United States ex rel. Carter v. KBR, Inc.: Some Good News and A Little Bad News for Whistleblowers
Last Tuesday, the United States Supreme Court issued its long-awaited ruling in United States ex rel. Carter v. KBR, Inc. The case dealt with two significant procedural issues related to the False Claims Act (“FCA”): (1) whether the tolling provisions of the Wartime Suspension of Limitations Act (“WSLA”) applied to civil as well as criminal claims; and (2) whether the FCA’s “first-to-file” rule only bars new claims while related claims are still “live”, i.e., have not been adjudicated. In unanimously answering “no” to the first question but “yes” to the second, the Court took from relators with one hand while giving with the other.
The FCA’s statute of limitations provision, states that a qui tam action must be brought within six years of a viola¬tion or within three years of the date by which the United States should have known about a violation. However, the WSLA provides that “[w]hen the United States is at war … the running of any statute of limitations applicable to any offense … involving fraud or attempted fraud against the United States … shall be suspended until 5 years after the termination of hostilities.” 18 U.S.C. § 3287. The FCA provides for the recovery of treble damages against any person who, among other things, knowingly presents a false or fraudulent claim to the United States government for payment or approval. 31 U.S.C. § 3729(a)(1)(A). From the perspective of potential FCA defendants, the KBR case threatened to establish indefinite tolling of the FCA limitations period as a result of United States military engagement, including in Afghanistan and Iraq.
The FCA’s first-to-file rule, meanwhile, precludes a qui tam suit “based on the facts underlying [a] pending action.” §3730(b)(5) (emphasis added).
The Supreme Court, in determining that the WSLA’s tolling provision did not reach civil claims, looked at the text and history of the statute. Essentially, the Court did not buy Relator’s argument that the 2008 amendment to the statute – which referenced only “offenses” rather than “indictable” offenses, as it had previously – marked a dramatic revision to the law to thereafter reach civil as well as criminal claims involving fraud related to the prosecution of a war.
However, the case was by no means a total loss for whistleblowers, as the Court handed them a significant victory as well. Citing a split 2014 decision from the District of Columbia U.S. Circuit Court of Appeals in U.S. ex rel Shea v. Cellco, KBR had argued that Congress meant “first filed” when it used the word “pending” in the FCA statute. The Court roundly rejected this argument. In determining the meaning of the word “pending”, the Court – following the dictionary definition of the term – interpreted the rule to mean that: “an earlier suit bars a later suit while the earlier suit remains undecided but ceases to bar that suit once it is dismissed.” Labeling KBR’s interpretation of “pending” as “peculiar,” the Court held that such an interpretation:
does not comport with any known usage of the term “pending.” Under this interpretation, Marbury v. Madison, 1 Crunch 137 (1803), is still “pend¬ing.” So is the trial of Socrates.
To KBR’s argument that the “narrower” reading of “pending” would create problems, particularly regarding a defendant’s willingness to settle, the Court, while acknowledging the possible merit of the argument, replied that ensuring the smooth operation of the FCA’s many procedural rules was beyond the power of a single ruling.
The Court’s holding has closed the door on Relators hoping to use the WSLA to bring civil claims otherwise barred as untimely under the FCA. However, by rejecting KBR’s expansive reading of “pending”, the Court has ensured that Relators will not be barred from bringing meritorious actions simply because a related case had previously been filed.