On May 26, 2015, the United States Supreme Court resolved uncertainty surrounding the application of wartime tolling of the statute of limitations under the civil False Claims Act (FCA), but simultaneously opened the door to repeat qui tamclaims. In Kellogg Brown & Root Services, Inc. v. United States ex rel Carter (KBR), No. 12-1497, __ S. Ct. __ (2015), the Supreme Court unanimously held that (1) the Wartime Suspension of Limitations Act (WSLA) only applies to criminal offenses and therefore does not toll the limitations period for civil fraud claims under the FCA, and (2) the FCA’s “first-to-file” jurisdictional bar precludes subsequent qui tam claims only while an earlier filed qui tam case remains “pending” in court.

KBR Background and the Proceedings Below In KBR, a qui tam plaintiff (known as a “relator”) brought civil FCA claims against government contractors alleging fraudulent claims for payment in connection with a contract to provide water purification services for the U.S. government during the Iraq War. The government declined to intervene in the action. A federal district court dismissed the relator’s complaint on statute of limitations grounds, and also on jurisdictional grounds because another qui tam lawsuit previously asserted similar claims against KBR. The FCA’s “first-to-file” bar provides a statutory bar to qui tam claims under the FCA where a previously-filed FCA action exists and the subsequent qui tamaction is “based on the facts underlying the pending action.” 31 U.S.C. § 3730(b)(5). The district court thus dismissed theKBR case in part because another relator previously had filed a similar FCA case, even though that prior case had been dismissed. The court also held that the relator’s claims were untimely and barred by the FCA’s six year statute of limitations.

The U.S. Court of Appeals for the Fourth Circuit reversed the dismissal and revived the claims, concluding that the suit was timely filed because the WSLA tolled the applicable statute of limitations for the relator’s civil claims. The Fourth Circuit held that the WSLA applies to civil claims involving alleged fraud against the government and noted that the United States was involved in an armed conflict in Iraq during the time period, which satisfied the “at war” provision of the WSLA.

The Fourth Circuit also held that the first-to-file bar does not preclude subsequent similar qui tam actions after a prior qui tam has been dismissed for failure to prosecute. Specifically, the Fourth Circuit found that the prior action was not “pending” at the time the district court considered the motion to dismiss in the KBR case because the prior qui tam had been dismissed by the time the relator filed his complaint.

The Supreme Court Rejects Wartime Tolling of Civil False Claims Congress enacted the WSLA in 1921 (and amended it in 1942, in 1948, and in 2008) as part of the federal criminal code to address war-related fraud during the First and Second World Wars. The WSLA suspends the running of any statute of limitations for “any offense . . . involving fraud against the United States or any agency thereof” when “the United States is at war.” 18 U.S.C. § 3287. Although dormant since the years following World War II, over the past decade, the government revived the WSLA as a basis to argue against the preclusive effect of limitations periods in civil FCA actions involving defense contractors as well as defendants accused of health care fraud and financial fraud against the government.

Federal courts disagreed on the WSLA’s application to civil FCA claims actions brought by the United States, but the Fourth Circuit expanded the WSLA to civil FCA actions brought by qui tam relators. Given the Fourth Circuit’s broad interpretations of the statutory terms “offense” and “at war” in the WSLA, KBR and multiple amici argued that the Fourth Circuit’s WSLA interpretation effectively eviscerated the civil FCA’s statute of limitations.

Rather than taking a potentially more restrictive tack by limiting a qui tam relator’s use of the WSLA without weighing in on the WSLA’s application to the government, the Supreme Court ruled broadly that the text of the WSLA only applies tocriminal fraud against the government, and therefore does not apply to civil actions under the FCA. Writing for the unanimous Court, Justice Alito reasoned that the text, structure and history of the WSLA, and the judicial preference for narrow construction of ambiguous statutes, favor the interpretation that the WSLA refers only to criminal conduct. The Supreme Court thus rejected the relator’s and the Solicitor General’s arguments that Congress’ removal of the phrase “now indictable” from the WSLA in 1948 suggested the Act should more broadly apply to civil frauds, and instead explained that the more plausible reading was that the deletion was intended to apply to prospective (and not only retrospective) criminal indictments. Accordingly, the Supreme Court’s decision removes any doubt that wartime tolling is inapplicable to the civil FCA. This outcome is favorable for persons and entities required to defend allegations of dated FCA violations, by restoring certainty in the applicability of the FCA’s limitations period in civil FCA cases.

The Supreme Court Allows Successive Qui Tam The unanimous decision, however, was not entirely favorable for FCA defendants. The decision went on to affirm the Fourth Circuit’s first-to-file ruling and confirmed that defendants may be subject to successive complaints if the prior FCA complaint is no longer “pending.” KBR had argued that the Fourth Circuit’s ruling, which permitted a subsequent qui tam action to proceed if the prior FCA case had already been dismissed, should be overturned because “pending” should be read as preclusive of any filing after an initially filed qui tam. The Supreme Court summarily rejected KBR’s argument, finding there is no ambiguity in the term first-to-file bar’s “pending” terminology and that the bar is therefore applicable only when the prior FCA case remains pending in court. Thus, if a prior FCA case has been dismissed for any reason (including as a result of a settlement, a relator’s failure to satisfy pleading requirements, or for failure to prosecute) and is not pending at the time of a motion to dismiss on the subsequent qui tam case, the first-to-file rule does not preclude the subsequent qui tam. Justice Alito acknowledged some merit in KBR’s argument that this ruling would create practical problems in defending successive qui tam lawsuits, but held that the Supreme Court was constrained by Congress’ choice of the word “pending” in the first-to-file provision. Justice Alito noted the relator’s counterargument that principles of claim preclusion may protect defendants if there is a decision on the merits on the prior FCA case, but declined to rule on the issue because it was beyond the circumstances presented in the instant case. Ultimately, FCA defendants who settle or successfully obtain dismissal of FCA claims may have to defend subsequent qui tam actions based on the same underlying facts.