In Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, 575 U.S. ____) (2015), Justice Alito stated "[t]he False Claims Act's qui tam provisions present many interpretive challenges." Lawyers and judges who struggle with those challenges understand the truth of that statement. The United States Supreme Court recently resolved two of those issues.
- Does the Wartime Suspension of Limitations Act toll the statute of limitations? No, that act only tolls criminal proceedings.
- Does the "First to File" Rule bar subsequent lawsuits if the first action is dismissed? The "First to File" Rule bars a "qui tam" action during the pendency of the first action and, upon its conclusion, another relator may file a lawsuit involving similar facts.
False Claim or "qui tam" lawsuits have proliferated as
whistleblowers and their legal counsel have discovered the
financial benefits of being the "qui tam" relator.
Although "qui tam" lawsuits have become synonymous with
healthcare, Congress enacted the False Claims Act in 1863 due to
the "rampant fraud" being committed by suppliers to the
Union Army during the Civil War. Congress recognized that it was
impossible for the federal government to police this industry
effectively because of the sheer number of contractors. Therefore,
Congress provided a process in which a private citizen with
knowledge of fraud (called a relator) could file a lawsuit on
behalf of the government. To incentivize the filing of these
lawsuits, the False Claims Act permitted the relator to obtain a
percentage of the ultimate recovery by the government.
The False Claims Act contains an express statute of limitations (31
U.S.C. § 3730). That statute requires a lawsuit to be filed
within six (6) years of the violation, but no later than three (3)
years after the date that the United States should have known about
the violation. In Kellogg Brown, the question was whether
another statute -- the Wartime Suspension of Limitations Act
– tolled the running of the statute of limitations. The
Supreme Court held that it did not. Instead, the Court held that
the express language of the Wartime Suspension of Limitations Act
made that act applicable only to criminal prosecutions and not to
cases involving "civil claims."
The False Claims Act also includes a provision that bars an action
if it is filed after another action -- the "first to
file" bar. Specifically, the False Claims Act provides that
"no person other than the Government may intervene or bring a
related action based on the facts underlying the pending
action." 31 U.S.C. § 3730(b)(5). In Kellogg
Brown, two qui tam lawsuits were filed that alleged
substantially similar facts. The Kellogg Brown lawsuit was
the second lawsuit filed. Therefore, the trial court dismissed that
lawsuit as being barred by the "first to file" bar. While
an appeal was pending, the first lawsuit was dismissed. The relator
refiled his lawsuit, but the court dismissed the lawsuit once again
stating that the "First to File" bar applied. The Supreme
Court rejected this argument noting that the express language of
the statute provided that the first-to-file bar ceases once the
earlier action is dismissed.
For healthcare providers, the Kellogg Brown decision
removes one source of uncertainty and creates another source of
uncertainty. The False Claims Act statute of limitations will not
be tolled during time of "war" regardless of the
definition of "war", but the settlement or dismissal of a
qui tam action will not necessarily bar another individual from
filing a lawsuit on the same grounds. The Supreme Court noted that
the dismissal of the first filed action may have "claim
preclusion" effect if the action is decided on its merits;
however, the Court relegated that issue to another day. Healthcare
providers should consider the impact of this decision during
settlement discussions for qui tam cases.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.