Posts Tagged ‘first to file’

Supreme Court Supports Narrow Interpretation of First-to-File Bar; Rejects Wartime Statute of Limitations

kbr-logoIn a rare unanimous decision last week, the United States Supreme Court issued a long-awaited opinion to False Claims Act (FCA) relator Benjamin Carter in the case of Kellogg, Brown & Root, Inc., et al v. U.S. ex rel. Carter, 575 U.S. ___ (2015). Justice Samuel Alito wrote for the undivided Court. Read More…

 

Kellogg Brown Supreme Court Case Likely A Split For The Whistleblower

Supreme Court To Consider Whistleblower Cases

720px-Seal_of_the_United_States_Supreme_Court.svgOn January 13, 2015, the United State Supreme Court heard oral arguments in the matter of Kellogg Brown & Root Service, Inc., et al., v. United States, ex rel. Benjamin Carter that we previewed last year.  This qui tam case raised two issues for the Court to decide:

  1. Can the Wartime Enforcement of Fraud Act’s statute of limitations tolling provision be applied to civil claims brought by private citizens?
  2. Does the FCA’s “first-to-file” requirement act as a “one-case-at-a-time” rule, allowing as many related claims to be filed as long as no prior claim is pending?

Read More…

 

U.S. Supreme Court Agrees to Hear False Claims Act Case about Statute of Limitations and First-to-File

The United States Supreme Court granted certiorari today in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, a False Claims Act case addressing two issues: the proper statute of limitations under the Wartime Suspension of Limitations Act (“WSLA”), and the application of the first-to-file bar once an earlier case is no longer pending. “Granting certiorari” is the legal terminology which means that the country’s highest court will hear arguments and make a decision in a case. This is a big step in itself, because very few cases which apply for certiorari actually get reviewed by the Court. The Supreme Court Justices and their clerks receive 8,000 to 10,000 petitions for review every year, and only 80 – 100 actually are heard during a term.

KBR v. U.S ex rel. Carter is a False Claims Act case which was originally filed in the Eastern District of Virginia and appealed to the Fourth Circuit Court of Appeals.  Benjamin Carter, a KBR employee in Iraq, filed the qui tam case regarding allegations that KBR submitted false claims by failing to perform required water purification services and by manipulating time records to submit bills for work not actually performed.  The procedural history of the case is complex, involving multiple dismissals and re-filings of Carter’s case over a period of years. The complaint at issue in the case was ultimately filed in 2011.

The first issue on appeal involves the application of the WSLA to False Claims Act cases. The WSLA is a provision of the United States Civil Code which extends the statute of limitations to bring a case during periods when the United State is at war.  The Fourth Circuit held that the WSLA applied to civil fraud cases during times of conflict, whether or not a “war” was formally declared. The court held, “The purpose of the WSLA – to combat fraud at times when the United States may not be able to act as quickly because it is engaged in ‘war’ – would be thwarted were we to find that the United States must be involved in a declared war for the Act to apply.” U.S. ex rel. Carter v. Halliburton Co., 710 F.3d 171, 179 (4th Cir.2013).  By the court’s calculation, the United States had been “at war” since Congress authorized President Bush to use military force in Iraq on October 11, 2002, and the WSLA tolled the statute of limitations since that time.

The second issue on appeal addresses whether the “first to file” bar – the rule that requires that a relator be the first to file a case against a defendant in order to bring the case – applies once an earlier case has been dismissed.  The Carter case presents a unique situation where earlier cases were pending at the time that Carter originally filed his case, but he re-filed the case once the earlier cases had both been dismissed. The Fourth Circuit held that, “once a case is no longer pending the first-to-file bar does not stop a relator from filing a related case.” Id. at 183. Therefore, Carter’s re-filed case was permitted to move forward.

From the prospective of relators’ counsel, it is not necessarily a positive sign that the Court has granted cert on both of these issues – though we are far from being able to predict the Court’s decision on any issue.  On one hand, the Court could have denied cert if it was comfortable with the holdings from the Fourth Circuit and wanted to leave the decisions as they stand.  On the other hand, both of these issues have caused splits among the circuit courts, so the Supreme Court may want the opportunity to clarify that these are the proper standards for all circuits to apply.  We are hopeful for the more optimistic approach, but with the present make-up of the Court, it is reasonable to be a bit concerned about what the Court has in mind.

The KBR case has been slated for the October 2014 term.  We will keep a very close eye on this case and post updates as soon as they are available.

If you have any questions about this blog or about the False Claims Act in general, please contact us through the website or give us a call at 1-800-651-2502.

 

A Race to the Courthouse: Why Being First Matters in Qui Tam Cases

A major point of emphasis in nearly every discussion of bringing a qui tam case is filing the case as early as possible.  Though there are several reasons for this, the most important is due to a part of the False Claims Act known as the “first-to-file bar.”  In sum, the first-to-file bar creates a literal “race to the courthouse” where the runner-up can be completely excluded from the proceeds of a successful qui tam lawsuit just by being in “second (or third, or fourth…) place.”  This means that, even if an investigation leads to a successful recovery, the so-called “later-filed relator” may walk away empty-handed while the first-filed relator reaps a significant financial award.

Section 3730(b)(5) of the Federal False Claims Act says,

          When a person brings an action under this subsection, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.

