Supreme Court in Carter Decision Narrows Scope of Whistleblower First-To-File Bar
By the C|C Whistleblower Lawyer Team
Under the False Claims Act’s so-called first-to-file rule, a whistleblower may not bring a qui tam action “based on the facts underlying [a] pending action.” There has always been some uncertainty as to how far this whistleblower bar extends — whether it applies only when the related claims of the “pending” action remain live, or whether it blocks those claims in perpetuity. In a clear victory for whistleblowers this week, the Supreme Court in Kellogg Brown & Root Services, Inc. v. United States Ex Rel. Carter upheld the more limited reach of the first-to-file bar.*
The whistleblower complaint in this action alleged that defense contractors Halliburton and Kellogg Brown & Root fraudulently billed the government for water purification services they provided in Iraq. In a dizzying procedural posture, there were several dismissals under the first-to-file bar of the whistleblower’s original and re-filed complaints because of related actions pending in other courts. Ultimately, these other actions were all dismissed and the Fourth Circuit held that the first-to-file bar did not prevent the whistleblower from re-filing his case because there were no longer any related actions still pending. In a rather straightforward decision, the Supreme Court agreed, holding that “a qui tam suit under the False Claims Act ceases to be ‘pending’ once it is dismissed.”
First, the Court looked to the simple definition of “pending,” finding “no reason not to interpret the term . . . in accordance with its ordinary meaning.” The Court flat out rejected the defendants’ argument that Congress used the term as a short-hand for first-filed action. The Court noted sardonically that under this “very different and very peculiar” interpretation, Marbury v. Madison would still be “pending” as would the trial of Socrates.
Second, the Court considered the policy implications of the defendants’ favored interpretation, finding it would not only “push the term ‘pending’ far beyond the breaking point, but it would lead to strange results that Congress is unlikely to have wanted.” A first-filed suit would bar all subsequent related suits even if the earlier suit was dismissed for a reason unrelated to the merits. The Court found it dubious that Congress would have wanted earlier filed suits without merit “to bar a later potentially successful suit that might result in a large recovery for the Government.”
Finally, the Court gave short shrift to the practical problems the defendants argued would accompany the narrower read of the first-to-file rule. Specifically, the Court recognized “some merit” in the argument that lifting the first-to-file bar after cases are settled may dissuade defendants from settling for the full amount they would accept if there were no prospect of subsequent suits asserting the same claims. However, it thought the potential for claim preclusion would somewhat limit this potential disincentive. More importantly, recognizing that “the False Claims Act’s qui tam provisions present many interpretive challenges,” the Court held “it is beyond our ability in this case to make them operate together smoothly like a finely tuned machine.”
*In a small defeat for whistleblowers, the Supreme Court in this decision also ruled that the Wartime Suspension of Limitations Act only applies to criminal claims. This is the law that suspends, during wartime or the authorized use of the Armed Forces, the statute of limitations for bringing False Claims Act cases.
Tagged in: Multiple Whistleblowers and First-to-File,