On January 13, 2015, the United States Supreme Court heard oral argument in Kellogg Brown & Root v. United States ex rel. Carter, No. 12-1497, a False Claims Act (FCA) qui tam case involving allegations of fraudulent billing brought by a former employee against a government contractor, Kellogg Brown & Root Services, Inc. (KBR). The case focuses on two procedural issues involving the tolling of the FCA’s statute of limitations under the Wartime Suspension of Limitations Act (WSLA) and the FCA’s first-to-file bar, each of which could have a significant impact on FCA litigation.
The first issue pertains to the statute of limitations, specifically, whether the WSLA, a criminal code provision that tolls the statute of limitations for “any offense” involving fraud against the government when the United States is “at war,” applies to claims of civil fraud brought by relators in FCA cases. The Justices appeared skeptical of the relator’s argument that the statute of limitations under the FCA is tolled by the WSLA, given that the WSLA applies to “offenses” and appears in the criminal code. Based on the nature of the Justices’ questioning during oral argument, it appears that the Supreme Court could reverse the decision of the Fourth Circuit, and rule that the WSLA does not toll the statute of limitations in FCA cases. Such a decision would be a favorable result for FCA defendants.
The second issue relates to the scenario in which multiple relators file suit based on the same alleged misconduct. The specific question is whether the FCA’s first-to-file bar functions as a “one-case-at-a-time” rule, which permits as many related claims to be filed by different relators as long as no prior claim is pending. The FCA’s first-to-file bar prohibits a subsequent would-be relator from brining a “related action based on the facts underlying [a] pending action.” 31 U.S.C. § 3730(b)(5). In the KBR case, another whistleblower had filed suit before the relator brought his claims against KBR, but the prior suit was dismissed without a ruling on the merits. The Fourth Circuit found in favor of the relator, holding that the first-to-file bar serves to prevent only simultaneous litigation; once the first case is no longer “pending,” the next case can proceed. During oral argument, KBR argued that the relator was barred from bringing suit because KBR already won against the prior whistleblower. KBR argued that the purpose of the first-to-file bar was to reward relators who promptly disclose fraud against the government, so the first suit served its purpose by bringing allegations of fraud to the government’s attention, even though the case ultimately was dismissed. The Justices did not appear persuaded by KBR’s argument, stating that KBR’s interpretation effectively writes the word “pending” out of the statute. It is not entirely clear how the Supreme Court will rule on this issue, but the decision will impact FCA defendants facing lawsuits by multiple relators who are in a “race to the courthouse.”
Notably, it is also possible that the Supreme Court could rule without actually deciding on the first-to-file issue. If the Court decides the WSLA issue in KBR’s favor, and the Court concludes that the FCA’s statute of limitations was not tolled with respect to the alleged conduct at issue, KBR has represented that it would prevail in its case against the relator.
The parties’ briefing is available here. King & Spalding will keep you updated on any developments in this case.
Reporter, Jennifer S. Lewin, Atlanta, + 1 404 572 3569, jlewin@kslaw.com.
