1) Does the Wartime Suspension of Limitations Act—which tolls the statute of limitations for an offense that involves fraud against the United States during wartime—apply to civil fraud claims and require a formal declaration of war?
2) Once a party files a suit, does the False Claim Act bar all subsequent suits based on similar facts indefinitely or only while the initial suit is pending before a court?
Benjamin Carter brought an action under the False Claims Act (“FCA”), alleging that Kellogg Brown & Root (“KBR”) had misrepresented water purification work and falsified time sheets in order to overbill the United States government. In this case, the Supreme Court will have the opportunity to resolve whether the Wartime Suspension of Limitations Act (“WSLA”) applies to civil suits brought under the FCA and whether the FCA bars all subsequent suits after a party files a suit based on the same underlying facts. KBR contends that the WSLA tolls the statute of limitations only for criminal suits and that the FCA bars every suit subsequent to the first suit filed on similar facts. Carter counters that the WSLA tolls both criminal and civil suits and that the FCA bars subsequent suits only when a similar suit is pending before a court. The Court’s ruling will affect whistleblowers as well as businesses and health care providers that supply services to the United States government.
Questions as Framed for the Court by the Parties
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.
Kellogg Brown & Root (“KBR”) had a government contract to supply logistical services to the United States military in Iraq. See U.S. ex rel. Carter v. Halliburton Co., 710 F.3d 171, 174 (4th Cir. 2013). For about three months in 2005, Benjamin Carter worked for KBR as an operator of a water purification unit. See id. Carter alleged that KBR was not purifying water but was misrepresenting to the United States that it was. See id. Carter also alleged that, along with other employees, he was instructed to submit time sheets that stated he worked twelve hours per day and eighty-four hours per week for worked performed in the water purification unit, even though he and other employees did not work these hours and the time sheets overbilled the United States. See id. at 174-75.
In 2006, Carter filed under seal “a qui tam action under the False Claims Act [“FCA”]” in the District Court for the Central District of California (“California District Court”) alleging that KBR falsely billed the United States for services performed in Iraq. See U.S. ex rel. Carter v. Halliburton Co., 710 F.3d at 175. The action was unsealed in 2008 after two years of investigation and transferred to the District Court for the Eastern District of Virginia (“Virginia District Court”). See id. at 175. Carter also amended his complaint during this time. See id. In January 2009, Carter’s action was dismissed without prejudice because Carter “failed to plead fraud with particularity.” Id. Carter amended and re-filed his complaint in the same month. See id. KBR moved to dismiss the second complaint, which the Virginia District Court granted in part. See id.
In March 2010, the Department of Justice made the parties aware of a 2005 FCA case in the California District Court—United States ex rel. Thorpe v. Halliburton Co. (“Thorpe”)—that involved a similar claim of fraud. See U.S. ex rel. Carter v. Halliburton Co., 710 F.3d at 175. KBR filed a motion to dismiss Carter’s suit on the grounds that it violated the FCA since it was a “related action based on the facts underlying the pending action.” See id.; 31 U.S.C. § 3730(b)(5). Carter, in turn, “argued that Thorpe was materially different” because it dealt with fraudulent billing while KBR was doing water purification work; however, his action focused on the misrepresentation to the United States that KBR was engaged in water purification work while KBR was not actually doing that work. U.S. ex rel. Carter v. Halliburton Co., 710 F.3d at 175. Carter failed to convince the Virginia District Court that Carter’s action and Thorpe were different, and thus the Virginia District Court dismissed his claim without prejudice in May 2010. See id.
A couple months later, the California District Court dismissed Thorpe in July 2010, and as a result, Carter re-filed his complaint two more times in the Virginia District Court—once in 2010 (which was dismissed in 2011), and another in 2011. See U.S. ex rel. Carter v. Halliburton Co., 710 F.3d at 175-76. In 2011, KBR moved to dismiss on the grounds that “the complaint was barred by two related actions, that the case was time barred, and that the case was barred by the public disclosure provision of the FCA.” See id. at 176. In fact, when Carter re-filed in 2011, two other plaintiffs had brought earlier-filed actions alleging that KBR had falsified time sheets in order to overbill the United States. See id. These two actions were dismissed in 2011 and 2012. See id. However, Carter’s claim was dismissed with prejudice in late 2011 because there was at least one pending action when he filed his claim in 2011. See id. The Virginia District Court also held that when Carter filed his 2011 claim, the six-year statute of limitations provided in the FCA had expired. See id. Furthermore, the Virginia District Court held that the Wartime Suspension of Limitations Act (“WSLA”)—which tolls the statute of limitations for an offense that involves fraud against the United States during wartime—did not apply to Carter’s action. See id.
