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Life After KBR: What the Supreme Court's Recent False Claims Act Decision May Mean for the Health Care Industry

On May 26, 2015, the Supreme Court of the United States answered two questions involving the False Claims Act (FCA). On its face, the case before the Court - Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter (KBR)1 - had nothing to do with health care. Instead, the underlying case involved alleged fraud by military contractors in Iraq. However, the answers provided by the Court could have a material impact on members of the health care industry facing investigations and litigation under the FCA.

The Court in KBR was asked to interpret the meaning of language in both the FCA and a fairly arcane statute known as the Wartime Suspension of Limitations Act (WSLA). Subject to certain exceptions not relevant here, the FCA contains a six-year statute of limitations.2 The FCA also provides that if a case is commenced by a whistleblower (as most are), “no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.”3 This latter provision is commonly known as the “first-to-file bar.”

The WSLA, in turn, provides that “[w]hen the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces, . . . the running of any statute of limitations applicable to any offense . . . involving fraud . . . against the United States . . . shall be suspended until 5 years after the termination of hostilities . . .”4 The WSLA does not define what constitutes an “offense.”

The Court’s opinion in KBR contained two central holdings. First, the Court held that the WSLA does not suspend the running of the FCA’s statute of limitations.5 The Court reached this conclusion after finding that the WSLA’s use of the word “offense” refers to criminal violations only.6 Second, the Court held that the FCA’s first-to-file bar does not preclude a whistleblower’s lawsuit if the previous suit has been dismissed.7 This, the Court found, was the result required by the FCA’s use of the word “pending” to describe what type of action triggers the first-to-file bar.8

As with any attempt to predict the future, prognostications regarding the impact of a Supreme Court decision can be notoriously inaccurate. However, logic and experience suggest that the Court’s decision in KBR could have certain positive and negative effects on the health care industry.

First, the Court’s decision with respect to the FCA’s statute of limitations provides much-needed clarity to defendants facing FCA litigation. Prior to the Court’s decision, whistleblowers and/or the Department of Justice (DOJ) could credibly argue that the relevant time period for purposes of discovery and quantifying the amount in controversy extended far beyond the six years before the initial complaint was filed. Now that the Court has spoken, defendants can more accurately assess the settlement value of cases and combat discovery that seeks information from time periods for which no FCA causes of action can be asserted.

Second, the Court’s interpretation of the FCA’s first-to-file bar could lead to repetitive, parasitic lawsuits brought by different whistleblowers seeking to take advantage of allegations made public by previously dismissed lawsuits. However, members of the health care industry would not be defenseless against such litigation tactics. For example, the FCA’s public-disclosure bar would likely preclude a later-filed suit where the whistleblower based his or her claims on allegations gleaned from public court filings in a previously filed federal action.9 While Congress recently amended the public-disclosure bar and gave DOJ discretion to waive the bar’s application, the public-disclosure bar remains a powerful tool for defendants facing litigation by whistleblowers with no firsthand knowledge on which to base their allegations.

Third, the Court’s interpretation of the first-to-file bar may have the salutatory effect of slowing the proverbial “race to the courthouse” by whistleblowers’ counsel. If the Court had held that the first-to-file bar applies regardless of whether an earlier-filed action is dismissed, the strategy of file first and ask questions later would continue to be a rational one for whistleblowers’ counsel to follow, lest another whistleblower file their complaint first. However, now that the incentive to be first is somewhat diminished, it may cause  whistleblowers’ counsel to exercise more care in deciding whether to commence litigation and, if so, what theories to pursue.

For additional information, please contact James Segroves in Washington, D.C. at  202.580.7710.


*Kevin Royer is currently a summer associate at Hooper, Lundy & Bookman and a law student at the UCLA School of Law.

1 No. 12-1497, 2015 WL 2456621 (U.S. May 16, 2015).

2 31 U.S.C. § 3731(b).

3 31 U.S.C. § 3730(b)(5) (emphasis added).

4 18 U.S.C. § 3287 (emphasis added).

5 2015 WL 2456621, at *5.

6 Id. at *5–8.

7 Id. at *8–9.

8 Id.

9 See 31 U.S.C. § 3730(e)(4).

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