District Court Says FCA’s Statute of Limitations Suspended Since 2001 Due to Iraq and Afghanistan Wars

Posted by Jonathan Cohn and Joshua Fougere

Last month, a federal district court in Texas held that the United States’s FCA suit could proceed, even though it was filed outside the six-year statute of limitations, because the Wartime Suspension of Limitations Act (“WSLA”) served to toll the limitations period based upon the ongoing conflicts in Iraq and Afghanistan. United States v. BNP Paribas SA, 2012 WL 3234233 (S.D. Tex. Aug. 6, 2012). The underlying facts have nothing to do with war or military contracting—they concern claims filed by BNP to recover on USDA guarantees that had been issued to commodity exporters sending goods to Mexico. Id. at *1-2. Because the relevant conduct ended in September 2005, more than six years before the complaint was filed in October 2011, BNP moved to dismiss the suit as time-barred. Id. at *5-6.

The district court denied the motion, agreeing, most notably, with the government’s contention that the WSLA suspended the FCA’s statute of limitations. Id. at *5-15. The WSLA is located in Title 18, among the criminal provisions of the United States Code, and postpones the running of statutes of limitations for “any offense … involving fraud or attempted fraud against the United States.” 18 U.S.C. § 3287. It originally applied only to times when the country is “at war,” but was amended in 2008 to apply as well when “Congress has enacted a specific authorization for the use of the Armed Forces.” 2012 WL 3234233 at *8-9. In order to find this statute applicable to an FCA case about USDA commodity guarantees, the court maneuvered as follows. First, it rejected defendant’s argument that the WSLA is applicable only to criminal offenses, finding persuasive two district court cases from the 1950s. Id. at *11-13. Next, the court found that the Iraq and Afghanistan conflicts were sufficient to extend the WSLA’s reach to cover the 2005 conduct at issue. In that regard, the court found that the United States was (and remains) “at war” in both countries despite no formal declaration of war, id. at *13-14, and that, in the alternative, the 2008 WSLA amendments “recogniz[ing] specific authorization for the use of Armed Force … as sufficient to trigger the WSLA” applied retroactively to sweep up defendants’ 2005 conduct, id. at *15.

Although this is just one decision, its potential ramifications are enormous. If the ruling is followed elsewhere—or even if it just emboldens the government to continue to invoke its novel theory in other FCA cases—it would upend settled expectations and signal open season on FCA allegations pertaining to years-old conduct that defendants thought to be time-barred. By the court’s own acknowledgment, the Iraq and Afghanistan conflicts continue to this day; thus, in the court’s view, the FCA’s statute of limitations has been suspended since 2001 and will continue as such until at least five years after those conflicts conclude. With settlement pressure especially high under the FCA, that is surely a startling prospect for industries and companies within the FCA’s purview.