On January 13, 2015, the Supreme Court held oral argument in the closely followed case of Kellogg Brown & Root v. United States ex rel. Carter. Two questions with sweeping False Claims Act (FCA) enforcement implications were at issue: first, whether the Wartime Suspension of Limitations Act (WSLA) tolls the statute of limitations in civil actions under the FCA while the nation is at war; and second, whether the FCA’s so-called “first-to-file” bar prohibits future filings based on the same alleged fraud or functions as a more permissive one-case-at-a-time rule, allowing duplicative claims in future actions. The lower court, the Fourth Circuit, held that the qui tam relator’s claims were timely. Kellogg Brown & Root (KBR) appealed.
Made relevant by over a decade of global military action, the WSLA was a little known criminal code provision tolling the statute of limitations for “any offense” involving fraud against the United States during war. Both the United States and the relator argue that the “any offense” language added in 1944 broadens the statute’s applicability from actions that are criminal in nature to civil actions including under the FCA.
At oral argument, KBR attacked the attempt to broaden “any offense” to include FCA allegations by focusing on the WLSA’s appearance in the criminal code. The Justices, possibly sympathetic, gave KBR counsel the benefit of long stretches of uninterrupted argument. At one point, Justice Sotomayor asked KBR counsel if the court would need to address the first-to-file issue if the Court reversed the lower court on the WLSA ruling. In contrast, the Justices peppered Respondents’ counsel on the strength of their position.
Based on the argument, it is not clear how the Court will come out on the second question. When a relator 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 interpretation of “pending” sits at the center of the dispute. The Fourth Circuit agreed that the first-to-file bar serves only to prohibit simultaneous litigation and therefore, the relator’s suit was permissible.
KBR argued that the Fourth Circuit’s interpretation creates the risk of duplicative litigation into perpetuity; however, the Justices appeared to be wrestling with the ambiguity of the statutory language. Both Justices Kennedy and Scalia seemed persuaded that future duplicative suits were not prohibited by the statute. The Justices seemed to agree with Respondents that the risk of duplicative suits would be mitigated under claim preclusion principles.
The Court’s hotly anticipated ruling will impact myriad cases filed asserting alleged fraud claims arising over a decade of wartime activity. The second issue involving relator rights has broad implications for how defendants can achieve finality in the resolution of pending FCA matters.