In other words, when a person files a qui tam complaint, no one else can file a complaint against the same defendant for the same fraud while the first case is pending.  Though the language of the statute is relatively short, there are several key parts which are equally important when determining whether a case is impacted by the first-to-file bar.

Is the First Case Pending?

The first-to-file bar does not create a permanent ban for all time against a defendant who has faced a qui tam allegations.[1]  However, the bar is in effect for the life of the first case – from the time is it is filed under seal until the time it is dismissed, settled or tried to a verdict.  In re Natural Gas Royalties Qui Tam Litigation (CO2 Appeals), 556 F.3d 956, 964 (10th Cir. 2009)(“The ‘pending’ requirement much more effectively vindicates the goal of encouraging relators to file; it protects the potential award of a relator while his claim remains viable, but, when he drops his action another relator who qualifies as an original source may pursue his own.”)

It can be very difficult to know whether there is a pending qui tam case which would impact a later-filed case.  Of course, if a case has been unsealed, it will appear on the publicly-accessible federal court docket, and there may well be media articles covering the case.  A major difficulty is presented by sealed cases, which by nature are not readily discoverable by the public.  On occasion, a whistleblower may hear water-cooler conversation about another employee filing a qui tam case, or experienced qui tam counsel may be able to read the tea leaves to interpret common corporate practices by a company involved in a False Claims Act investigation.  But, while these may be strong clues, it is impossible to know with certainty whether another qui tam case has been filed and remains under seal.

It is important to remember that for purposes of the first-to-file bar, it does not matter whether the later-filed relator had actual knowledge of the first-filed complaint.  It is strictly a matter of being first-in-time.

What is a “Related Action” for Purposes of the First-to-File Bar?

Later-filed cases are only precluded by the first-to-file bar if it is a “related action based on the facts underlying the pending action.”  While that standard is broad, it is not all-encompassing, meaning that a defendant is not automatically protected from all other qui tam cases just by virtue of one case existing.  There has been extensive case law developed around the issue of what constitutes “a related action based on the facts underlying the pending action” and ultimately a first-filed and later-filed complaint will require a head-to-head comparison to see whether the first-to-file bar is invoked.  U.S. ex rel. LaCorte v. SmithKline Beecham Clinical Laboratories, Inc., 149 F.3d 227, 234 (11th Cir. 1994)

Two complaints do not need to be identical for the first-filed complaint to preclude the later-filed complaint.  U.S. ex rel. Batiste v. SLM Corp., 659 F.3d 1204, 1208 (D.C. Cir. 2011).  If the first-filed complaint provided the information necessary to set the government on the trail of fraud, then it will bar any later-filed complaints that would be traveling on the same trail.  LaCorte, 149 F.3d at 232-34.  The bar is exception-free.  U.S. ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1187 (9th Cir. 2001).

However, there are situations where the first-to-file bar does not prohibit a second complaint.  For example, if a complaint alleges a similar fraudulent scheme but identifies different defendant companies than an earlier-filed complaint, then the later-filed complaint may still survive.  In re Natural Gas Royalties Qui Tam Litigation (CO2 Appeals), 556 F.3d at 962.  Similarly, if the later-filed complaint identifies the same defendants but an entirely unique fraudulent scheme, then the later-filed complaint will likely not be subject to the first-to-file bar.  U.S. ex rel. Heineman-Guta v. Guidant Corp., 874 F.Supp.2d 35, 38 (D.Mass. July 5, 2012).

If a whistleblower learns of a first-filed, pending complaint, experienced qui tam counsel will conduct an exacting comparison of the two complaints to determine if there are unique aspects or whether the cases overlap entirely.  The relators and their counsel may reach an agreement on how to proceed, or the government or the judge can assist in the process.  There may even be situations where a second-filed complaint would be precluded by the first-to-file bar, but the two relators resolve to work together to present a stronger case against the defendants.  Experienced qui tam counsel will present a relator with all viable options before determining how to proceed.

Conclusion

Beyond just the first-to-file bar, there are additional reasons why a relator should come forward as early as possible to report fraudulent conduct.  From a purely ethical standpoint, the sooner the fraud is reported, the sooner it can be stopped.  Additionally, the timeliness of a relator’s complaint is considered in the factors that determine the relator’s share at the end of a successful case.  Simply put, a relator is given additional consideration if he came forward with evidence of the fraud as soon as the scheme was apparent, rather than waiting months or years while the government continued to be victimized.

The most important thing a relator can do to avoid the first-to-file bar is to seek out qui tam counsel as soon as he is aware of fraud against the government.  A relator who comes to the first meeting with well-organized and documented allegations will be valuable in moving the case forward quickly and efficiently.  Because the potential consequences of being the second-filed relator are so severe, the relator should expect a sense of urgency to get a case investigated and filed as soon as possible.  Being available and helpful during this period may make the ultimate difference in whether a case can proceed or whether it is precluded by the first-to-file bar.

If you believe you have information regarding fraud against the government and are considering bring a False Claims Act case, please contact James Hoyer for an evaluation of your claims.  Click here for more information about the firm and to submit your information electronically, or you may contact our office at 813-397-2300.

Written by Jillian Estes



[1] Once a case is resolved and unsealed, there may be other issues such as the Public Disclosure Bar or claim preclusion that effectively preclude a relator from moving forward with a qui tam case.  These are unique from the first-to-file bar and should be given careful consideration by a whistleblower and his attorneys before filing.