In Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, 575 U.S. ____) (2015), Justice Alito stated “[t]he False Claims Act’s qui tam provisions present many interpretive challenges.” Lawyers and judges who struggle with those challenges understand the truth of that statement. The United States Supreme Court recently resolved two of those issues.

  1. Does the Wartime Suspension of Limitations Act toll the statute of limitations? No, that act only tolls criminal proceedings.
  2. Does the “First to File” Rule bar subsequent lawsuits if the first action is dismissed? The “First to File” Rule bars a “qui tam” action during the pendency of the first action and, upon its conclusion, another relator may file a lawsuit involving similar facts.

False Claim or “qui tam” lawsuits have proliferated as whistleblowers and their legal counsel have discovered the financial benefits of being the “qui tam” relator. Although “qui tam” lawsuits have become synonymous with healthcare, Congress enacted the False Claims Act in 1863 due to the “rampant fraud” being committed by suppliers to the Union Army during the Civil War. Congress recognized that it was impossible for the federal government to police this industry effectively because of the sheer number of contractors. Therefore, Congress provided a process in which a private citizen with knowledge of fraud (called a relator) could file a lawsuit on behalf of the government. To incentivize the filing of these lawsuits, the False Claims Act permitted the relator to obtain a percentage of the ultimate recovery by the government. 

The False Claims Act contains an express statute of limitations (31 U.S.C. § 3730). That statute requires a lawsuit to be filed within six (6) years of the violation, but no later than three (3) years after the date that the United States should have known about the violation. In Kellogg Brown, the question was whether another statute -- the Wartime Suspension of Limitations Act – tolled the running of the statute of limitations. The Supreme Court held that it did not. Instead, the Court held that the express language of the Wartime Suspension of Limitations Act made that act applicable only to criminal prosecutions and not to cases involving “civil claims.” 

The False Claims Act also includes a provision that bars an action if it is filed after another action -- the “first to file” bar. Specifically, the False Claims Act provides that “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). In Kellogg Brown, two qui tam lawsuits were filed that alleged substantially similar facts. The Kellogg Brown lawsuit was the second lawsuit filed. Therefore, the trial court dismissed that lawsuit as being barred by the “first to file” bar. While an appeal was pending, the first lawsuit was dismissed. The relator refiled his lawsuit, but the court dismissed the lawsuit once again stating that the “First to File” bar applied. The Supreme Court rejected this argument noting that the express language of the statute provided that the first-to-file bar ceases once the earlier action is dismissed. 

For healthcare providers, the Kellogg Brown decision removes one source of uncertainty and creates another source of uncertainty. The False Claims Act statute of limitations will not be tolled during time of “war” regardless of the definition of “war”, but the settlement or dismissal of a qui tam action will not necessarily bar another individual from filing a lawsuit on the same grounds. The Supreme Court noted that the dismissal of the first filed action may have “claim preclusion” effect if the action is decided on its merits; however, the Court relegated that issue to another day. Healthcare providers should consider the impact of this decision during settlement discussions for qui tam cases.