On July 1, the Supreme Court granted certiorari in Kellogg Brown & Root Services v. United States ex rel. Carter, a case from the Fourth Circuit raising two important questions under the False Claims Act (FCA) that together create the risk that FCA defendants may have to face continued qui tam lawsuits no matter how old the conduct in question.
First, the case raises the question of whether the Wartime Suspension of Limitations Act (WSLA), which tolls the statute of limitations for fraud offenses when the country is at war, applies to civil actions for fraud or when there has not been any formal declaration of war. The WSLA is located in the criminal title of the United States Code and does not expressly include civil claims. If wartime tolling applies to civil FCA claims and does not require a formal declaration of war, the FCA statute of limitation might conceivably become a dead letter because it is unlikely that a war that was not formally declared would ever be formally concluded.
FCA plaintiffs have been successful in numerous cases arguing that wartime tolling applies to civil FCA claims and currently applies because of the conflicts in Iraq and Afghanistan. As discussed on this blog, it was only last month that the District Court for the District of Columbia became the first court to reject that argument, in a case involving an FCA suit against Lance Armstrong related to monies he received from his sponsorship by the United States Post Office. As seen by that case, arguments for wartime tolling have not been limited to defense contracts or to events occurring in war zones, so wartime tolling is potentially of concern to any entity receiving federal government funds.
Second, Kellogg Brown & Root raises the issue of how broadly the first-to-file bar is to be interpreted. Under the FCA, “[w]hen a person 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.” As the Fourth Circuit noted in its decision, “the [FCA] seeks to prevent parasitic lawsuits based on previously disclosed fraud.” The Fourth Circuit held, however, that the first-to-file bar applied only when the earlier lawsuit was actually pending, and that the first-to-file bar no longer applied if that lawsuit was dismissed, although depending on the resolution of the first case, another doctrine such as claim preclusion might prevent the filing of subsequent qui tam actions. The court held that a subsequently filed lawsuit must be dismissed without prejudice, with the potential to bring the lawsuit again after conclusion of the first-filed lawsuit. This decision, which followed previous decisions from the Seventh and Tenth Circuits, is of potentially great concern to FCA defendants, who may face the prospect of defending repeated qui tam complaints brought by different relators as long as each suit is sequential instead of concurrent.
Unusually, the Supreme Court granted certiorari on both issues in the case, despite opposition by the solicitor general. The solicitor general recommended that the Court not grant certiorari regardless of a circuit split on the first-to-file bar issue.