In a unanimous Supreme Court decision issued May 26, 2015, Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter (KBR), Case No. 12-1497, the United States Supreme Court addressed two significant False Claims Act (FCA) issues: first, whether the Wartime Suspension of Limitations Act (WSLA) applies to civil claims brought under the FCA or only to criminal charges; and second, whether the FCA’s so called first-to-file bar keeps new claims out of court only while related claims are still alive (i.e., pending),or whether it may bar those claims in perpetuity.
When the WSLA applies, it lengthens the time to prosecute criminal fraud offenses against the United States during times of war or when Congress has enacted a specific authorization for the use of the Armed Forces. The Fourth Circuit held in United States ex rel. Carter v. Halliburton Co., 710 F. 3d 171 (2013), available here, that the WSLA applies to civil actions under the FCA. But in KBR, the Supreme Court reversed the Fourth Circuit and held that the WSLA applies only to criminal charges. Thus, this ruling is a win for defendants seeking to dismiss a FCA case on statute of limitations grounds, because FCA plaintiffs may not rely on the WLSA to toll the statute of limitations during times of war or official conflict.
As to the second issue, the Court resolved a circuit court split and asserted that under the FCA, “an earlier suit bars a later suit while the earlier suit remains undecided but ceases to bar that suit once it is dismissed.” The first-to-file rule, set forth in 31 U.S.C. § 3730(b)(5), provides that “[w]hen a person brings an action . . . no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” The petitioner in KBR argued that the term “pending” is “used as a short-hand for the first filed action.” Thus, the petitioner asserted that the first-filed action remains “pending” even after it has been dismissed and should forever bar any subsequent related action. The Court rejected the petitioner’s position and held that “a qui tam suit under the FCA ceases to be ‘pending’ once it is dismissed.” Thus, under the Court’s rule, the first-to-file bar no longer applies once an earlier FCA suit is dismissed.
In reaching its holding on the meaning of “pending,” the Court acknowledged that “if the first-to-file bar is lifted once the first-filed action ends, defendants may be reluctant to settle such actions for the full amount that they would accept if there were no prospect of subsequent suits asserting the same claims.” The Court indicated, however, that the doctrine of claim preclusion could potentially provide some protections for defendants if the first-filed action is decided on the merits, but it declined to address this issue because it was not before the Court.
The full text of KBR is available here.