Don’t Apply Wartime Extensions of Limitations to Qui Tam: PhRMA, AHA, AMA

Three major players in health care litigation have urged the Supreme Court to reverse a Fourth Circuit decision that would extend the deadlines to bring whistleblower suits under the False Claims Act (31 USC sec. 3729 et seq.) when the United States is involved in armed conflict. The Pharmaceutical Research and Manufacturers Association (PhRMA), the American Hospital Association (AHA), and the American Medical Association (AMA) joined with the national Chamber of Commerce and the Clearing House Association, an organization of banks, to file an amicus curiae brief in Kellogg Brown & Root Services, Inc. v United States ex rel. Carter. The United States Supreme Court granted certiorari on July 1, 2014.

The Wartime Suspension of Limitations Act

Congress enacted the Wartime Suspension of Limitations Act (18 U.S.C. sec. 3287) in 1942 in order to preserve the options of federal prosecutors to bring criminal charges against perpetrators of fraud against the federal government during wartime until three years after the war was over. Before a 2008 amendment, it provided that the running of any statute of limitations applicable to any offense involving fraud committed against the United States was suspended “while the United States is at war.” In 2008, the Wartime Enforcement of Fraud Act (P.L. 110-417) amended the law to apply when Congress has enacted specific authorization for the use of military force, until there is either a presidential proclamation or concurrent resolution of congress declaring that hostilities have ended. The law originally applied only to criminal prosecutions, but the words “now indictable” were deleted in 1944, and courts have accepted the government’s position that the law applies to civil actions as well.

Application to Qui Tam Actions

The case before the Supreme Court involves allegations of fraud by government contractors billing for their work in Iraq. The relator was an employee of one of the contractors; the United States declined to intervene. The contractors raised the statute of limitations as a defense, and the relator argued that the WSLA tolled the statute of limitations. The trial court dismissed the complaint, ruling that the WSLA applied only when the government was a party to the litigation.

The Fourth Circuit Ruling

The Court of Appeals reversed, ruling that the WSLA applied to all matters involving alleged fraud against the United States government. In addition, it held that the “first to file” rule did not bar the relator’s claims because the earlier lawsuits had been dismissed.

Amici Concerns About the WSLA

Although the particular case involved government contractors doing work for the military, the court’s ruling was not limited to defense contractors. Thus, the decision would suspend the statute of limitations in all actions under the False Claims Act, including those involving alleged health care fraud, anti-kickback violations, or other matters completely unrelated to activities of the military. The amici contend that business generally, and health care-related businesses in particular, would be unable to plan when the country is involved in military operations. The United States’ intervention in Afghanistan, for example, has lasted more than 10 years and is ongoing. Neither the President nor Congress has any obligation or incentive to declare that hostilities have ended.

The amici argue first that the law was intended to apply only to criminal prosecutions. They do not address the argument that Congress was aware that courts had applied the law to civil litigation and chose not to address the question when it amended the statute in 2008. Their main point is that the lack of a definitive deadline to bring an action will encourage relators to delay filing in order to increase their awards, according to amici. The level of uncertainty is intolerable for business. The amici also argue that there is no need to extend the limitations period to qui tam actions once the government has decided not to participate, as the government has decided it has no interest to protect. They note that only about 10 percent of the cases the government declines ever result in a payment; the rest are dismissed. The need to preserve scarce government resources does not apply to private parties.

First-to-File Rule

Although 31 U.S.C. sec. 3730(b)(5) provides that no party other than the government may sue under the False Claims Act when there already is another action pending on a related claim, the Fourth Circuit ruled that the provision no longer applies if the previous litigation has been dismissed. The amici contend that this interpretation allows relators to dismiss and re-file, adding to the uncertainty that potential claims may never die. Indeed, the relator had dismissed and re-filed after earlier litigation was dismissed; it did not matter that the same litigation was pending when he originally filed.

Oral argument has not been scheduled. The respondents’ brief is due October 14, 2014.