Kellogg Brown & Root Services, Inc. v. U.S. ex rel. Carter

Does the Wartime Suspension of Limitations Act apply to civil claims?

Does the first-to-file bar continue to keep new claims out of court even once the initial claim is dismissed?  Or does the bar cease once the initial claim is dead?

U.S. Supreme Court No. 
Oral Argument 
January 13, 2015
May 26, 2015
Background of the Case 

Relator Benjamin Carter (the respondent) brought a qui tam action against Kellogg Brown & Root Services (the petitioners), a defense contractor and its affiliates, alleging that the KBR billed the federal government for water purification services that were not performed or were not performed properly.

Before trial, the government informed the parties that a pending qui tam suit (Thorpe) had similar claims and therefore the District Court dismissed the case (Carter I) under the first-to-file bar.  The relator sought to appeal the dismissal and while the appeal was pending, Thorpe was dismissed for failure to prosecute.  The relator then filed a new lawsuit (Carter II), which was also dismissed under the first-to-file rule, as Carter I was still pending for appeal.  The relator then voluntarily dismissed Carter II and filed the complaint discussed by the Supreme Court, Carter III, more than six years after the alleged fraud.   The False Claims Act’s statute of limitations provision states 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.”

The District Court dismissed Carter III under the first-to-file bar, due to a new pending lawsuit in Maryland.  The Court further found that the Wartime Suspension of Limitations Act (WSLA) only applied to criminal charges and therefore all but one of the respondent’s claims were untimely, as they occurred six years prior.  The Fourth Circuit reversed and remanded to the District Court, ruling that WSLA applied to civil claims and that the first-to-file bar no longer applied once a related action was dismissed.  The defendants appealed and certiorari was granted.  

The Court's Decision 

The Supreme Court affirmed the Fourth Circuit’s decision in part, reversed in part, and remanded for further proceedings, holding that the WSLA only applied only to criminal charges and that the first-to-file bar ceased to apply once the pending qui tam suit at issue was dismissed.

First, the Supreme Court reversed the Fourth Circuit’s decision that WSLA applied to civil claims. The WSLA tolls the statute of limitations for fraud committed during wartime. The Supreme Court found that the text, structure, and history of WSLA indicated that it only applied to criminal offenses and therefore the majority of Carter III’s claims were untimely.  However, the court held that because one claim could have been filed on time, they would further explore exclusion under the first-to-file bar.

Second, the Supreme Court affirmed the Fourth Circuit’s ruling that the first-to-file rule ceased to bar Carter III once the initial complaint was dismissed and therefore dismissal without prejudice by the District Court was not called for and Carter was entitled to refile his complaint.  The first-to-file rule states that “[w]hen a person brings an action… no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.”  The Supreme Court found that because the provision references “pending” actions, “an earlier suit only bars a later suit so long as it remains undecided but ceases to bar once it is dismissed.”  The Court rejected the defendants’ argument that “pending” was simply meant as short-hand for “first-filed,” thereby forever barring subsequent actions.  The Court held that if “pending” was intended as “short-hand” this intent could have been conveyed with better language.  Moreover, the Court added that defining “pending” as permanently barring subsequent actions would prevent potentially successfully suits from reclaiming federal funds, which Congress clearly would not have intended. 

Therefore, the Supreme Court reversed the Fourth Circuit’s ruling in regards to its application of the WSLA to civil claims; affirmed the Fourth Circuit’s ruling in regards to whether respondent’s complaint was barred under the first-to-file rule; and the Supreme Court remanded the case for further proceedings consistent with the opinion.