On appeal, the Court of Appeals for the Fourth Circuit (“Fourth Circuit”) reversed and held that the WSLA applies to Carter’s claim, and therefore, his action was not time-barred by the FCA. See U.S. ex rel. Carter v. Halliburton Co., 710 F.3d at 180. The Fourth Circuit also held that the FCA’s “first-to-file” bar would not prevent a plaintiff from bringing an action if there are no pending actions at that time. See id. at 183.
In this case, the Supreme Court has the opportunity to determine whether the WSLA applies to civil suits brought by private parties in the name of the Government pursuant to the FCA and, if so, whether the FCA restricts multiple suits from pending simultaneously or bars all suits subsequent to the first suit filed with similar underlying facts. See Brief for Petitioners, Kellogg Brown & Root et al. at I. Petitioner KBR contends that the WSLA applies exclusively to criminal suits. See id. at 19. However, Respondent Carter asserts that the WSLA is not limited to criminal suits but instead reaches civil suits as well. See Brief for Respondent, United States ex rel. Carter at 17. Also, KBR claims that once a party initiates an FCA claim against another party, subsequent suits are statutorily barred regardless of whether the initial suit reaches a disposition or is dismissed. See Brief for Petitioners at 43, 45. Contrarily, Carter contends that the FCA bars suits that are based on the same underlying facts of a prior suit only while the prior suit is before a court. See Brief for Respondent at 47-49. Accordingly, Carter maintains that once all prior claims are no longer pending, another plaintiff may bring a suit based on the same facts. See id.
DOES THE TEXT, HISTORY, AND PURPOSE OF THE WSLA ALLOW FCA PLAINTIFFS TO INVOKE THE WSLA?
The FCA authorizes private parties to commence civil suits “in the name of the Government” against a party that presents a fraudulent claim for payment from the United States. See Brief for Petitioners at 4. KBR contends that the text, history, and purpose of the WSLA restrict use of the WSLA to criminal cases and thus, civil FCA claims do not fall under the WSLA. See Brief for Petitioners at 19, 22. KBR professes that the location of the WSLA—Title Eighteen of the United States Code, which Congress enacted to “codif[y] . . . federal criminal laws”—illuminates that Congress’ purpose was for the WSLA to apply only to criminal offenses. See id. at 20. In support of this assertion, KBR claims that every use of the term “offense” in Title Eighteen references exclusively a crime, which suggests that Congress intended the same meaning to attach to the use of “offense” in the WSLA. See id. at 20-21. Moreover, KBR maintains that, historically, Congress has referred to the WSLA as a criminal statute. See id. at 23-27.
Carter counters KBR by claiming that the text, history, and purpose of the WSLA supports an expansive reading of “offense” that encompasses both criminal and civil suits—including civil FCA actions. See Brief for Respondent, at 17, 24-25, 34-35. Carter asserts that courts have long recognized that “offense” can refer to both civil and criminal offenses, and that “offense” connotes a breach, transgression, or violation of law. See id. at 18-19. Moreover, Carter claims that Title Eighteen does provide for civil remedies and, thus, does not exclusively refer to criminal offenses. See id. at 20. Carter also contends that Congress, when referring to criminal violations only, generally uses the phrase “criminal offense” to distinguish criminal from civil offenses. See id. at 20-21.
KBR also contends that the FCA’s statute of repose irreconcilably conflicts with Carter’s interpretation of the WSLA, resulting in an improper effectuation of Congress’ purpose in creating both the WSLA and the FCA. See Brief for Petitioners at 35, 37. The FCA provides a statute of repose that states which, according to KBR, directly conflicts with the WSLA’s indefinite tolling of statute of limitations during wartime. See id. at 8-9, 36. KBR contends that allowing indefinite tolling for civil fraud claims would both undermine “the FCA’s purpose of combating fraud quickly” and extend the WSLA’s protection beyond opportunistic exploitation of the government’s limited resources during war through fraud. See id. at 37-38 (internal quotation marks omitted).
