May 262015

As Expected, Supreme Court Issues Split Decision in KBR v. Carter

Scott D. Stein and Monica Groat
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Today the Supreme Court issued its opinion in Kellogg Brown & Root Services, Inc. et al. v. U.S. ex rel. Carter, a case we have written about extensively here, here, here, and here. In a unanimous opinion authored by Justice Alito, the Court held that the Wartime Suspension of Limitations Act (WSLA) does not apply to toll the statute of limitations in civil FCA cases, rejecting the position advanced by the relator and the Department of Justice. However, relators will find solace in the portion of the Court’s ruling holding that the first-to-file bar applies only so long as a first-filed case is active and pending, and ceases to apply when the first-filed case is settled or dismissed.

With respect to the WSLA, Justice Alito first focused on the language and structure of the WSLA. He noted that “[t]he term ‘offense,'” used in the WSLA to describe the actions to which the Act applies, “is most commonly used to refer to crimes.” Slip Op. at 7. In response to the argument of the Solicitor General, arguing on behalf of the United States as amicus curie, that “regulatory provisions outside Title 18 sometimes use the term ‘offense’ to describe a civil violation,” the Court found that “it is significant that Congress chose to place the WSLA in Title 18.” Id. at 8. Referring to a tolling statute applicable to antitrust laws, the Court also found it “revealing that Congress has used clearer and more specific language when it has wanted to toll the statutes of limitations for civil suits as well as crimes” and that “Congress obviously could have included a similar ‘civil proceedings’ clause in the WSLA, but it did not do so.” Id. at 9 (citations omitted). Finally, the Court found significant that “neither respondent [Carter] nor the Solicitor General … has been able to find a single provision of that title in which ‘offense’ is employed to denote a civil violation.” Id. at 8.

Turning to the WSLA’s history, the Court noted that the history “provides what is perhaps the strongest support for the conclusion that it applies only to criminal charges.” Id. at 9. Both Carter and the Solicitor general focused on the removal of the phrase “now indictable,” which previously modified the “offenses” to which the WSLA applied. However, Justice Alito reasoned that “[f]undamental changes in the scope of a statute are not typically accomplished with so subtle a move. … If Congress had meant to make such a change, we would expect it to have used language that made this important modification clear to litigants and courts.” Id. at 9–10. The Court thus found that the decision to remove this language “was more plausibly driven by Congress’ intent to apply the WSLA prospectively, not by any desire to expand the WSLA’s reach to civil suits.” Id. at 10.

The opinion turned cheekier as it addressed the first-to-file issue. The Court summarily dismissed KBR’s position that a first-filed case should be deemed to be still “pending” under the FCA even after it has been settled or dismissed, nothing that under that interpretation, “Marbury v. Madison is still ‘pending.’ So is the trial of Socrates.” Id. at 12. The Court acknowledged that the merits of KBR’s concerns about the “practical problems” raised by the prospect of serial litigation. And while it acknowledged that both KBR and DOJ argued that claim preclusion would protect defendants if a first-filed case was decided on the merits, the Court concluded that “that issue is not before us in this case.” Concluding with a generous understatement, the Court acknowledged that “The False Claims Act’s qui tam provisions present many interpretive challenges, and it is beyond our ability in this case to make them operate together smoothly like a finely tuned machine.”

While the Court’s decision settles certain issues, it ensures ancillary litigation as the scope of the ruling is fleshed out. We will undoubtedly see further litigation on the issue the Court declined to decide concerning the preclusive effect of the resolution of first-filed cases. We may also see disputes arise as relators whose cases were dismissed on first-filed grounds seek to revive claims that the Court’s decision suggests were improperly dismissed on jurisdictional grounds.

Scott D. Stein

Chicago

sstein@sidley.com

Monica Groat

MonicaGroat@sidley.com

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