Thoughts on the Oral Argument in US ex. rel. Carter v. KBR

Close Up Of Hand Holding Stopwatch On White Background

The U.S. Supreme Court took up the appeal of Kellogg Brown Root today with oral arguments over the meaning of the word “offense” in the Wartime Statute of Limitations Act and “pending” in the first to file requirement of the False Claims Act.  The transcript can be found here.

The relator accuses KBR of time card fraud during the provision of water testing and purification services to troops in Iraq in 2005.  The first part of the oral argument dealt with whether the WSLA, historically limited to tolling the statute of limitations in criminal offenses, also extends the statute of limitations for civil violations pursued under the False Claims Act.  The Government and the relator contend that the law was changed in the 1940s when Congress amended the law to delete “now indictable” from the statute.  The Fourth Circuit agreed with this position.

Although the case has had a complicated procedural history to date, the facts provide for a surprisingly good framework to answer the issue raised regarding the WSLA, which has remained an open question speculated about by practitioners for several years.  Why?  Because there has been an open question whether the war tolled the statute of limitations for all fraud cases or only cases related to the war.  In KBR, the Supreme Court can decide the matter without tackling the issue of how broadly the tolling applies.  For example, the relator in the Lance Armstrong case made the argument that the WSLA tolled the statute of limitations in a case involving fraud against the U.S. Postal Service involving their sponsorship of a popular cycling team.

The petitioner’s argument focused on the use of the word “offense” in the WSLA, arguing that it only applied criminal prosecutions.  This position appeared to receive support, with only Justices Breyer and Kagan defending the relator and government’s argument that the WSLA applies to civil violations also.

The Supreme Court’s decision to grant cert on the petition in this case absent a circuit split suggests that it may be getting ready to reverse the Fourth Circuit’s decision.  Interestingly, after a question by Justice Sotomayer, the petitioner asked the court to reach the second question presented on the scope of the first-to-file provision even if it sides with the defendant on the length of the WSLA because of a potential argument about equitable tolling on remand.

On the first to file question, the Justices seemed to agree with the relator and Government’s interpretation of the word pending. Justices Kennedy and Scalia both questioned the odd choice of the word pending if Congress had intended for the statute to be read as the defendant/petitioner asked. Justices Ginsburg, Sotomayer, Kennedy and Scalia then proceeded to craft hypotheticals struggling with the limitations on filing a qui tam lawsuit after the dismissal of the first-to-file lawsuit.

If the Justices decide to extend their opinion past the initial question of the statute of limitations, it looks like the U.S. Government and relators will get a common sense interpretation of the word pending that could help a few relators beaten to the courtroom but nevertheless able to navigate the potential pitfalls of claim/issue preclusion and public disclosure.