Supreme Court Resolves False Claims Act Limitations Issues
In a unanimous decision issued in May, the Supreme Court decided a False Claims Act (FCA) case that cleared up issues concerning limitations provisions and how those provisions are applied. The decision in Kellogg Brown & Root Services, Inc. v. U.S. ex rel. Carter, No. 12-1497 (2015) (KBR) has important ramifications for government contractors and all who submit claims to the government.
Many FCA cases are brought by a relator (or whistleblower) in a qui tam action. In such cases, the FCA provides that “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). In KBR, the Supreme Court resolved a split among Circuit Courts over that “first to file” bar. The key to that part of the decision was the meaning of the word “pending.” Giving the term its ordinary meaning, the Court held that a FCA claim is not barred if a previous lawsuit has been dismissed. In reaching its conclusion, the Court rejected the argument that “pending” is “short-hand for the first-filed action” and held: “This interpretation does not comport with any known usage of the term ‘pending.’” Justice Alito pointed out that under that interpretation the trial of Socrates is still pending.
In its opinion, the Supreme Court also addressed an issue that has been applied by courts and litigants to extend the FCA’s limitations period. The Wartime Suspension of Limitations Act, 18 U.S.C. § 3287 (WSLA) suspends “the running of any statute of limitations applicable to any offense . . . involving fraud or attempted fraud against the United States or any agency thereof.” The Court’s ruling on this provision turned on the meaning of the term “offense.” Following a review of the language of the WSLA and its history, the Supreme Court held that the WSLA applies only to crimes and not to civil claims. Significantly, the term “offenses” in the earlier versions of the statute applied only to crimes. The Supreme Court also rejected the argument that Congress’ removal of the phrase, “now indictable under any statute” had the effect of “sweeping in civil claims.” Justice Alito noted: “Fundamental changes in the scope of a statute are not typically accomplished with so subtle a move.”
At the end of the day, government contractors can take solace in the fact that potential FCA claims are not always lurking beyond the horizon. Since 9/11, the country has essentially been on a continuous war footing and interpretations of the WSLA have left contractors fearing that old claims could rise from the dead any time, never mind that memories, details, documents and witnesses all fade. Of course, with them any ability reasonably to defend against old allegations fades as well. After KBR, the WSLA should no longer indefinitely extend the FCA’s six year limitations period.