United States: In an Important Victory for Government Contractors, the Supreme Court Holds that WSLA Does Not Toll the FCA's Statute of Limitations

Government contractors and health care companies have become increasingly concerned about the application of the Wartime Suspension of Limitations Act ("WSLA"), 18 U.S.C. § 3287, and the Department of Justice's ("DOJ") and False Claims Act ("FCA") relators' arguments that the statute extends indefinitely the limitation period applicable to civil FCA cases. 31 U.S.C. §§ 3729-3733. Today, the Supreme rejected the unwarranted extension of the WSLA and properly limited the reach of that statute (and suspension of limitations periods) to the context of criminal law. The decision in Kellogg Brown & Root Services, Inc. v. U.S. ex rel. Carter ("KBR") is an important victory for Government contractors, health care companies and other recipients of federal funding. It provides protection against stale claims, which should be barred by the statute of limitations. It is particularly noteworthy because it removes the risk of stale FCA claims that would otherwise be time barred and that have no connection to wartime activities, such as health care claims, or lawsuits related to other civilian agency programs, e.g., the Department of Agriculture program discussed in United States v. BNP Paribas SA.

The WSLA was enacted shortly after World War I and was reenacted during World War II. Until 2008, it permitted the period of limitations to be suspended during wartime and for three years after the end of hostilities. Prior to 2008, it was not clear whether the WSLA was triggered by the military operations in Iraq and Afghanistan as there had been no declaration of war. Congress expanded the WSLA in 2008 to apply when Congress enacts a "specific authorization for the use of the Armed Forces" and increased the suspension period to five years after the termination of hostilities. Given the ongoing conflicts in which the U.S. has been involved during the past decade, questions have arisen about whether the suspension of the limitations period has become indefinite and is being used for matters that have no connection to wartime.

Today, in KBR, the Supreme Court reversed the Fourth Circuit and held that the WSLA does not toll the statute of limitations in civil fraud cases. In KBR, a former employee who had worked for the company in Iraq, brought a civil False Claims action as a relator, claiming that the contractor had billed the Government for work that was never performed. The Government did not intervene in the case. Before the Supreme Court, Carter and the Government (as amicus) argued that, even though the WSLA is part of Title 18, it applied to civil fraud matters. The Government noted that until 1944, the WSLA applied to offenses that were "now indictable under existing law"—and that the "now indictable" language was removed in 1944. (The district court's decision BNP Paribas provides a detailed history of the WSLA.) The Government's amicus brief also defended application of the WSLA to civil cases based on policy considerations, such as asserting that its time and resources are overtaxed during wartime and that fraud often requires a substantial amount of time to uncover and pursue.

During oral argument, members of the Court noted that the placement of the WSLA in Title 18 is significant. Members of the Court also expressed concerns with lengthy extensions of the limitations period in civil cases in which the matters at issue were aged and the cases ordinarily would have been dismissed years ago.

In its opinion, after explaining the history of the WSLA, the Court explained why the statute applies only to criminal charges, not civil claims. The Court's analysis focused on WSLA's text, i.e., "the running of any statute of limitations applicable to any offense . . . involving fraud or attempted fraud against the United States or any agency thereof." Although "the term 'offense' is sometimes used more broadly" by legal dictionaries, the Court explained several legal dictionary definitions supported a narrower reading—as did the Government's inability to find any part of Title 18 in which the term is "employed to denote a civil violation" and the fact "that Congress chose to place the WSLA in Title 18."

The Court rejected the Government argument that the 1944 removal of the phrase "now indictable under any statute" from the WSLA expanded the WSLA's reach to civil claims. The Court explained: "Simply deleting the phrase 'now indictable under the statute,' while leaving the operative term 'offense' unchanged would have been an obscure way of substantially expanding the WSLA's reach. Fundamental changes in the scope of a statute are not typically accomplished with so subtle a move."

In addition to the WSLA, KBR's appeal raised an important issue concerning the first-to-file bar under section 3730(b)(5) of the civil False Claims Act. This section provides: "When a person brings an action under this subsection , no person other than the Government may intervene or bring a related action based on the facts underlying the pending action." The effect of this provision is to bar subsequent actions alleging false claims violations that have previously been alleged by a relator or the Government in another case. The notion behind the first-to-file bar is to encourage relators to come forward with information previously unknown to the Government to aid in uncovering fraud. A subsequent action (or "me-too" suit) involving the same material elements does not further that goal.

A division has developed among the Courts of Appeal regarding what it means for an action to be "pending" under the first-to-file bar. The First and D.C. Circuits have held that a prior dismissed action bars later actions. The Fourth, Seventh, and Tenth Circuits have held that once an action is dismissed without prejudice, it is no longer considered "pending."

Carter's case has a tortured history of procedural dismissals and amended complaints—which the Court described as "a remarkable sequence of dismissals and filings." KBR explained that the repeated actions it faced had unfairly extended the period in which the claims could be brought and exposed it to repeated costs and risk. It argued that the word "pending" in the first-to-file bar should be read expansively to preclude successive claims, i.e., "the first-filed action remains 'pending' even after it has been dismissed, and it forever bars any subsequent related action."

The Court rejected KBR's argument, explaining:

This interpretation does not comport with any known usage of the term "pending." Under this interpretation, Marbury v. Madison, 1 Cranch 137 (1803), is still "pend­ing." So is the trial of Socrates.

The Court also noted that, in addition to "push[ing] the term 'pending' far beyond the breaking point," KBR's argument "would lead to strange results that Congress is unlikely to have wanted." These would include barring "all subsequent related suits even if th[e] earlier suit was dismissed for a reason having nothing to do with the merits." The Court was not swayed by the "practical problems" Government contractors face from successive lawsuits by relators making similar (if not identical) allegations. The Court noted that the relator and the Government had argued that the contractor's concerns were overblown and could be addressed by "the doctrine of claim preclusion"; in any event, this concern was not raised directly by the issue before the Court.

Tags: FCA First-to-File Rule, Supreme Court

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2015. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions