On Monday, May 27, 2014, the Solicitor General filed an amicus curiae brief urging the Supreme Court not to review two critical and hotly disputed issues that are plaguing defendants in False Claims Act (“FCA”) litigation: (1) whether the Wartime Suspension of Limitations Act (“WSLA”) suspends the civil FCA’s statute of limitations for qui tam claims, and (2) whether the FCA’s first-to-file bar requires dismissal of a related second-filed qui tam action if the first-filed complaint is resolved or dismissed. These issues are raised in the pending petition for certiorari in Kellogg Brown & Root Servs., Inc. v. United States ex rel. Carter, No. 12-1497, and on the opening day of its current term, the Court invited the Solicitor General to set forth the views of the United States on both issues.
In advising the Court to deny certiorari, the Solicitor General’s brief relies on outdated World War II-era precedent on the question of whether the WSLA applies to the civil FCA and downplays a direct circuit split on the first-to-file issue. In addition, the Solicitor General failed to consider the enormous real world consequences of these issues, not just for traditional government contractors, but for all defendants in FCA litigation. The Supreme Court should remedy those mistakes by rejecting both the Solicitor General’s advice and its arguments.
The Wartime Suspension of Limitations Act Issue
The WSLA is a 72-year-old criminal code provision that suspends the statute of limitations for “any offense” involving fraud against the government when the United States is “at war.” 18 U.S.C. §3287. As explained in more detail in our prior FraudMail Alerts addressing this issue, the Fourth Circuit’s sweeping ruling in United States ex rel. Carter v. Halliburton Co., 710 F.3d 171 (4th Cir. 2013), interpreted this criminal code provision to apply to the civil claims in a non-intervened qui tam action and allowed what could amount to an indefinite tolling of the FCA’s statute of limitations. See FraudMail Alert Nos. 13-03- 21; 13-10-09. See also FraudMail Alert No. 12-08-16.
In its May 27 brief, the Solicitor General urged the Supreme Court not to review the Fourth Circuit’s interpretation that the term “offense” in the WSLA encompasses civil as well as criminal violations. In doing so, while the Solicitor General admitted that the term “offense” “sometimes encompasses civil violations and sometimes does not,” it argued that “Congress’s failure to include language limiting the WSLA to crimes” indicates Congress intended WSLA application in the civil context. See Brief for the United States as Amicus Curiae at 10 n.3, 11, Kellogg Brown & Root Servs., Inc. v. United States ex rel. Carter, No. 12-1497 (May 27, 2014). However, the opposite conclusion—that the lack of language specifically including civil claims indicates that Congress did not intend WSLA application in the civil context—seems more valid when discussing the expansion of a criminal statute (found in Title 18) to civil actions. Moreover, the Solicitor General’s brief does not explain away other indicators of congressional intent, including, for example, why, in 2008, when Congress expanded the WSLA’s suspension period from three years to five years after termination of hostilities, it chose a period analogous to criminal statutes of limitations, or why the WSLA was not mentioned in the civil FCA’s amendments in 1986, 2009, and 2010.
Beyond that, in relying on World War II-era cases, the Solicitor General failed to address that establishing liability under the post-1986 FCA does not satisfy the requirements of the WSLA—a statute that requires as an “essential ingredient…the element of deceit that is the earmark of fraud.” See United States v. Grainger, 346 U.S. 235, 243 (1953). Under the modern-day FCA, with its expanded statutory definition of “knowing,” “the element of deceit” found in common law fraud is indisputably not an essential ingredient of an FCA violation. See FraudMail Alert No. 13-03-21 at 3.
