On May 26, 2015, the United States Supreme Court issued a decision favoring whistleblowers in False Claims Act cases, basing its decision in part on the status of the trial of Socrates.
The main question before the court was how to interpret the “first-to-file rule.” That’s the rule that says in effect that when a whistleblower files a False Claims Act case, other plaintiffs can’t bring more whistleblower cases based on the same facts.
The case arose when former Kellogg Brown & Root (KBR) employee Ben Carter filed a whistleblower case, claiming that KBR had not performed the water-purification services for the U.S. Army in Iraq required by its government contract.
Carter’s case was dismissed under the first-to-file rule because of an earlier, pending case alleging the same facts. When that earlier case was dismissed, Carter refiled, but the court dismissed that case because Carter’s own, earlier case was still pending on appeal. He withdrew his appeal and filed a third time. The court dismissed this case, too, because two other cases, in Maryland and Texas, had been filed by other whistleblowers between Carter’s first and third filings.
On appeal to the Fourth Circuit Court of Appeals, Carter argued that the first-to-file rule shouldn’t apply to his case because the Maryland and Texas cases had been dismissed by the time his appeal was heard. The Fourth Circuit agreed with him and reversed the dismissal.
KBR appealed to the Supreme Court. On May 26, that court upheld the Fourth Circuit’s ruling in favor of Carter. It held that his third case was not barred by the Maryland and Texas cases, because both had been dismissed and were no longer pending when the Fourth Circuit rendered its opinion.
The court looked to the language of the first-to-file statute. Despite the commonly used term “first-to-file,” what the statute actually says is that, “when a person brings an action…no person other than the government may intervene or bring a related action based on the facts underlying the pending action.” 31 U.S.C. Sec. 3730(b)(5) (emphasis in court opinion.)
So, the court reasoned, in order for a case to be barred by the first-to-file rule, the earlier case must still be pending when the rule is applied. This is where the trial of Socrates comes in. The court noted that under KBR’s argument — the argument that once filed, a case remains pending even if dismissed — the trial of Socrates would still be pending. So would Marbury v. Madison.
The effect of the ruling is to deprive hospitals and other contractors of a defense that had been effective in at least four circuits, the First, Fifth, Ninth and D.C.: namely, that once a whistleblower case has been filed on a certain set of facts, no one else may ever file a case based on those same facts, even if the first case is dismissed. The Supreme Court’s decision means that if the first case fails, someone else may file a new case based on the same facts. So contractors may find themselves fighting the same fight over again.
The decision is Kellogg Brown & Root v. U.S. ex rel. Carter, No. 12-1497.