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U.S. Supreme Court: Dismissal of a Prior Case Under the FCA Does Not Necessarily Bar a Subsequent Related Action

Until last week, if you were a potential whistleblower with a claim filed under the False Claims Act (FCA) in one of several federal circuits, your claim could be precluded if another case under the same facts had ever been brought before yours and then dismissed for any reason, even a dismissal that never addressed the merits of the suit. But no longer.
On May 26, 2015 the Supreme Court unanimously held in Kellogg Brown & Root Services Inc. v. United States ex rel. Carter that a prior claim brought under the FCA does not operate as a bar to a subsequent claim if that earlier claim was dismissed for reasons unrelated to the merits. This decision represents a victory for relators, taxpayers and, as Justice Samuel Alito wrote, for the “ordinary meaning” of the statute,
Addressing the FCA’s first-to-file rule (31 U.S.C. § 3730(b)(5)), which provides that when a qui tam relator brings a case, “no person other than the Government may intervene or bring a related action based on the facts underlying the pending action,” Justice Alito rejected the First, Fifth, Ninth and D.C. Circuits’ “very peculiar” interpretation of the FCA that a “pending” claim included any claim based on the same underlying facts.
The FCA certainly bars new claims while an earlier-filed case is “pending,” Justice Alito wrote, but a case is not “pending” after it has been dismissed. Such an interpretation, he said, “does not comport with any known usage of the term ‘pending.’” Why, he asked, would Congress frustrate a possible recovery for taxpayers simply because an earlier-filed case failed “for a reason having nothing to do with the merits”, noting that “[u]nder [KBR’s] interpretation, Marbury v. Madison … is still ‘pending.’ So is the trial of Socrates.”
KBR argued that the Fourth Circuit’s ruling in the case, permitting a subsequent qui tam action to proceed even if the prior FCA case had already been dismissed, should be overturned because “pending” should be read to mean “first-filed.” In essence, KBR pushed for a ruling that any previously filed qui tam case, whatever its outcome, should protect defendants against all related future claims.
The Supreme Court summarily rejected KBR’s argument, finding that such a bar is only applicable when the prior FCA case remains pending in court. Thus, if a prior FCA case has been dismissed for any reason – including by settlement, a relator’s failure to satisfy pleading requirements, or for failure to prosecute — and is not pending at the time of a motion to dismiss on the subsequent qui tam case, the first-to-file rule does not bar the subsequent qui tam action. Ultimately, FCA defendants who settle or successfully obtain dismissal of FCA claims may have to defend subsequent qui tam actions based on the same underlying facts.
New complaints that flesh out or expand upon the allegations in a prior filed case are not uncommon, and the Supreme Court’s decision will permit the government and whistleblowers to continue to pursue defendants in such cases. Whistleblowers will nevertheless still have to demonstrate that their allegations are not based on publicly disclosed information, which includes previously filed complaints. And subsequent plaintiffs (including the government) are still subject to collateral estoppel defenses should any first-filed case with similar allegations have been dismissed on the merits.
The case also yielded another ruling, one with which defendants will be far happier. Faced with the question whether statutes of limitation are deferred in times of war, the Supreme Court held that the Wartime Suspension of Limitations Act (WSLA), a World War II-era statute that extends the amount of time the government can bring a lawsuit based on wartime fraud against the United States, is inapplicable to civil actions brought by a qui tam relator under the FCA.
The FCA’s statute of limitations provision requires that a qui tam action must be brought within six years of a violation or within three years of the date by which the United States should have known about a violation. There is a 10-year limitation against suits in any event.
In ruling that the WSLA does not apply to the FCA, which typically arises in a case brought by a private qui tam relator after the government declines to intervene and take over the case, Justice Alito wrote, “[c]onverting the WSLA from a provision that suspended the statute of limitations for criminal prosecutions into one that also suspended the time for commencing a civil action would have been a big step.”
While the Court’s ruling limited the WSLA to criminal actions, it should motivate potential FCA whistleblowers to bring claims without delay. In any event, the Court’s ruling that prior FCA claims that were not decided on the merits do not necessarily preclude subsequent suits based on the same facts is most welcome. Prior to Carter, a defendant that saw a flawed claim under the FCA dismissed could remain free from the consequences of its fraud. However, after Carter, whistleblowers may continue to pursue claims to hold fraudulent defendants accountable, even when prior whistleblowers may have failed.
Under the FCA, individuals who report fraud to the government are sometimes entitled to monetary awards. If you are aware of wrongdoing and would like to know more about your rights, please click here.

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