Supreme Court's Decision in KBR Inc. v. U.S. ex rel Carter Confirms that False Claims Act Statute of Limitations Is Not Tolled Under WSLA, but May Expose Health Care Providers to “Copycat” False Claim Act Suits Under “First-to-File” Rule
On Tuesday, the U.S. Supreme Court issued its decision in a False Claims Act (FCA) case, KBR Inc. v. U.S. ex rel Carter, which had the potential to significantly alter the FCA landscape. In a unanimous decision, the Court ruled that the statute of limitations for civil FCA cases is not subject to the Wartime Suspension of Limitations Act (WSLA), a wartime tolling law. The Court also resolved a longstanding circuit split regarding whether the FCA's “first-to-file” bar precluded qui tam relators from filing certain “copycat” cases. The Court ruled that the “first-to-file” bar is triggered only when a prior case involving similar claims is actually “pending.”
The first issue in the case—whether the WSLA, which tolls the statute of limitations on criminal fraud claims during wartime and five years after the official end of a conflict, extends to civil claims—had the potential to significantly or even indefinitely expand the statute of limitations for civil FCA cases. However, the Court found that “the text, structure, and history of the WSLA show that the act applies only to criminal offenses.” Justice Alito, writing for the unanimous Court, determined that the operative word Congress used in the WSLA—“offense”—is most commonly used in criminal actions. This issue was of significant concern to health providers and others who commonly face qui tam suits, because an extension of the WSLA to civil cases would have effectively gutted the statute of limitations for FCA cases altogether. The Court put those concerns to rest and confirmed that the statute of limitations remain a viable defense available to FCA defendants.
The other holding of great interest to health care providers and others facing FCA claims was whether the “first-to-file” bar blocked subsequent, related suits based on similar, “pending” actions. The Court found that only live or active complaints constitute “pending” suits that effectively bar new FCA complaints from being filed. Thus, once an FCA action is settled or voluntarily dismissed, a new complaint can theoretically be filed. This ruling is of particular interest to health care providers and others who face an increasing risk of FCA actions, as it may pave the way for successive FCA cases. For now, it appears defendants may be subject to additional or subsequent suits even after dismissals or settlements with prior qui tam relators are finalized. Fortunately, defenses such as claim preclusion may provide some comfort and defense to those defendants faced with such a scenario.
Please contact Mark Bina at mark.bina@quarles.com / (312) 715-5051 or Lauren Stine at lauren.stine@quarles.com / (602) 229-5474 with any questions concerning this case or issues involving the False Claims Act.