The U.S. Supreme Court granted the petition for certiorari in KBR, Inc. v. United States ex rel. Carter, 740 F.3d 171 (4th Cir. 2013), cert. granted, Jul. 1, 2014, a False Claims Act (FCA) case that could greatly affect the scope of liability of potential defendants. The United States opposed the petition for certiorari, which raised two issues.

The first issue concerns the Wartime Suspension of Limitations Act (WSLA), which tolls the statute of limitations for “any offense” involving fraud against the government when the United States is at war. In addressing whether the WSLA applies even absent a formal declaration of war, the Fourth Circuit found that a congressional declaration of war was not necessary for the WSLA’s tolling provisions to apply, and found that Congress’s 2002 Authorization for the Use of Military Force against Iraq was sufficient to trigger the WSLA.

The Court also held that the WSLA’s tolling provisions applied even in civil cases where the United States was not a party. The Fourth Circuit’s ruling on this issue is contrary to decisions of federal district courts in different circuits, which have held that the WSLA’s tolling provision does not apply in cases where the United States does not intervene. In one recent case, United States ex rel. Landis v. Tailwind Sports Corp., 2014 U.S. Dist. LEXIS 83313 (D.D.C. June 19, 2014) the District Court for the District of Columbia held that the WSLA did not apply to any civil FCA cases.

The second issue concerns the breadth of the FCA’s first-to-file rule. Under this provision, district courts do not have jurisdiction over an FCA case if another case with the same claims had already been filed. KBR argued that, because two previous FCA cases with the same allegations against KBR had been voluntarily dismissed, the first-to-file rule deprived the court of jurisdiction over Carter. The Fourth Circuit held against KBR, ruling that the first-to-file rule did not prohibit duplicative actions as long as the earlier-filed action was no longer pending. While the Seventh and Tenth Circuits have reached the same conclusion, the First, Fifth and Ninth Circuits have held that the first-to-file rule bars all duplicative claims, regardless of whether the earlier claims are still pending.

The Supreme Court’s rulings on these issues could have broad implications for the FCA defendants. If the Supreme Court upholds the Fourth Circuit’s ruling on the first issue, the FCA statute of limitations—for civil as well as criminal cases—could be tolled for the foreseeable future, especially given the President’s recent announcement that he would send additional troops to Iraq. If the Supreme Court upholds the Fourth Circuit’s ruling on the second issue, relators may have an incentive to delay making allegations of fraud in order to maximize potential damages. This would be especially concerning for defendants because another bar to FCA actions, the public disclosure bar, was substantially weakened in 2010 with the passage of the Patient Protection and Affordable Care Act (PPACA). Under the old public disclosure bar, a relator’s FCA claim would be dismissed if the allegations were based on publicly disclosed information and the relator was not an original source of that information. However, the PPACA amendments have narrowed the types of disclosures that satisfy the public disclosure bar, broadened the “original source” exception to the bar, and have allowed the federal government to prevent dismissal of a private FCA action by opposing the application of the public disclosure bar.