The US Supreme Court this morning granted cert in a closely watched False Claims Act (FCA) case, Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter — a case that raises important questions about wartime suspension of the FCA's statute of limitations, and about how the FCA's "first-to-file bar" operates.
How the Court rules will impact how long after an FCA violation the government — or a qui tam relator — can bring suit, and whether multiple relators can bring related actions against a defendant so long as the related actions are not simultaneously pending.
Wartime Suspension of Limitations Act (WSLA)
At issue in Carter is whether the WSLA, 18 U.S.C. § 3287, a World War II-era statute that extends the amount of time the government can bring a lawsuit based on wartime fraud against the United States, applies to the FCA, and, if so, whether it applies to a case brought by a private qui tam relator if the government declines to intervene and take over the case.
As amended by the Wartime Enforcement of Fraud Act of 2008, the WSLA extends the statute of limitations for "offenses" involving fraud against the government to five years after the termination of hostilities as determined by the President or Congress. Although the statute of limitations for bringing an FCA action is ordinarily the greater of six years from the violation or three years from when the government knew, or should have known, of the violation (but in no event more than 10 years from the violation), 31 U.S.C. § 3731(b), several courts have held that the WSLA applies to FCA lawsuits and therefore suspends the FCA's statute of limitations during the conflicts in Afghanistan and Iraq.
In Carter, a divided panel of the Fourth Circuit held that the WSLA applies to both criminal and civil fraud claims — including those brought under the FCA by a private relator. Petitioners KBR and Halliburton appealed, arguing that the WSLA should apply only to criminal cases, and that — even if the WSLA applies to FCA actions — it should suspend the statute of limitations only for the government, but not for a private relator, who is not distracted by the demands of a military conflict. The DOJ, in a brief submitted by the Solicitor General, agreed with the Fourth Circuit's holding and argued that the Supreme Court should not take the case.
If the Court affirms, FCA defendants could be liable for FCA violations dating back to 2001 — the beginning of the conflict in Afghanistan — even if brought by the government or a relator several years from now, so long as the case is brought within five years of the termination of hostilities as declared by the President or Congress. Petitioners refer to this result as "indefinite tolling." On the other hand, if the Court holds that the WSLA does not apply to FCA actions, the government and relators will need to bring suit in compliance with the FCA's statute of limitations and its 10-year cutoff. In the years to come, the Court's decision will meaningfully impact the many defendants accused of submitting false claims dating back to 2001.
Also at issue in Carter is whether the FCA's first-to-file bar precludes all subsequent related actions, or only those that are simultaneously pending. The FCA's first-to-file bar provides, "[w]hen a person brings an action under [the FCA], 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). The first-to-file bar aims to incentivize relators to promptly file lawsuits while also protecting defendants from facing multiple suits based on the same conduct.
In Carter, the district court dismissed with prejudice the relator's FCA action because a "related action" was pending in another court. The Fourth Circuit reversed, holding that, while the dismissal was appropriate because a related action was in fact pending, the district court should have dismissed the case without prejudice so that the relator could re-file in the event the related action is dismissed. The court explained that the first-to-file bar does not permanently bar a related action, but rather bars a related action only while the first action is pending; if the first action is dismissed, the relator can re-file and avoid the bar. Petitioners argue that the Fourth Circuit improperly transformed the first-to-file bar into a "one-case-at-a-time rule," frustrating the provision's purpose. The Solicitor General agreed with the Fourth Circuit's approach.
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