In opposition, Carter maintains that the FCA’s statute of repose does not conflict with the WSLA’s indefinite tolling of its statute of limitations. See Brief for Respondent at 35-36. Carter counters KBR’s claim that the application of the WSLA to FCA claims undermines the purpose of both statutes by asserting that the FCA’s purpose is to assist the government in policing fraudulent activity during war instead of merely to combat fraud quickly. See id. at 35-36. According to Carter, “[g]iven that the FCA provides that the liability elements of the [criminal] offense underlying a parallel civil action are deemed proven, Congress would reasonably expect the WSLA to toll both civil and criminal actions for FCA offenses.” See id.
DOES THE WSLA REQUIRE A FORMAL DECLARATION OF WAR?
KBR contends that the WSLA applies only when Congress has formerly declared war. See Brief for Petitioners at 38. In support, KBR asserts that Congress’ original understanding of the term “war” as used in the WSLA was that war meant congressionally declared war; when Congress enacted the WSLA, undeclared wars were not prevalent. See id. at 39. Moreover, KBR maintains that Congress could not have intended for the judiciary to endure the politicized task of determining when an undeclared conflict has become a war and when that war has terminated. See id. at 40-41.
Divergently, Carter maintains that the Supreme Court does not need to determine whether a congressional war declaration is necessary for the WSLA. See Brief for Respondent at 43. According to Carter, Congress authorized the use of military force in Iraq in 2002, which satisfies the definition of war in the WSLA (2008 version). See id. at 43-44 n. 13.
DOES THE FCA HAVE A FIRST-TO-FILE BAR OR A ONE-CASE-AT-A-TIME RULE?
The FCA states that “when a person brings an action under the FCA, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” See Brief for Petitioners at 43. KBR asserts that the FCA has a first-to-file bar, which indefinitely prevents a party from bringing a suit subsequent to a suit based on similar facts. See id. at 45. Moreover, KBR contends that this bar is not removed even if the first party to commence a suit relinquishes its claim or has its claim dismissed. See id. KBR asserts that the statutory language surrounding the FCA supports the conclusion that Congress did not intend for the FCA to bar suits only as long as a suit based on the same facts is pending. See id. at 46. According to KBR, courts have interpreted statutes as barring suits while another suit is pending only when the statute’s language expressly provides for this impediment. See id. at 45. KBR claims that the FCA does not have this express language, and, thus, the Supreme Court should interpret the FCA to bar all subsequent suits. See id. at 46.
Contrarily, Carter maintains that the FCA has a one-at-a-time rule, which bars against subsequent suits only when a suit based on the same underlying facts is pending before a court. See Brief for Respondent at 47-48. Carter asserts that the phrase “pending action” in the FCA requires an actually pending suit to avoid an illogical interpretation of the statute. See id. at 49. Moreover, Carter contends that Congress would have used express language to clarify that pending means first-filed suits if Congress had intended to preclude all suits after the commencement of the first suit. See id. at 50. Furthermore, according to Carter, the purpose of this provision of the FCA is to prevent a multiplicity of suits over the same alleged unlawful activity. See id. at 51. Carter maintains that this purpose is effectuated only when an action is currently before a court, and, resultantly, the FCA’s bar applies only when a suit is before a court. See id. at 51-52.
This case presents the United States Supreme Court with the opportunity to decide two questions: (1) whether the WSLA applies to civil fraud suits under the FCA and, relatedly, if Congress needs to declare war in order to activate the WSLA, and (2) whether the FCA’s “first-to-file” bar allows only one active suit at a time for similar actions or whether it prohibits all subsequent suits once a first-filed suit has been brought before a court. See Brief for Petitioners, Kellogg Brown & Root et al. at I; Brief for Respondent, United States ex rel. Carter at i. KBR contends that upholding the Fourth Circuit’s decision—applying the WSLA to FCA claims and allowing whistleblowers to file actions with the same underlying facts after the initial suit is dismissed or resolved—would harm businesses and health care providers and waste government resources. See Brief for Petitioners at 42-43, 55. Conversely, Carter argues that upholding the Fourth Circuit’s decision is vital to aiding the government in recovering money obtained through fraud, and would encourage whistleblowers to file their claim early and with detailed allegations. See Brief for Respondent at 34-35, 58-59.
