On May 26, 2015, in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, the US Supreme Court held that the False Claims Act’s first-to-file rule bars new claims only while related claims are still alive, not in perpetuity (No. 12–1497, (May 16, 2015)).

In early 2005, Benjamin Carter worked for petitioners, who are defense contractors and related entities that provided logistical services to the US military in Iraq. Carter filed a qui tam complaint (Carter I) under the False Claims Act (FCA) (31 U.S.C. §§ 3729-3733) alleging that petitioners had fraudulently billed the US government. Shortly before trial in 2010, the government informed the parties that an earlier-filed qui tam suit (Thorpe) had similar claims. The district court subsequently dismissed Carter I without prejudice under the FCA's first-to-file rule, which prevents a second relator from bringing another action based on the same facts underlying the pending action (31 U.S.C. § 3730(b)(5)). While Carter's appeal of the dismissal was pending, Thorpe was dismissed for failure to prosecute. Carter then filed a new complaint (Carter II), but the district court dismissed it under the first-to-file rule because Carter I’s appeal was pending. Carter then dismissed his appeal and in June 2011 filed the complaint at issue here (Carter III). The district court dismissed the complaint, this time with prejudice, under the first-to-file rule because of two allegedly related cases that had been filed in the interim between Carter I and Carter III. Carter appealed.

The Fourth Circuit Court of Appeals reversed the dismissal, concluding that the first-to-file bar no longer applies once a related action is dismissed. Because any related pending suits had been dismissed by the time the court made its decision, Carter had the right to re-file his case. The petitioners appealed.

The US Supreme Court affirmed this part of the Fourth Circuit's ruling, holding that under the FCA's first-to-file rule, an earlier suit bars a later suit only while the earlier suit remains undecided, and ceases to bar that suit once it is dismissed. Therefore, the court held that dismissal with prejudice was incorrect in this case. The court grounded its holding in the first-to-file rule's statutory text, which bars later suits related to "pending" actions that remain undecided. The court rejected the petitioners' contrary reading, which would forever bar any subsequent related action even if the first-filed action had been dismissed for a reason having nothing to do with the merits, such as Thorpe, which was dismissed for failure to prosecute.

Practitioners dealing with qui tam complaints under the False Claims Act should be aware that the first-to-file rule only bars new claims while related claims survive, not in perpetuity.