Friday, October 10, 2014

United States Supreme Court To Review Two Qui Tam Issues: Application of “First-to-File” Under the Federal False Claims Act and Tolling Provisions of the Wartime Suspension of Limitations Act

The United States Supreme Court granted certiorari on July 1, 2014 to review the United States Fourth Circuit’s March 18, 2013, decision that reversed the district court’s dismissal of a qui tam petitioner’s False Claims Act (“FCA”) complaint, with prejudice. See United States v. Halliburton Co., 710 F.3d 171 (4th Cir. 2013).

In his complaint, the petitioner alleged that Halliburton Company, KBR, Inc., Kellogg Brown & Root Services, Inc. and Service Employees International (collectively “KBR”) fraudulently billed the United States for services provided to the military forces serving in Iraq. The district court dismissed the petitioner’s complaint on two bases: (1) because the district court lacked subject matter jurisdiction over the petitioner’s claims under the “first-to-file” bar of the False Claims Act, 31 U.S.C. § 3730(b)(5) and (2) because the petitioner’s complaint was filed beyond the six-year statute of limitations and had not been tolled by the Wartime Suspension of Limitations Act (“WSLA”), 18 U.S.C. § 3287. The district court ruled that the WSLA did not apply to non-intervened qui tam cases. The Fourth Circuit, however, reversed and held that the district court did have jurisdiction and that the WSLA did apply to the qui tam action.

While there were previously filed qui tam actions against KBR urging false billing practices, the petitioner urged that those cases did not bar his qui tam action because they alleged false billing practices in different work scopes and by different employees in different company divisions than those alleged in his complaint. The Fourth Circuit, however, applied the “material elements test” that had been adopted by the Third, Fifth, Sixth, Ninth, Tenth, and D.C. Circuits, instead of a test requiring “identical” actions, and held that all of the actions essentially involved submission of false time sheets in order to falsely claim payment.

The petitioner further argued that, although the other cases were active when his case was filed, they had since been dismissed, so they were no longer a “pending” case giving rise to the “first-to-file” bar of the statute. On this point, the Fourth Circuit agreed and held that the district court’s dismissal with prejudice was incorrect.

Regarding application of the WSLA to toll the six-year statute of limitations for an action under the FCA, the statute originally tolled the statute of limitations regarding offenses involving defrauding or attempting to defraud the United States that were “indictable under any existing statutes,” but that requirement was deleted from the statute in 1944. KBR argued that the use of the term “offense” in the statute maintained the statute’s original intent to toll only criminal actions; therefore, the petitioner’s civil qui tam action was barred by the statute of limitations, which had not been tolled due to the Iraq conflict. The Fourth Circuit, though, held that, if Congress had intended that result, it could have done so by not deleting the “indictable” requirement in 1944, so the statute of limitations on the petitioner’s action had been tolled by the WSLA.

On July 1, 2014, the U.S. Supreme Court granted certiorari to decide:

1. Whether the Wartime Suspension of Limitations Act--a criminal code provision that tolls the statute of limitations for "any offense" involving fraud against the government "[w] hen the United States is at war," 18 U.S.C. § 3287, and which this Court has instructed must be "narrowly construed" in favor of repose--applies to claims of civil fraud brought by private relators, and is triggered without a formal declaration of war, in a manner that leads to indefinite tolling.

2. Whether, contrary to the conclusion of numerous courts, the False Claims Act's so called "first-to-file" bar, 31 U.S.C. § 3730(b)(5)--which creates a race to the courthouse to reward relators who promptly disclose fraud against the government, while prohibiting repetitive, parasitic claims--functions as a "one-case-at-a-time" rule allowing an infinite series of duplicative claims so long as no prior claim is pending at the time of filing.

We will keep an eye out for a decision, but in the meantime, for your reference, the U.S. Supreme Court docket information is linked here, and the Fourth Circuit’s March 18, 2013, decision is linked here.

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