courts in Maryland and Texas. The district court granted the defendants' motion to dismiss, citing both (1) the pending third complaint and (2) the FCA's six-year statute of limitations, which would also apply to any future suit contemplated by the relator. The Fourth Circuit reversed on both grounds, holding that neither the first-to-file bar nor the FCA's statute of limitations barred the relator's 2011 complaint. On the latter point, the Fourth Circuit reasoned that under the WSLA, the armed conflict in Iraq suspended the statute of limitations for civil FCA claims brought by private relators. 

The Supreme Court granted certiorari last year to consider (1) whether the WSLA applied to civil claims, or only criminal offenses, and (2) whether the FCA's first-to-file rule prohibits a second complaint only while a prior lawsuit is pending, or indefinitely once a prior complaint has been filed.

The WSLA Does Not Apply to Civil Claims

Looking to the text, structure and history of the WSLA, the Supreme Court held that the WSLA applies only to criminal offenses, not to civil claims such as qui tam suits brought under the False Claims Act. After walking through the WSLA's post-World War I roots, and subsequent amendments, the Court held that the statute only tolls the time to file criminal charges. 

The Court focused on Congress's use of the word "offense," which it explained "is most commonly used to refer to crimes," particularly given the WSLA's location within Title 18 (titled "Crimes and Criminal Procedure"). The Court rejected the relator's and the Government's theory that the removal of the phrase "now indictable" from the statute in 1944 broadened its reach to civil claims as well as criminal offenses, reasoning that "[s]imply deleting the phrase 'now indictable under the statute,' while leaving the operative term 'offense' unchanged would have been an obscure way of substantially expanding the WSLA's reach." The Supreme Court concluded that the more plausible explanation of congressional intent in deleting that phrase was to give effect to the intent to change the statute from a retroactive statute applicable to past acts during past wars to a forward-looking one.

The First-to-File Bar Only Applies While Another Case Is Pending

Although the Court held that the WSLA did not extend the statute of limitations for civil claims, it still needed to address the first-to-file question because the operative complaint raised at least one claim that would still be timely. On this question, the Court found the text of the statute, and in particular the word "pending," to be dispositive. The Court looked closely at the statutory language providing that "[w]hen a person brings an action . . . no person other than the Government may intervene or bring a related action based on the facts underlying the pending action." 31 U.S.C. § 3730(b)(5) (emphasis added). The Court concluded that the only sensible reading of the term "pending" is its ordinary meaning (i.e., not yet decided or in continuance). The Court thus rejected the contention that "pending" should be construed "as a short-hand for the first filed action," finding that once an action is dismissed it is no longer pending.

Although the Court's first-to-file holding rested squarely on the statutory text, it did confront some of the policy arguments the parties had raised about the first-to-file bar. The Court noted that a broad reading of the first-to-file bar would block all subsequent related suits even where the first-filed action was dismissed for some reason unrelated to the merits of the case. "Why," the Court asked, "would Congress want the abandonment of an earlier suit to bar a later potentially successful suit that might result in a large recovery for the Government?"

The Court also did acknowledge "some merit" to the concern that its holding "would produce practical problems" in FCA litigation. It acknowledged, for example, that "defendants may be reluctant to settle [FCA] actions for the full amount that they would accept if there were no prospect of subsequent suits asserting the same claims." However, the Court's opinion declined to delve into these issues, choosing instead to highlight the "many interpretive challenges" that remained and noting that "it is beyond our ability in this case to make them operate together smoothly like a finely tuned machine." 

Implications of the Court's Decision

The Supreme Court's reversal of the Fourth Circuit's expansive application of the WSLA provides important certainty to defendants in civil actions. If it had been left intact, the Fourth Circuit's holding had the potential to substantially extend civil liability in the FCA context and beyond. Instead, the Court affirmed the availability of vital statute of limitations protections to civil defendants regardless of any uncertainties that might exist as to the nation's status of being "at war."

While the Court's ruling on the first-to-file bar definitively answers the question whether a prior case must remaining "pending" to bar subsequent actions, many questions remain. For one, as the Court noted in its opinion, considerable uncertainty remains for defendants who settle cases with the government on the basis of less than all of the conduct alleged in the complaint brought against them. It also remains unclear the extent to which other defenses – such as claim preclusion – protect defendants even when the first-to-file bar does not. The court's opinion merely held that a qui tam suit under the FCA ceases to be "pending" once it is dismissed, and so the first-to-file bar on its own may not block subsequent complaints.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions