On July 1, 2014, the Supreme Court granted certiorari in Kellogg Brown & Root Services, Inc., et al. v. United States ex. rel. Carter, which raises two issues central to False Claims Act litigation involving, respectively, the FCA’s first-to-file bar and statute of limitations.
Benjamin Carter, a former employee of Kellogg Brown & Root (KBR) filed a qui tam action against KBR, alleging that the company had fraudulently billed the United States for services provided to the U.S. military in Iraq in 2005. After prior versions of his complaint were dismissed for procedural defects, Carter filed an amended complaint in 2011. The district court dismissed Carter’s 2011 complaint with prejudice on two grounds. First, the district court held that the complaint had been filed beyond the FCA’s six-year statute of limitations, and that the Wartime Suspension of Limitations Act (WSLA)—which would have tolled the statute of limitations—did not apply. Second, the district court held that it lacked subject matter jurisdiction over Carter’s claims under the FCA’s first-to-file rule because his allegations substantially overlapped with a previously-filed suit that was dismissed shortly after Carter filed his 2011 complaint. The Fourth Circuit reversed on both grounds.
The WSLA tolls the statute of limitations for “any offense” involving fraud against the federal government “[w]hen the United States is at war.” 18 U.S.C. § 3287. The Fourth Circuit held that the Act applies to all civil actions, including FCA claims brought by private relators in which the United States has declined to intervene. The Court also held that the Act “does not require a formal declaration of war,” reasoning that such a requirement “would be an unduly formalistic approach that ignores the realities of today[.]” Accordingly, the Court held that Carter’s claim was not time-barred. Petitioners argue that this holding effectively repeals the statute of limitations for civil fraud claims and authorizes an indefinite tolling of FCA claims pursuant to the WSLA.
The first-to-file bar provides that “[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.” 31 U.S.C. § 3730(b)(5). The Fourth Circuit joined the Seventh and Tenth Circuits in holding that the rule bars duplicative qui tam suits only during the period that a related, previously-filed suit remains “pending,” and permits the duplicative suit to proceed once the prior action has been resolved. Petitioners argue that, as held by the First, Fifth, Ninth, and D.C. Circuits, the first-to-file rule bars new suits even if the initial action is no longer pending. Petitioners contend that the fundamental purpose of the first-to-file rule is satisfied “even when an earlier-filed case has been dismissed” because the earlier case “alerted the government to the essential facts of an alleged fraud[.]”
The Supreme Court will address both issues on appeal. Specifically, the Court will decide (1) whether the WSLA “applies to claims of civil fraud brought by private relators, and is triggered without a formal declaration of war;” and (2) whether the FCA’s first-to-file bar “functions as a ‘one case-at-a-time’ rule.” The Court’s decision will resolve a significant circuit split on the first-to-file bar, and will carry important practical consequences regarding the scope of FCA liability.