Kellogg Brown and Root v. U.S. ex rel Carter: Justices dubious of government's broad reading of False Claims Act

Argument analysis: Justices dubious of government's broad reading of False Claims Act

Dear readers: I commend to you the excellent analysis by Ronald Mann of SCOTUSblog of the oral argument held today at the Supreme Court in the case of Kellogg Brown and Root v. U.S. ex rel Carter. That case raised two questions for the Supreme Court to decide: (1) whether the Wartime Suspension of Limitations Act applies to the False Claims Act; and (2) "whether . . . the False Claims Act’s so-called 'first-to-file' bar, 31 U.S.C. § 3730(b)(5) . . . 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." 

A. Brian Albritton
January 14, 2015

Whistleblower's False Claims Act Case Does Not Toll Statute of Limitations If Relator Seeks to Later Add a Retaliation Claim

When a relator files a False Claim Act case and seeks to later add a claim that his or her employer retaliated against them, is the three-year statute of limitations for retaliation claims "tolled" during the time the relator's False Claims Act claims are pending? And, if a relator seeks to amend his or her False Claims Act case to add a retaliation claim, does the retaliation claim "relate back" in time to when the relator originally filed their False Claims Act case? In a thoughtful opinion, the Court in Hayes v. Department of Education of the City of New York, __ F.Supp. 2d__, 2014 WL 2048196 (May 16, 2014 S.D.N.Y.) addressed both of these questions and found that a relator's attempt to amend her False Claims Act complaint long after she had filed it in order to add a retaliation claim was futile and barred by the statute of limitations.

In Hayes, the relator's attorney withdrew from relator's False Claims Act case. After several attempts to obtain new counsel, the Court granted the defendant's motion to dismiss the case on the grounds that the relator could not bring the case without an attorney or pro se. Relator sought to amend her False Claims Act complaint to add a claim of retaliation, a claim for which she did not need an attorney to pursue. Relator's proposed retaliation claim was more than three years after the events in question.

The Court considered the question of "when a relator herself tolls the statute of limitations for her own claim." While the relators' filing of the False Claims Act complaint may toll the statute of limitations for claims pled in that complaint, the Court concluded that the statue is not tolled for relator's claims which are not brought in the original complaint. The statute of limitations for a retaliation claim related to an underlying False Claims Act case would continue to run, the Court found, even if the case were under seal for a period.

Finding the relator's claim to be barred by the statute, the Court next considered whether the relator may be permitted to amend her complaint to add a retaliation claim pursuant to Federal Rule of Civil Procedure 15. After undertaking a lengthy analysis, the Court found that "an amended pleading adding a retaliation claim may not relate back to the original complaint filed here: neither Rule 15(c)(1)(A) nor 15(c)(1)(B) permits it."

This decision prevents relators from trying to belatedly salvage their False Claims Act cases by trying to add a retaliation claim more than three years after the events at issue. It is not clear, however, how much effect this case will have: False Claims Act cases by ex-employees almost invariably contain retaliation claims and such claims are frequently the bases for settlements when relators' False Claims Act cases fail.

A. Brian Albritton

June 10,2014

Recents Blog Posts and Articles of Interests

I have recently come across of a number of blog posts and articles which I commend to you:

• Seventh Circuit Rejects Constructive Knowing As Basis for Retaliation Claim

Scott Stein at Sidley Austin's Original Source blog writes about the case Halasa v. ITT Educational Services, Inc., 8/14/12, wherein the Seventh Circuit recently dismissed a False Claims Act retaliation claim and rejected the plaintiff's claim that "constructive knowledge" on the part of those who discharged him was sufficient to prove retaliation. The Court found that without actual knowledge of plaintiff's protected activities, plaintiff had not established a "causal link" between the plaintiff's reports of irregularities and his termination. 

• DOJ Brings Suit Against Gallup Organization

 Under the column of interesting qui tams, the Department of Justice recently announced it had intervened in a qui tam suit filed against none other than the polling organization, Gallup.  "According to the whistleblower’s complaint, Gallup violated the False Claims Act by giving the government inflated estimates of the number of hours that it would take to perform its services, even though it had separate and lower internal estimates of the number of hours that would be required.   The complaint further alleges that the government paid Gallup based on the inflated estimates, rather than Gallup’s lower internal estimates."

• Qui Tam Relator Not Original Source; U.S. ex rel. Repko v. Guthrie Clinic

Ellyn Sternfield at MintzLevin's Health Law & Policy Matters blog writes about the Repko case, wherein the Third Circuit dismissed the qui tam brought against Guthrie Healthcare System by its former general counsel and executive VP, Rodney Repko, on the grounds that Repko was not an original source such that he could avoid the public disclosure bar of the False Claims Act.  Repko had been charged with trying to steal two million dollars from Guthrie after he left the company and had pled guilty.  As part of his plea agreement, he was required to provide the government with "information concerning the unlawful activities of others."  As the article points out, the Third Circuit "was persuaded by the fact Repko had initially disclosed the challenged arrangements to the government under his plea agreement; the disclosure was bargained-for consideration which enabled Repko to obtain a lower sentence on his bank fraud charges.  While never mentioning the word 'voluntarily,' the court found that since the plea agreement compelled his disclosures to the government, Repko was essentially estopped from invoking the original source exception."

•  District Court Rules That Wartime Suspension of Limitations Act Suspends False Claims Act's Six-Year Statute of Limitations

Douglas Baruch and John Boese of Fried Frank recently wrote a "FraudMail Alert®" on the case of United States v. BNP Paribas SA, No. H-11-3718, 2012 WL 3234233 (S.D. Tex. Aug. 6, 2012), wherein a federal court in Texas applied the Wartime Suspension of Limitations Act, 18 U.S.C. § 3287 (2008) (“WSLA”) and held that the statute of limitations in a False Claims Act case had been suspended  due to the Iraq and Afghanistan conflicts. In addition, Baruch and Boese write "the district court’s ruling makes clear that the WSLA’s suspension is not limited to FCA cases arising out of wartime contracting or even Defense Department contracting in general, meaning that the FCA’s statute of limitations would be rendered ineffective in all sorts of cases, including those involving allegations arising out of the financial and healthcare industries."  Finding the case to run "counter to the plain meaning of the WSLA as well as the clear intent of Congress," they analyze the case in detail and declare it to be just plain "wrong."

A. Brian Albritton
August 30, 2012