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.

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