Fourth Circuit Expands False Claims Act Statute-Of-Limitations Period

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For the first time in the more than 50-year history of the statute, a federal appeals court has applied the Wartime Suspension of Limitations Act (WSLA), 18 U.S.C. § 3287, to a civil False Claims Act (FCA) case.  A World War II-era statute, the WSLA tolls any statute of limitations relating to an "offense" involving "fraud or attempted fraud" against the federal government "[w]hen the United States is at war."  18 U.S.C. § 3287.  In United States ex rel. Carter v. Halliburton Co., 2013 WL 1092732 (4th Cir. Mar. 18, 2013), a divided panel of the U.S. Court of Appeals for the Fourth Circuit concluded that the WSLA tolled the six-year FCA statute of limitations, 31 U.S.C. § 3731(b)(1), for false claims alleged under a 2005 war zone contract in Iraq involving water purification services.  Reversing the district court and remanding the case for further proceedings, the panel interpreted the term "offense" in the obscure WSLA statute to apply both to criminal and civil FCA actions.  According to the panel, the WSLA tolling provisions are operative even though the United States has not formally declared war and even if the government has not intervened as a party in the underlying FCA action.  Judge Agee filed a partial dissent, concluding that the United States must be a party in the FCA case for the WSLA provisions to apply.

The Carter decision leaves contractors increasingly vulnerable to stale claims asserted by opportunistic litigants.  Although a federal district court in Texas reached a similar conclusion on the WSLA last year in an FCA case (United States v. BNP Paribas SA, 884 F. Supp. 2d 589 (S.D. Tex. 2012)), that decision had been viewed largely as an outlier given the absence of an appellate court ruling.  Not surprisingly, qui tam plaintiffs with cases pending in the Fourth Circuit and other circuits already are relying on the Carter decision to preserve old claims, including claims completely unrelated to wartime contracts.  See, e.g., Relator's Supplemental Opposition to Defendant's Motion to Dismiss, United States  ex. rel Tullio Emanuele v. Medicor Assocs., Civil Action No. 10-245E (W.D. Pa. filed Mar. 29, 2013). 

Since the Carter case has been remanded to the district court for further proceedings, it likely will remain in place for some time, absent reconsideration by the Fourth Circuit.  In the meantime, defendant contractors may be forced to grapple with qui tam relators seeking to extend the FCA statute of limitations in perpetuity while the United States is fighting the war against terrorism.  Contractors may find some solace in the FCA's 10-year statute of repose, as the Fourth Circuit left unresolved whether it would be trumped by the WSLA's tolling provisions.  Under the FCA, claims must be brought within the later of six years after the violation occurred or three years after the “official of the United States charged with responsibility to act in the circumstances” knows or should have known of the "facts material to the right of action" but "in no event more than 10 years after the date on which the violation is committed."  31 U.S.C. § 3731(b)(2).  While it remains uncertain whether other federal district courts and circuit courts of appeals will interpret the WSLA as broadly as Carter, to the extent the WSLA is found to toll the FCA statute of limitations, the FCA statute of repose should limit the WSLA tolling to 10 years.  However, contractors must be ever vigilant in resisting the large-scale application of the Carter decision to resurrect untimely FCA claims in other circuits.