United States: KBR V. Carter–Supreme Court Holds That The First-To-File Bar Only Applies To Pending Cases

Last Updated: June 3 2015
Article by Brett W. Barnett and James J. Schanaberger

On Wednesday the Supreme Court, in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, No. 12-1497 (2015), held that the Wartime Suspension of Limitations Act ("WSLA") only tolls the statute of limitations for criminal offenses, not civil claims under the False Claims Act ("FCA"). The Court also held that the FCA's first-to-file bar only prohibits a later-filed suit based on the same allegations while the first suit is still pending. After the first-filed case is dismissed, the first-to-file bar does not prevent the filing of any subsequent FCA cases based on the same factual allegations.

As the Court aptly noted, the procedural history of Carter is "remarkable" and filled with premature filings, unwarranted dismissals, and three other FCA suits based on the same factual allegations. Petitioners are defense contractors that provided logistical services to the United States in Iraq. Respondent worked as a water purification operator for Petitioners for several months in 2005 and thereafter filed a qui tam action alleging that Petitioners had fraudulently billed the Government for services that were not performed (Carter I).

In 2010, the district court dismissed the Petitioner's claims after it was discovered that there was an earlier filed case containing the same allegations. Respondent appealed and while the appeal was pending, the earlier filed case was dismissed. Respondent hurriedly filed a new complaint (Carter II), which was subsequently dismissed because Carter I was still pending on appeal. Subsequently, Respondent voluntarily dismissed Carter I and filed yet another complaint (Carter III—the complaint at issue). However, between the filing of Carter I and Carter III, two additional FCA cases based on the same allegations were filed.

The district court dismissed the Petitioner's qui tam action, holding that the WSLA did not apply to civil FCA claims, and therefore, Petitioner's claims were untimely under the FCA's 6-year statute of limitations. The district court also held that the first-to-file rule barred Petitioner's action because another related FCA case was still pending at the time Carter III was filed. The Fourth Circuit reversed on both grounds and the Supreme Court subsequently granted certiorari.

In holding that the WSLA does not apply to civil claims, the Supreme Court focused on the statute's legislative history, the common usage of its key terms, and its location in the United States Code, and the common usage of the its key terms. Specifically, the Court noted that previous versions of the WSLA extended the statute of limitations for offenses that were "indictable" and reasoned that because only criminal offenses are "indictable" Congress did not intend for the WSLA to extend to civil cases of fraud. The Court bolstered this reasoning by examining the WSLA's use of "offense" to indicate what activities fell within the WSLA. The Court reasoned that because "offense" is most commonly used to refer to crimes, Congress would not have implicitly intended to expand the meaning of "offense" within the WSLA without further elaboration. The Court also suggested that the WSLA's location, Title 18 of the United States Code—which is entitled "Crimes and Criminal Procedure"—indicated that Congress intended for the WSLA to only apply to criminal offenses.

The Court's analysis of the FCA's first-to-file bar, 31 U.S.C. § 3730(b)(5), relies heavily on the plain language of the text while acknowledging that its reading could produce practical problems for defending FCA litigation against subsequent relators. The first-to-file bar statute states 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." Petitioners argued that the first-to-file bar served to bar all subsequently filed FCA suits based on the same allegations in perpetuity. The Court rejected Petitioners' argument, reasoning that the first-to-file bar's use of "pending action" indicated that "an earlier suit bars a later suit while the earlier suit remains undecided but ceases to bar that suit once it is dismissed."

However, the Court acknowledged that its interpretation could produce practical problems; namely, if the first-to-file bar is lifted upon dismissal of the first-filed action, FCA defendants will be reluctant to settle the first-filed action for the full amount knowing that subsequent suits can be filed asserting the same claims. The Court agreed with Petitioners, but rather than offering an explanation as to why its interpretation does not leave the door open for copycat claims, simply admitted that "it is beyond our ability in this case to make [the FCA's qui tam provisions] operate together smoothly like a finely tuned machine." Although the FCA's public disclosure bar—which we have previously discussed here, here, and here—will be used to prevent subsequently filed suits by advantageous relators seeking simply to cash in, the uncertainty surrounding the metes and bounds of the Carter Court's holding will assuredly result in consequential litigation testing the scope of what constitutes a "pending action."

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