14 January 2015

Oral Argument Suggests A Mixed Result in Carter

Posted by Scott Stein and Monica Groat

Yesterday, the Supreme Court heard oral argument in Kellogg Brown & Root v. Carter, a case which raises two important issues under the False Claims Act: (1) whether the Wartime Suspension of Limitations Act (WSLA) applies to toll the statute of limitations in civil FCA cases, and (2) whether a first-filed case is still deemed to be “pending” within the meaning of the FCA, barring any subsequently-filed suit, even after the first-filed case is settled or dismissed. We have previously written about this case here, here, and here. Though it is always precarious to predict the outcome of a case based on oral argument, the questioning at the argument suggests that while many of the justices were receptive to KBR’s argument that the WSLA does not apply to civil FCA claims, the relators and DOJ appeared to have the upper hand with regard to the scope of the first-to-file bar.

The lawyer for petitioner Kellogg Brown & Root (KBR) framed the first question before the Court as “whether Congress changed [the WSLA] along the way to make it civil” when the statute was amended in 1944 to delete the phrase “now indictable” from the phrase “offenses now indictable,” referencing the scope of actions to which the statute’s tolling provisions applied. Most members of the Court seemed skeptical of the arguments advanced by both respondent Carter and the Solicitor General that these amendments were intended to broaden the scope of the WSLA to apply to both criminal and civil matters. The Justices appeared to be far more receptive to KBR’s argument that Congress removed the phrase “now indictable” from the WLSA to ensure that the statute operated prospectively, and added the word “any” to clarify that the statute was applied to any offenses “against the United States.”

Carter’s lawyer and the Deputy Solicitor General arguing on behalf of the United States as amicus curie advanced several arguments in favor of reading the 1944 amendments to expand the WSLA to civil matters, but the Justices did not appear particularly receptive. Several of the Justices appeared wary of the argument advanced by both Carter and the Solicitor General that the use of the term “offenses” used in the WSLA and other sections of Title 18 of the United States Code could be read to refer to civil offenses.

The parties spent less time addressing the first-to-file bar. KBR’s attorney argued that if the Court found in KBR’s favor on the WLSA argument, it would not need to address the first-to-file issue at all. KBR did maintain the argument advanced in its briefs that the FCA’s first-to-file bar continues to apply to any subsequently filed suit even after a first-filed case is settled or dismissed. However, a number of justices appeared skeptical of this argument. Justice Kennedy noted that KBR’s arguments “give no significance of the word ‘pending'” and “almost write that out of the statute.” Justice Sotomayor and other justices suggested that the original source provision provided adequate protection from non-meritorious second-filed suits. Justice Ginsburg seemed more receptive to the argument that the first-to-file bar creates a race to the courthouse that incentivizes relators to bring information to the Government’s intention and may ultimately incentivize settlement.

A number of justices expressed concerns about whether the relator in a second-filed non-intervened suit would be bound by an adverse judgment against the relator in a first-filed non-intervened suit. To assuage those concerns, the Deputy Solicitor General argued that the United States, and any relator in a second-filed suit, would be bound by an adverse judgment in a non-intervened suit by a first-filed relator. This is actually a significant concession that runs directly contrary to the position that DOJ routinely takes in lower courts around the county – an issue we plan to cover in a separate post.

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A decision in Kellogg Brown & Root is expected by June 2015, and we will provide an update when it is available.

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