U.S. Supreme Court Clarifies And Limits False Claims Act Liability Under WSLA
1. Whether the Wartime Suspension of Limitations Act—a criminal code provision that tolls the statute of limitations for "any offense" involving fraud against the government "[w]hen the United States is at war," 18 U.S.C § 3287, and which the Court has instructed must be "narrowly construed" in favor of repose—applies to claims of civil fraud brought by private relators, and is triggered without a formal declaration of war, in a manner that leads to indefinite tolling.
2. Whether, contrary to the conclusion of numerous courts, the False Claims Act's so-called "first-to-file" bar, 31 U.S.C. § 3730(b)(5)—which creates a race to the courthouse to reward relators who promptly disclose fraud against the government, while prohibiting repetitive, parasitic claims—functions as a "one-case-at-a-time" rule allowing an infinite series of duplicative claims so long as no prior claim is pending at the time of filing.
The U.S. Chamber urged the Supreme Court to review a decision by the Fourth Circuit, which would greatly expand how trial lawyers can use the False Claims Act against businesses that contract with the government. The Fourth Circuit did this by deciding two things. First, it dramatically increased liability under the Wartime Suspension of Limitations Act (WSLA) by allowing private plaintiffs to go after companies for any alleged fraud against the government while the government is engaged in “armed hostilities”. (The WSLA was originally designed to give the government the right to go after criminal fraud that occurred while the United States was at war – even if the statute of limitations had run on the fraud claim.) Second, the Fourth Circuit interpreted the FCA’s “first to file” provision as allowing relators to file duplicative lawsuits as long as none of the lawsuits were pending at the same time.
The Chamber argued that the combined effect of these two rulings will be to allow trial lawyers to indefinitely toll the statute of limitations for all claims involving alleged fraud against the government and then to use this indefinite toll to file duplicative claims one after another, essentially assuring businesses can be subjected to litigation on the same issue over and over again.
The Chamber filed jointly with The Clearing House Association LLC, the Pharmaceutical Research and Manufacturers of America (PhRMA), and the American Medical Association.
In its opinion, the U.S. Supreme Court held that the text, structure, and history of the Wartime Suspension of Limitations Act applies only to criminal offenses, not to civil claims like those in this case. Futhermore, dismissal with prejudice was not called for in this case because the False Claims Act's first-to-file bar keeps new claims out of court only while related claims are still alive, not in perpetuity.
The case was reversed in part, affirmed in part, and remanded.