Today, in a blow to Justice Department efforts to expand False Claims Act (“FCA”) enforcement to otherwise stale conduct, the Supreme Court ruled that the Wartime Suspension of Limitations Act (“WSLA”) has no place in the civil FCA arena. At the same time, the Court resolved a circuit court split on the FCA’s “first-to-file” bar, ruling that later suits are not barred unless a prior suit is still active when the second suit is filed. On both issues, the Court’s opinion in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, No. 12-1497 (U.S. May 26, 2015)—authored by Justice Alito—was unanimous and largely expected following oral argument in January 2015. Nonetheless, it is notable that the Court took the opportunity to criticize the poor legislative draftsmanship that plagues the FCA, even as it concluded that there was little it could do to combat that overarching problem.
The WSLA in FCA Litigation
The WSLA is a Title 18 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. The roots of the WSLA reach back to World War I. At that time, the statute addressed the concern that the exigencies of war were preventing federal prosecutors from filing timely charges against perpetrators of criminal fraud offenses. During World War II, Congress enacted the suspension provision in the WSLA and placed it in Title 18 (i.e., the criminal code).
In spite of this history, in recent FCA lawsuits—and in many more Justice Department investigations that were resolved by settlement—the government has been citing the WSLA as a basis for avoiding the already generous FCA statute of limitations. And beginning three years ago, some courts adopted the Justice Department’s rationale, holding that the WSLA applies full-force to both criminal and civil fraud claims, and that it even applies to civil FCA cases having nothing to with war-related contracting activities.1 In the only recent appellate court decision to reach this issue, the Fourth Circuit interpreted this Title 18 provision to apply to civil claims in United States ex rel. Carter v. Halliburton Co., 710 F.3d 171 (4th Cir. 2013), cert. granted sub nom. Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, 134 S. Ct. 2899 (2014). As explained in detail in prior Alerts, the Fourth Circuit’s rationale in Carter, if allowed to stand, virtually would have nullified the FCA’s statute of limitations. See FraudMail Alert Nos. 12-08-16; 13-03-21; 13-10-09; 14-05-30; 14-07-01. Perhaps as an early sign of its concern over this spate of decisions and the reasoning behind them, the Supreme Court granted certiorari on this question, even without any circuit court split. The Supreme Court’s unanimous decision today ends this short-lived and ill-advised attempt to indefinitely suspend the FCA limitations period.
The Court’s WSLA Decision
The Court had no trouble reaching its result. It analyzed the WSLA’s roots, its statutory text, the significance of its codification in Title 18, and its various amendments, all of which weighed heavily in favor of limiting application of the WSLA to criminal offenses. The Court began by finding that the term “offense” most commonly refers to crimes, and that Black’s Law Dictionary defines it as “a violation of the law; a crime.” And the Court noted—as some Justices had observed during oral argument—that neither the Solicitor General nor the relator was able to cite a single instance in Title 18 in which “offense” referred to a civil violation. Nor did the Solicitor General or counsel for the Carter relator dispute that the term, as used in the pre-1944 WSLA, applied only to crimes. Instead, the Solicitor General and the Carter relator had argued that removal of the phrase “now indictable” in a 1944 amendment expanded the WSLA’s reach to civil claims. The Court readily dispensed with that argument:
Simply deleting the phrase “now indictable under the statute,” while leaving the operative term “offense” unchanged would have been an obscure way of substantially expanding the WSLA’s reach. Fundamental changes in the scope of a statute are not typically accomplished with so subtle a move.
Slip op. at 9. The Court instead pointed to a more plausible explanation for the removal of the phrase, which was to indicate that the suspension provision also applies prospectively rather than only retrospectively, slip op. at 10, an explanation advanced by various amici. See Brief for the National Defense Industrial Ass’n et al. as Amici Curiae Supporting Petitioner at 10-18. 2
In the end, the Court roundly rebuffed each argument in support of an expansionist view of the WSLA. By reaching to reject the government’s reasoning before it gained any further traction in the lower courts, the Court restored the FCA statute of limitations as a proper check on civil fraud enforcement by the government and relators.
The No Longer “Pending” First-to-File Issue
The Court also addressed a separate FCA dispute in its Carter ruling. Under the FCA’s first-to-file bar in 31 U.S.C. § 3730(b)(5), 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.” A circuit court split raised the question of whether to apply the Fourth Circuit’s purely temporal interpretation of “pending action” that allowed successive suits as long as the earlier-filed suit has been dismissed without prejudice and was no longer pending, or whether “pending action” was shorthand for the first-filed action, as the D.C. Circuit reasoned in United States ex rel. Shea v. Cellco P’ship, 748 F.3d 338 (D.C. Cir. 2014). See FraudMail Alert No. 14-04-15 (discussing Shea). The main issue before the Court in Carter was whether the bar only applies if the first-filed suit remains pending—i.e., has not been dismissed—at the time the subsequent qui tam suit is filed.
The Court saw no reason to interpret “pending” other than by reference to its ordinary meaning. Applying the dictionary meanings in both Black’s and Webster’s, the Court found that “pending” means “[r]emaining undecided; awaiting decision,” and that to interpret a dismissed first-filed action as “pending” that could bar a subsequent related action “forever,” was unsupported by “any known usage of the term.” Slip op. at 11-12.
But, Justice Alito’s opinion raised an issue he also addressed in past decisions as a federal circuit court judge—the poor legislative drafting of key FCA provisions. In addressing the petitioner’s argument on the practical problems that would result from allowing seriatim qui tam suits, he explained: “The False Claims Act’s qui tam provisions present many interpretive challenges, and it is beyond our ability in this case to make them operate together smoothly like a finely tuned machine.” Slip op. at 13.