On May 26, 2015, the Supreme Court issued a unanimous opinion in Kellogg Brown & Root v. United States ex rel. Carter (S. Ct. No. 12-1497), a case addressing several important issues under the False Claims Act (FCA).  In a previous post, we laid out the two issues in this case.  First, when the United States is at war, does the Wartime Suspension of Limitations Act (WSLA) toll the statute of limitations in civil FCA lawsuits?  Second, does the FCA’s so-called “first-to-file” bar prevent all future cases based on the same alleged fraud, or is it a one-case-at-a-time rule, allowing duplicative claims in the future as long as the first action is settled or dismissed?

The Court ruled in favor of Kellogg Brown & Root (KBR) on the first issue, holding that the WSLA only tolls the statute of limitations for criminal offenses, not in civil false claims like the relator filed against KBR.  The WSLA tolls the statute of limitations for “any offense” involving fraud against the government during war.  First, the Court reasoned that the term “offense” usually refers to a crime.  And, in Title 18, where Congress chose to place the WSLA, the term always refers to a crime.  Next, the Court looked to the history of the WLSA.  In doing so, it was most persuaded by Congress’ decision to remove the language “now indictable” from the statute.  According to the Court, this revealed Congress’ intent to apply the WSLA to future fraud as well as past fraud, not—as the government and relator argued—to expand it to civil lawsuits.  Finally, the Court reasoned that it has repeatedly called for a “narrow” construction of the WSLA.  Therefore, even in times of war, relators bringing civil actions against companies like KBR will have to follow the FCA’s statute of limitations provision.  See31 U.S.C. § 3731(b).

On the second issue, the Court agreed with the government and relator, holding that a previously-filed qui tam lawsuit under the FCA is no longer “pending” under the statute’s first-to-file bar once it is dismissed.  When a 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.”  See 31 U.S.C. § 3730(b)(5) (emphasis added).  In finding that a previously-filed lawsuit only qualifies as “pending”—thereby prohibiting subsequent qui tam suits—if the first action is still being litigated when the subsequent action is filed, the Court said it was construing the term “pending” per its usual meaning.  The Court further reasoned that any other interpretation would mean that Congress intended to abandon potentially successful false claims actions even in situations where the first-filed suit is dismissed for reasons that do not involve the merits.

In practice, the decision may permit second, and even third, lawsuits under the FCA on the same set of facts.  Indeed, rather than reduce litigation, it may have the opposite effect: encouraging more qui tam litigation.  The Court acknowledged that there is “some merit” to this point, and noted that claim preclusion “may protect defendants if the first-filed action is decided on the merits.”  Nonetheless, the Court concluded that this was not the issue before it in KBR.

While the KBR decision addresses two significant questions, it raises many more:  When does an earlier decision—dismissing a first-filed case—bar a later suit under the doctrine of claim preclusion?  When settling an FCA case, will the settlement agreement’s terms, including the government’s civil release, limit the possibility of a future FCA action based on the same conduct?  And, after KBR, will relators seek to refile or revive claims dismissed under the reading of the FCA rejected by the Court?  We will continue to monitor these issues.