Finally, the Solicitor General did not address the more wide-ranging practical implications that alone warrant Supreme Court review of this issue. The Justice Department and qui tam relators are advocating the WSLA’s application to toll the FCA’s statute of limitations in cases involving not just war- or defense- related contracts, as found in Carter, but in all types of civil FCA cases, including those involving financial services, healthcare, and commodities. See, e.g., United States v. Wells Fargo Bank, N.A., 972 F. Supp. 2d 593 (S.D.N.Y. 2013)1; United States ex rel. Emanuele v. Medicor Assocs., No. 10-245 Erie, 2013 U.S. Dist. LEXIS 104650 (W.D. Pa. July 26, 2013); United States ex rel. Paulos v. Stryker Corp., No. 11- 0041CV-W-ODS, 2013 U.S. Dist. LEXIS 82294 (W.D. Mo. June 12, 2013); United States v. BNP Paribas SA, 884 F. Supp. 2d 589 (S.D. Tex. 2012). As the Petitioners in Carter noted, what broad WSLA application to civil FCA claims would mean for all of these potential FCA defendants is daunting:
The panel decision…has grave implications for potential [FCA] defendants, by requiring them to defend against stale [FCA] claims years or even decades later, as memories fade and helpful evidence is lost. It places intolerable burdens on companies, by requiring them to either retain documents indefinitely or risk discarding records that may only become relevant years later when an unforeseen [FCA] claim is filed…The panel majority’s interpretation has fundamental implications for the government’s relationships with potential contractors.
Petition for Writ of Certiorari at 23, Kellogg Brown & Root Servs., Inc. v. United States ex rel. Carter, No. 12-1497 (June 24, 2013). Moreover, the Solicitor General does not explain how his own client agencies are going to be able to retain documents for such lengthy periods, particularly since those agencies have had difficulty retaining relevant documents for the existing FCA limitations period.
The Solicitor General’s endorsement of the Fourth Circuit’s application of the WSLA to the modern-day civil FCA is questionable in many respects. Moreover, the implications of allowing the WSLA to be applied to claims—brought by private parties (qui tam relators) who face no exigencies of war, based on contracts having nothing to do with war, for indefinite periods of time—alone warrant review by the Supreme Court.
The First-to-File Issue
Section 3730(b)(5) of the FCA (the “first-to-file bar”) provides that when a relator brings a qui tam action, “no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” This bar prevents multiple qui tam suits based on the same underlying conduct.
In Carter, the Fourth Circuit recognized that two earlier-filed related qui tam complaints were pending when the Carter relator filed his claims, but ruled that the relator’s claims essentially were revived when the two earlier complaints were dismissed. The Fourth Circuit’s ruling was based on its purely temporal interpretation of the phrase “pending action.” In contrast, in United States ex rel. Shea v. Cellco Partnership, No. 12-7133, 2014 WL 1394687 (D.C. Cir. Apr. 11, 2014) (“Verizon II”), the D.C. Circuit rejected a temporal reading of the phrase “pending action” and instead considered the phrase to be shorthand for “first-filed action.” See FraudMail Alert No. 14-04-15.
In its May 27 brief to the Supreme Court, the Solicitor General sided with the Fourth Circuit. While the Solicitor General’s and Fourth Circuit’s interpretation purports to serve the goal of encouraging and rewarding whistleblowers to come forward and file qui tam claims, it does nothing to serve the first-to-file bar’s purpose of preventing duplicative qui tam suits that could go on indefinitely. That consideration, as well as the point that “[t]he resolution of the first-filed action does not somehow put the government off notice of its contents,” were key factors in the D.C. Circuit’s directly contradictory interpretation of “pending action” in Verizon II.
In spite of this obvious discord, the Solicitor General attempted to downplay the circuit split by characterizing the disagreement between the circuit courts as “a narrow one that may resolve itself without this Court’s intervention.” Brief for the United States as Amicus Curiae at 22. In making that argument, the Solicitor General anticipated two unknown future events: both a grant of en banc review in Verizon II and an en banc decision supporting the relator’s (and the Fourth Circuit’s) temporal definition of “pending.”
The Solicitor General’s speculative characterization should not dissuade the Supreme Court from addressing an issue that is arising in more and more qui tam cases and where there is clear circuit court disagreement. The Fourth Circuit’s too narrow focus should be corrected, and the Supreme Court should adopt the D.C. Circuit’s interpretation, which preserves the first-to-file bar’s important gatekeeping, efficiency, and fairness purposes.