The Supreme Court yesterday heard oral argument in a case we have been closely watching (see here and here), Kellogg Brown & Root Services, Inc., et al. v. United States ex rel. Carter, No. 12-1497, which is the first case specifically addressing the False Claims Act that the Supreme Court has accepted since its 2011 decision in Schindler Elevator Corp. v. United States ex rel. Kirk, 131 S. Ct. 1885 (2011).  The Court accepted Kellogg Brown’s petition for certiorari to address two questions:  first, whether the Wartime Suspension of Limitations Act (“WSLA”)—a criminal code that tolls the statute of limitations for offenses involving fraud perpetrated against the government when the United States is “at war”—applies to claims of civil fraud such as those brought under the False Claims Act and is triggered without a formal declaration of war; and second, whether the False Claims Act’s “first-to-file bar” allows relators to file duplicative claims so long as no prior claim is pending at the time of filing.

With respect to the WSLA, briefing in the case largely focused on the presence of the words “any offense” as well as the removal of the words “now indictable,” which Respondents, along with the United States, referenced to argue that the WSLA includes civil violations.   With respect to the “first-to-file bar,” the parties focused on the statutory language prohibiting the government to intervene or bring a related action based on facts underlying a “pending action.”

The oral argument largely mirrored the briefing, with statements from both sides focusing on the statutory language.  On the first question, John Elwood, counsel for Kellogg Brown, began by stating that the plain text and history of the WSLA confirms that the WSLA applies exclusively to crimes, as seen by its appearance in the criminal code and its applicability only to “offenses.”  In response to Mr. Elwood’s arguments, Justice Kagan called Mr. Elwood’s explanation of the removal of the language “now indictable” from the statute a “fair understanding of why that term came out,” but asked why Congress added the word “any” to “any offense” if it did not mean to suggest breadth.  Mr. Elwood’s response—that the language conveyed “offenses against the laws of the United States”—was not questioned.  Ultimately, Kellogg Brown’s arguments on the first question proved solid when Justice Sotomayor asked Mr. Elwood to move on to the second question,       “[a]ssuming we agree with you on the first.”

On the second question, Justices Kennedy, Scalia, and Sotomayor seemed to have trouble with the word “pending,” with Justice Sotomayor noting that “you[’re] not giving ‘pending’ any meaning.”  Mr. Elwood acknowledged that the statute could have been written better but emphasized that his reading of the “first-to-file bar” serves the bar’s purpose given that after the first suit, the Government has been properly notified.  Though only introduced as a quick point, Mr. Elwood also explained that an opposing reading would discourage settlement because a defendant will not want to settle a case immediately if there is the possibility that upon settlement, more suits will be brought.

When David Stone, counsel for Respondents, began his arguments as to the first question, he was immediately interrupted, with Justice Scalia stating that the word “offense” is “a criminal offense,” and “[i]t wouldn’t make any sense in Title 18 unless the offense they’re referring to is one – one of the criminal offenses of Title 18.”  Justice Alito further raised Petitioner’s point with respect to the lack of any evidence in the legislative history that Congress intended to change the statute when removing the words “now indicated,” and asked Stone:  “What is your response to the argument that we might find a little – a bit of evidence here or there that that’s what was intended, but Mr. Elwood says there’s nothing?”  When arguing the second point before the Court, Mr. Stone was joined by Malcolm L. Stewart, the Deputy Solicitor General, in presenting the more moderate opinion that if the first case was decided on the merits, that would preclude later litigation.

Regardless of the outcome, the Supreme Court’s decision will likely have a large impact on the filing of False Claims Act suits.