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June 30, 2014 Military Contractor Fraud

Solicitor General Urges Courts to Put Military-Related False Claims Act Cases on Hold Under Wartime Suspension of Limitations Act

The False Claims Act got its start addressing fraud and misconduct pursuant to contracts with the U.S. military during the Civil War. The Act works to deter and punish government contractors who take advantage of the Department of Defense under contracts for the provision of materials, logistics, support, and many other necessary components of military operation.

However, it is not uncommon for potential claims under the False Claims Act to languish for several years before someone discovers the fraud and reveals it to a False Claims Act attorney. As a result, defense contractor defendants are often invoking the statute of limitations as a defense, arguing that any claims filed longer than six years after the occurrence of the fraud should be barred forever.

However, a separate statute known as the Wartime Suspension of Limitations Act (WSLA) is regularly applied to these situations in order to grant relators and the Department of Justice additional time to file the claims and seek justice. Recently, the U.S. Solicitor General submitted its opinion on the issue and the extent to which the WSLA and FCA should interplay in pivotal wartime fraud cases.

Background of conflict

In a highly-publicized military contractor case involving Kellogg, Brown & Root, the U.S. Court of Appeals for the Fourth Circuit (a hotbed of False Claims Act litigation) held that the False Claims Act’s typical six-year statute of limitations should be extended under the WSLA, which works to “toll” (stop) a statute of limitations from expiring on any claim for fraud occurring while the United States is at war.

The defendants in the case, who are alleged to have overcharged for logistical services to the U.S. military in Iraq, argue that the six-year statute of limitations has long passed for False Claims Act purposes and the relator should be precluded from advancing his claim. Defendants also argued that FCA claims are not within the purview of the WSLA, as it only applies to criminal fraud offenses, not civil.

In an extremely crucial holding, the Fourth Circuit held that the statute of limitations on any false claim arising out of military activity during the wars in Iraq or Afghanistan will be paused until a presidential proclamation that the conflict is over. A five-year statute of limitations then applies from the date of the proclamation onward. In addition, the Fourth Circuit found that the term “offense” applies to both civil and criminal fraud and FCA claims could not be excluded from WSLA protections merely by falling within the civil realm of fraud offenses.

The defendants filed a writ of certiorari to the U.S. Supreme Court for clarification on the issue. The Supreme Court then invited the Solicitor General to weigh in – which it did in a brief filed late last month.

Overview of Solicitor General’s opinion

In siding with the Fourth Circuit, the U.S. urged the Supreme Court to deny writ in this case – asserting that the appellate decision was a correct application of the law. The brief begins by pointing out that the WLSA is broadly drafted to cover any type of fraud against the United States, no matter if it is civil or criminal in nature – citing the fact that “any” is a term of “breadth.” The brief further reiterated that because the WSLA does not distinguish between cases filed by the U.S. government and those filed by private individuals, all FCA cases should be protected by the extension of the statute of limitations.

The brief explored several other areas involving the intersection of the FCA and the WSLA, which are beyond the scope of today’s article. However, it will be interesting to see whether the Supreme Court opts to grant the defendants’ writ of certiorari and, if so, how it chooses to apply these two statutes to false claims arising out of the Iraq and Afghanistan conflicts.

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