U.S. Supreme Court Rejects Indefinite Tolling of False Claims Act under Wartime Suspension of Limitations Act; Holds First-to-File Bar Only Applies to Pending Cases
Yesterday, in Kellogg Brown & Root Services, Inc., et al. v. United States ex rel. Carter, 575 U.S. __ (2015), the Supreme Court settled two important questions under the False Claims Act (the FCA). In a unanimous decision authored by Justice Alito, the Court held: (1) the Wartime Suspension of Limitations Act (WSLA) applies only to criminal actions, and thus the statute of limitations under the FCA is not tolled under the WSLA while the United States is at war; and (2) the FCA first-to-file bar prevents the filing of an FCA action only when a related action is pending, not when a related action has been filed but dismissed.
During the past several years, FCA qui tam relators and the government have argued, with some success, that the WSLA, an obscure statute first enacted during World War I that tolls the statute of limitation on certain “offenses” while the United States is at war, tolls the statute of limitation under the FCA. As a result, relators and the government have been able to pursue violations of the FCA that occurred as long as 20 years ago. In Carter, the Court emphatically rejected application of the WSLA to civil actions, such as actions under the FCA. Rather, the Court held that the WSLA applies only to “offenses,” which, as used in the WSLA, means criminal offenses.
The Court further limited a defense to duplicative FCA actions known as the first-to-file bar. The first-to-file bar, codified at 31 U.S.C. § 3730(b)(5), states that when a qui tam relator 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.” KBR argued that this provision barred qui tam actions both where an earlier filed related qui tam is pending, and where such a qui tam had already been adjudicated. KBR reasoned that interpreting the first-to-file bar as applying only to pending cases would allow the filing of serial claims against defendants and create a disincentive to settlement. The Court rejected KBR’s argument, holding that an action is no longer “pending” once dismissed.
Carter represents another significant victory for FCA defendants before the Supreme Court. The Court’s holding that the WSLA is inapplicable to civil actions under the FCA is an important precedent that will prohibit relators and the government from pursuing long-stale claims. The limitation of the first-to-file bar to pending actions has the potential to expose defendants to serial whistleblower litigation, but only in a small subset of cases where other defenses like claim preclusion and the public disclosure bar are not available.
Special thanks to Proskauer summer associate Krista L. White for her contributions to this post.