Posts Tagged ‘Supreme Court’

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?

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Will the Supreme Court slash False Claims Act penalties?

Gosselin Worldwide MovingOne case we’ll be watching next term is whether the Supreme Court takes the appeal of Gosselin World Wide Moving, N.V. v. U.S. ex rel Bunk.

The complicated fact pattern laid out in the Fourth Circuit’s opinion tells the tale of the defendant moving company colluding with its industry peers to artificially inflate the packing and loading component of bids submitted to the government. For its actions, the moving company was convicted of federal criminal offenses in the Eastern District of Virginia. See United States v. Gosselin World Wide Moving, N.V., 411 F.3d 502 (4th Cir. 2005).

The Fourth Circuit’s opinion ends with a final judgment of $24 million in False Claims Act (FCA) penalties even though the actual damages inflicted on the government were much less than that amount. This is because once liability is established, the FCA permits treble damages plus a civil penalty of $5,000 to $11,000 for each false claim submitted. In the Gosselin case, the penalties added up quickly because the Fourth Circuit ruled that the FCA allows for a separate penalty for each of the more than 9,000 false invoices the moving company submitted to the government.

The American Hospital Association, United States Chamber of Commerce, and the Pharmaceutical Research and Manufacturers of America joined forces to submit an amici curiae brief (amici curiae is a legal term meaning that the organizations are offering the court information although they are not parties in the case) to encourage the Supreme Court to hear the case in order to limit the moving company’s exposure under the FCA.

The organizations that joined in the amici curiae brief are made up of businesses that would greatly benefit from decreased FCA exposure so their interest in the case is readily apparent. Conversely, the case is equally important to whistleblowers who could see their case’s value severely diminished by an adverse Supreme Court decision.

We at James Hoyer hope that the Supreme Court agrees with the Fourth Circuit that the dollar amount “appropriately reflects the gravity of Gosselin’s offenses and provides the necessary and appropriate deterrent effect going forward.” We’ll let you know what happens.

If you have any questions about this case or any other whistleblower matter, please contact us.


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.


Supreme Court Extends Whistleblower Protections

The U.S. Supreme Court has decided whistleblower protections apply not just to publicly traded companies but also to subcontractors that do business with them.

The justices voted 6-3 along non-ideological lines in a ruling that extends whistleblower protections to investment advisers, law firms, accounting firms and other such businesses working for public companies.

The court majority said the decision was in accordance with how the U.S. Department of Labor had interpreted the law for almost a decade. Justice Ruth Bader Ginsburg, writing for the majority, noted that Congress had enacted Sarbanes-Oxley after accounting problems brought down energy company Enron Corp and communications provider WorldCom Inc, calling those events the “mischief to which Congress was responding.”

The three dissenting justices said the ruling had a “stunning reach” that could give protections far beyond that, potentially even reaching household employees like babysitters.

The National Federation of Independent Business criticized the decision, saying in a statement that it gave plaintiffs’ lawyers “additional incentives to pursue aggressive litigation” against employers.

The justices were interpreting part of the Sarbanes-Oxley Act, the 2002 Wall Street reform law passed by Congress that sets standards for all U.S. publicly traded company boards, management and public accounting firms.

Read more from Reuters.


Supreme Court Denies Cert in Allison Engine Retroactivity Case

Supreme CourtAmid a series of high-profile and highly anticipated decisions this week, the Supreme Court made a relatively minor decision with potentially far-reaching consequences for the False Claims Act on June 24, 2013.  The highest court in the United States denied a petition for certiorari in a case called Allison Engine Company v. United States ex rel. Sanders.  The decision, commonly called “denying cert,” means that the Supreme Court decided not to hear an appeal of a Sixth Circuit opinion in the case.  The question before the Court was whether Section 3729(a)(1)(B) of the False Claims Act applies retroactively to cases pending on or after June 7, 2008, where allegedly no false claims for payment were pending on or after that date. Read More…