U.S. Supreme Court Issues False Claims Act Ruling of Interest to Health Care Providers

The United States Supreme Court recently issued a ruling in a False Claims Act case with mixed implications for the health care industry. Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, No. 12-1497, decided May 26, 2015. In this qui tam lawsuit brought under the False Claims Act, a former employee of a defense contractor during the Iraqi conflict alleged that defense contractors and related entities had fraudulently billed the government for water purification services that were not performed or not performed properly. Although this was not a health care case, the Court’s ruling will impact False Claims Act matters involving health care providers.

The case involves two restrictions on qui tam lawsuits under the False Claims Act. The first restriction is the “first-to-file” bar which prohibits a qui tam lawsuit “based on the facts underlying [a] pending action.” 31 U.S.C. § 3730(b). The second restriction involves the statute of limitations: the False Claims Act requires that a qui tam action must be brought within six years of the violation or within three years of the date the United States should have known about the violation, but cannot be brought more than ten years after the date of a violation. 31 U.S.C. § 3731(b). The Court had to decide whether the Wartime Suspension of Limitations Act, which suspends the statute of limitations involving fraud whenever Congress authorizes the use of the armed forces as described in section 5(b) of the War Powers Resolution, is limited to criminal actions or whether it extends to civil claims.

In a unanimous decision, the Court issued a ruling that has both good and bad consequences for health care providers. The Court declined to extend the qui tam statute of limitations under the Wartime Suspension of Limitations Act to civil claims. After analyzing the statutory language, the Court concluded that the Wartime Suspension of Limitations Act applies only to criminal charges. Thus, the Wartime Suspension of Limitations Act did not suspend the time for filing civil claims under the False Claims Act.

Adopting the ordinary meaning of “pending,” the Court also decided that the False Claims Act’s first-to-file bar does not keep new claims out of court once the related suit is dismissed because a qui tam suit ceases to be “pending” once it is dismissed. The first-to-file bar does not forever prevent a subsequent lawsuit from being filed. Thus, an earlier suit bars a later suit only while the earlier suit remains undecided. However, the Court noted that the issue of claim preclusion, which may protect defendants if the first-filed action is decided on the merits, was not before it. Thus, a subsequent lawsuit may nonetheless be barred if it was decided on the merits under the doctrine of claim preclusion, which generally speaking, bars relitigation of a claim that was already decided on the merits.