Supreme Court to Hear False Claims Act Case

Author: Marta Moakley, XpertHR Legal Editor

July 11, 2014

The Supreme Court has agreed to hear Kellogg Brown & Root Services, Inc., v. United States ex rel. Carter, in which the Court will decide whether to interpret two key provisions of the False Claims Act (FCA) that may affect the frequency of filing whistleblower lawsuits. The provisions at issue affect key defenses frequently asserted by employers: (i) whether the claim was brought in a timely fashion; and (ii) whether the claimant was the first to file a claim or, if not, (iii) whether the case is barred from proceeding.

The FCA allows individuals who blow the whistle regarding fraud occurring against the government to file a lawsuit. As an incentive, these individuals - called "relators" - are entitled to a share of any monetary recovery. The government has the option to opt into the relators' lawsuits. The law has its roots in the Civil War but has been cited (with much success) in numerous recent lawsuits by both relators and the Department of Justice.

The FCA has a "first-to-file" bar: only the first relator to file a lawsuit may reap any percentage of a court's monetary award. This provision rewards those individuals who promptly disclose fraudulent practices and outlaws repetitive, "me too" claims. The "first-to-file" bar often results in a "race to the courthouse" for those seeking bounties.

In Kellogg Brown & Root Services, Inc., the 4th Circuit Court of Appeals had allowed a relator's claim to proceed although the case had been filed after the six-year limitations period on lawsuits had run. The circuit court ruled that the Wartime Suspension of Limitations Act (WSLA), which suspends any limitations period for FCA claims during wartime (in this case, the Iraq War), was applicable in the relator's case.

In addition, the 4th Circuit ruled that although a then-closed case had been previously filed under the same facts, the "first-to-file" bar only applied to pending, not terminated, cases. Therefore, under the 4th Circuit's reasoning, an employer may be subject to either a single case alleging a certain set of facts, or may have to defend a number of sequential lawsuits based on the same facts.

The case will be set for argument during the Supreme Court's upcoming October Term.