BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe

Supreme Court wartime litigation ruling protects federal contractors

But justices leave door open on related whistleblower allegations


The U.S. Supreme Court has given businesses that contract with the federal government a partial victory in a case involving a World War I-era law and a present-day whistleblower, but the ruling could lead to more litigation.

Kellogg Brown & Root Services Inc. et al. v. United States presented the high court justices with two issues.

One was whether individuals have unlimited time to file civil suits that allege fraud when the country is at war. The Wartime Suspension of Limitations Act, first passed in 1921 to address wartime contractor fraud and later amended, can be triggered without a formal declaration of war.

The other issue was whether the False Claims Act, first passed in 1863 and later amended, bars lawsuits alleging the same wrongdoing once a single whistleblower files suit, even if the original suit is dismissed.

In a unanimous opinion written by Associate Justice Samuel Alito, the Supreme Court held that the “text, structure, and history of the WSLA show that the Act applies only to criminal offenses.”

The high court's opinion noted that private parties may file civil actions to enforce the False Claims Act. Generally, these must be brought within six years of a violation, but the Wartime Suspension of Limitations Act suspends “the running of any statute of limitations applicable to any offense involving fraud against the federal government.”

Separately, the FCA's “first-to-file bar” precludes a qui tam suit — a suit in which a private party who assists the prosecution can receive at least some portion of the penalty imposed — if it's based on the facts underlying a pending action.

Benjamin Carter, who worked for Kellogg Brown when it was a subsidiary of Halliburton Co., initially filed suit in 2006, alleging the technology, engineering, procurement and construction company “fraudulently billed the government for water purification services that were not performed or not performed properly,” according to the Supreme Court opinion.

A federal judge, noting that a similar whistleblower suit had already been filed, dismissed Mr. Carter's claim.

But a three-judge panel of the 4th U.S. Circuit Court of Appeals in Alexandria, Virginia, held in 2013 that the Wartime Suspension of Limitations Act “applied to civil claims and that the first-to-file bar ceases to apply once a related action is dismissed,” Justice Alito wrote. “Since any pending suits had by then been dismissed, the court held, respondent had the right to refile his case.”

While the Supreme Court disagreed and said the wartime law applies only to criminal cases, it also left the door open for one of Mr. Carter's complaints to go forward, saying that a first-filed suit does not bar all subsequent related suits, such as when the earlier suit was dismissed for a reason having nothing to do with the merits. The high court sent the case back to the appeals court for reconsideration.

Had the court ruled otherwise regarding the Wartime Suspension of Limitations Act, “it would have been an absolute nightmare — these claims could go on forever,” said Robin S. Conrad, a partner in the Washington office of McKenna Long & Aldridge L.L.P. and former executive vice president of what now is the U.S. Chamber Litigation Center, which handles litigation for the U.S. Chamber of Commerce.

The federal government is under “enormous pressure” to bring in revenue from false claims allegations, said Ms. Conrad. “The returns on investment on these (False) Claims Act actions could be huge.”

The decision is important for two reasons, said Scott Stein, a partner in the Chicago office of Sidley Austin L.L.P.

On the defense side, “it's very much a good-news, bad-news decision,” Mr. Stein said.

“Under the WSLA as interpreted by the lower court, as long as there is conflict going on involving armed forces, the statute of limitations would not begin to run. The statute of limitations of the False Claims Act is already aggressive. It's already six to 10 years,” he said. “This essentially brought some rationality back to (the) enforcement side.”

“On the other side, you had this completely separate issue about the first-to-file bar,” he said of the high court's decision, which he termed “understandable but disappointing.”

The high court said “you might have serial cases; you might have one case that's resolved and somebody comes in and files a second case,” he said. The problem is that the Supreme Court “has thrown it back down to the lower courts to figure out under what circumstances that might be acceptable,” he said. “There will be years of litigation throughout the lower courts to try to identify the circumstances under which a subsequent or second-filed case can proceed.”