Amicus National Whistleblower Center (“NWC”), in support of Carter, argues that lawsuits initiated by whistleblowers are the FCA’s backbone—given whistleblowers’ access to information that can uncover fraud—as well as the government’s primary source of information in efforts to recover funds obtained through fraud. See Brief of Amicus Curiae National Whistleblower Center ("NWC"), in Support of Respondent at 5-6. Despite their importance however, the NWC notes that much fraud goes undetected as employees are already reluctant to come forward. See id. at 13. The Taxpayers Against Fraud Education Fund (“TAFEF”) echoes this concern, stating that barring all later related claims would block future whistleblowers from helping the government collect stolen funds even, for example, in the situation where the first-filed suit was “dismissed for purely procedural reasons.” See Brief of Amicus Curiae Taxpayers Against Fraud Education Fund ("TAFEF"), in Support of Respondent at 29-30. The NWC also notes that if only the first whistleblower can bring a suit under the FCA, then if the first whistleblower who brings suit “file[s] a vexatious, frivolous, overbroad and all-encompassing lawsuit[,] [t]he government would be left as uninformed of the fraud as it was prior to the filing of the suit.” See Brief of NWC at 18-19.
Amicus Verizon, in support of KBR, counters that allowing subsequent FCA claims so long as an earlier claim is not pending before a court would run counter to the FCA’s purpose, which is to alert the government “to the essential facts of a fraudulent scheme” so that the government can pursue the claim on its own. Brief of Amicus Curaie Verizon, in Support of Petitioners at 6-7. If plaintiffs can file subsequent claims, Verizon argues, plaintiffs would have an incentive to release pieces of information about a fraud over multiple suits instead of releasing all of the information in a single suit. See id. at 6, 8. Verizon maintains that this is because the government must pay a whistleblower part of whatever the government recovers if the government intervenes in the whistleblower’s case. See id. at 8; 31 U.S.C. § 3730(d)(1). The Chamber of Commerce, among other amici, similarly argues that if the FCA statute of limitations is tolled during wartime, then whistleblowers will have the incentive to wait for others to file before them first in order use information provided by the earlier-filed claims for their own prosecution. See Brief of Amici Curiae Chamber of Commerce of the United States of America et al. ("Chamber of Commerce"), in Support of Petitioners at 10.
BUSINESSES, HEALTH CARE PROVIDERS, THE FEDERAL JUDICIARY, AND THE GOVERNMENT
The Chamber of Commerce, in support of KBR, contends that if the WSLA applies to civil cases and does not require Congress to declare war, “indefinite tolling” for many civil FCA claims may be possible. See Brief of Chamber of Commerce at 9 (emphasis in original). Furthermore, according to the Chamber of Commerce, this would financially burden businesses and health care providers by forcing them to defend repeated, old claims. See id. at 13, 16. The Chamber of Commerce also contends that businesses and health care providers would be exposed to uncertainty and reputational harm if claims can be brought indefinitely. See id. at 17. Furthermore, Verizon explains notes the government must pay whistleblowers for each lawsuit the government intervenes in and must expend finances to litigate those claims. See Brief of Verizon at 8. Finally, the New England Legal Foundation also points out that the federal judiciary would also incur some of those costs by having to hear “stale” claims. See Brief of Amicus Curiae New England Legal Foundation, in Support of Petitioners at 2.
Amici in support of Carter, including the United States, counter that no one would be subject to repeated claims because of other potential bars within the FCA itself as well as certain principles of civil procedure. See Brief of TAFEF at 10; Brief of Amicus Curiae United States, in Support of Respondent at 32-34. For example, TAFEF points out that subsequent claims can be dismissed under some principles of civil procedure such as res judicata and collateral estoppel. See Brief of TAFEF at 10. Furthermore, TAFEF argues that the FCA itself places limits on claims through its public disclosure provision, which only allows the attorney general or “an original source of the information” to bring actions based on publically disclosed information. See id. at 19-21.
In this case, the Supreme Court will determine whether the WSLA tolls the statute of limitations for civil suits brought in the name of the Government under the FCA. The Supreme Court will also likely examine whether the WSLA requires a formal declaration of war to be triggered. Moreover, the Supreme Court will resolve whether the FCA bars all subsequent suits after the commencement of a suit based on the same underlying facts regardless of whether the initial suit is still before a court. The Court’s ruling will have an effect on whistleblowers as well as businesses and health care providers that supply services to the United States government.
- Amy Howe: Solicitor General files invitation briefs – Part 2, SCOTUS Blog (June 13, 2014).
- Barbara Leonard: Halliburton Overbilling Case Faces Review by High Court, Courthouse News Service (July 1, 2014)
- Greg Stohr: KBR, Halliburton Get Court Review in Iraq Billing Case, Bloomberg (July 1, 2014).