Posted by Jonathan Cohn and Brian Morrissey
Last week, the Solicitor General filed an amicus brief urging the Supreme Court to deny certiorari on a case that presents two questions of critical importance to FCA defendants. As previously reported gt;on this blog, the Fourth Circuit in United States ex rel. Carter v. Halliburton Co., 710 F.3d 171 (4th Cir. 2013), held that the Wartime Suspension of Limitations Act (WLSA), 18 U.S.C. § 3287, tolls the FCA’s statute of limitations for frauds committed against the Federal Government at any time since the Iraq conflict began in 2002 until the Government declares a formal end to that conflict. Separately, the Fourth Circuit held that the FCA’s “first-to-file” rule, 31 U.S.C. § 3730(b)(5), bars a duplicative qui tam suit only while the related, previously-filed suit remains ongoing. Once the first suit is resolved, the new suit may be re-filed, despite its overlap with the first.
Benjamin Carter, a former employee of Kellogg Brown & Root Services (KBR) filed a qui tam action against Halliburton and its subsidiaries, including KBR, alleging that the company submitted false claims for services provided to the U.S. military in Iraq during early 2005. After prior versions were dismissed without prejudice, Carter filed his operative complaint in June 2011. The district court held that Carter’s 2011 complaint was barred by the FCA’s six-year statute of limitations, 31 U.S.C. § 3731(b), and, alternatively, that the complaint was barred by the FCA’s first-to-file rule because Carter’s allegations substantially overlapped with a previously-filed qui tam suit that was pending when Carter filed his 2011 complaint, but dismissed shortly thereafter. The Fourth Circuit reversed on both grounds, concluding that the WLSA tolled the FCA’s statute of limitations on Carter’s claims, and that Carter should have been allowed to proceed on his claims once the prior action had been dismissed. The Halliburton parties now seek certiorari.
The WLSA tolls the statute of limitations for “any offense” involving “fraud” on the Federal Government while the Nation is “at war.” 18 U.S.C. § 3287. The Fourth Circuit held that (1) the Iraq conflict constitutes a “war” under the WLSA; (2) that the WLSA tolls the statute of limitations for civil FCA claims, not just criminal “offenses”; and (3) that the WLSA applies to qui tam actions, even if the Government does not intervene. The Solicitor General argues that all three conclusions are correct. Importantly, the text of the WLSA is not limited to acts of fraud committed by military contractors. Thus, under the Fourth Circuit’s and the Solicitor General’s position, the WLSA arguably tolls the statute of limitations for all FCA claims based on conduct that occurred after 2002, even if the alleged conduct is entirely unrelated to military action (e.g., healthcare or mortgage fraud). As Petitioners argue, if this expansive reading is upheld, the FCA’s “statute of limitations has not even begun to run” on any claim based on conduct occurring after the hostilities in Iraq and Afghanistan began. Pet. for Certiorari at 3.
The Fourth Circuit also held that the FCA’s first-to-file rule bars duplicative qui tam suits only during the period that a related, previously-filed suit remains “pending,” and permits the duplicative suit to go forward once the prior action has been resolved. This deepens a circuit split on this important question: the Seventh and Tenth Circuits join the Fourth; the D.C. Circuit takes the contrary position, holding that the first-to-file rule bars new suits “even if the initial action is no longer pending.” United States ex rel. Shea v. Cellco Partnership, No. 12-7133, 2014 WL 1394687 (D.C. Cir. Apr. 11, 2014). Petitioners count the First, Fifth, and Ninth Circuits as joining the D.C. Circuit, a point the Solicitor General disputes. The Solicitor General strongly endorses the Fourth Circuit’s view, which Petitioners argue will transform the first-to-file rule from a “crucial limitation” on “parasitic” FCA suits into a mere “one-case-at-a-time rule.” Pet. for Certiorari at 24-25.
Petitioners will have the opportunity to reply to the Solicitor General’s brief before the Supreme Court acts on the petition. The Chamber of Commerce and the National Defense Industrial Association previously filed amicus briefs urging the Court to grant certiorari.