A U.S. Supreme Court decision Tuesday won't extend the statute of limitations in fraud lawsuits, as many in the healthcare industry had feared it might. But the ruling could make it easier, in some cases, for whistle-blowers to file fraud lawsuits over issues already brought to court.
In a unanimous decision, the justices Tuesday partly reversed and partly affirmed a lower court's decision, sending the case, Kellogg, Brown & Root Services Inc. v. United States ex. rel. Carter, back to the lower court.
They decided that the Wartime Suspension of Limitations Act extends statutes of limitations only in criminal cases during times of war, not civil cases such as those filed by whistle-blowers under the False Claims Act.
However, they also decided that federal law does not prohibit whistle-blowers from filing cases making the same allegations as those made in previous cases if the earlier cases had already been dismissed for reasons other than their merits.
It's a mixed ruling for healthcare providers.
On one hand, providers can “get some comfort” knowing that the statute of limitations won't be extended for all whistle-blower cases, said David Chizewer, an attorney with Goldberg Kohn, a law firm in Chicago that works with whistle-blowers.
If the Supreme Court had ruled the other way on that issue, “it would have opened up a flood gate of arguments by whistle-blowers that there's essentially no statute of limitations in healthcare civil cases,” said Larry Freedman, an attorney with Mintz Levin in Washington who defends providers in False Claims Act cases.
Maureen Mudron, deputy general counsel for the American Hospital Association, called that part of the ruling “good news for hospitals and for the fair administration of the law.”
“The alternative would have resulted in efforts to revive decades-old stale civil claims, the vast majority of which would prove meritless, and impose significant unwarranted costs on healthcare providers,” Mudron said in a statement.
But Tuesday's decision could also mean more time in court for healthcare providers.
Freedman called that second part of the ruling a “big deal,” saying it could encourage “tactical gamesmanship” by whistle-blowers.
“This could impose a very serious burden on healthcare providers to defend in multiple actions,” Freedman said.
Chizewer, however, said it could mean strong whistle-blower cases will no longer be blocked by earlier, weaker ones.
“What this ruling by the Supreme Court does is essentially pave a wider path for the case that is most likely to be successful to see the light of day and not to be barred by an earlier filed case that may have had less of a chance of success,” Chizewer said.
Healthcare industry groups including the American Hospital Association, the American Medical Association and the Pharmaceutical Research and Manufacturers of America filed a brief with the Supreme Court in September arguing that a lower court's ruling in the case had the potential to extend statutes of limitation for all fraud cases indefinitely. They had also worried that the lower court's ruling could allow whistle-blowers to file never-ending strings of repetitive lawsuits.
In their September brief, the groups argued that whistle-blowers shouldn't be allowed to file repetitive lawsuits just because earlier, similar lawsuits were dismissed. They argued that the purpose of whistle-blowers is to alert the government of potential fraud, making multiple cases about the same issue unnecessary, including when the first case is dismissed.
The lower court's ruling on the matter, which the Supreme Court upheld Tuesday, would clog up the courts, and, “Businesses, moreover, would be subjected to serial, duplicative claims without any corresponding public benefit,” according to the industry groups' brief. “Every suit filed drains resources from all involved.”
The Supreme Court, however, said in its opinion, written by Justice Samuel Alito, that the False Claims Act bars lawsuits from being filed only when similar cases are still “pending.” Alito wrote that “pending” does not include cases that have already been dismissed as the petitioners in the case argued it should.
“Why would Congress want the abandonment of an earlier suit to bar a later potentially successful suit that might result in a large recovery for the government?” Alito wrote.
Though the case has implications for healthcare, it was actually filed over issues unrelated to the industry. At issue was whether a Kellogg, Brown & Root Services employee, Benjamin Carter, who worked in Iraq, could sue the company, now known as KBR, under the False Claims Act. Carter alleged the company billed the government for purifying and testing contaminated water when it was not actually purifying or testing the water.
Attempts to reach KBR, which was a subsidiary of Halliburton at the time, were not immediately successful Tuesday afternoon.
A federal district court ruled that Carter could not sue because the statute of limitations had expired, and because previous suits making similar allegations had already been filed. But the 4th U.S. Circuit Court of Appeals in Virginia reversed that ruling.