by Ben Vernia | March 19th, 2013
In a March 18 decision in U.S. ex rel. Carter v. Halliburton Co., et al., the Court of Appeals for the Fourth Circuit reversed Eastern District of Virginia Judge James C. Cacheris’s dismissal of a whistleblower’s declined qui tam on first-to-file and statute of limitations grounds.
The whistleblower, a former employee of KBR, alleged in 2006 that the defendant companies submitted fraudulent billings for services provided to U.S. armed forces - including providing fresh water - in Iraq. After the government declines to intervene in the case, the relator persevered, overcoming - for two counts - a motion to dismiss for lack of particularity. One month before trial, the Department of Justice notified the parties of the existence of another case - filed in 2005 - against KBR which, like the relator’s case, alleged that KBR billed the government for 12 hours a day regardless of the actual number of hours worked.
The company moved to dismiss the relator’s case on the grounds that the 2005 action was related and therefore barred the whistleblower’s case under the False Claims Act’s first-to-file bar, 31 USC 3730(b)(5). EDVA Judge Cacheris disagreed with the relator’s argument that the cases were distinct because his focused on the company’s fraudulent misrepresentation that it was actually performing water services, and Judge Cacheris dismissed the case. The relator appealed.
What happened next is something of a procedural morass.
While the appeal was pending (in fact, only two weeks after the case was dismiss), the court hearing the other case dismissed it, too, and the relator in the EDVA case refiled his complaint (in 2010); he moved in the Fourth Circuit to dismiss his appeal, and that court granted the motion. Judge Cacheris dismissed the 2010 case, however, on the ground that by filing his 2010 complaint while his earlier case remained on appeal, he had “thereby creat[ed] his own jurisdictional bar under the FCA’s first-to-file provision.” The relator did not appeal this decision, but then filed his complaint yet again - by then, it was 2011. KBR moved to dismiss this one, too, arguing that two prior actions barred it, and that the court lacked jurisdiction because of public disclosures.
Meanwhile, other whistleblowers had filed cases against KBR - in 2007 (one year after this relator’s first complaint) - and another (that remained under seal), also filed in 2007. These were both ultimately dismissed, but were pending when the relator refiled his complaint in 2011.
Judge Cacheris dismissed the relator’s case, reasoning that the unsealed 2007 case was pending at the time of the relator’s 2011 refiling, and that in any event, the case was barred by the FCA’s 6-year statute of limitations - rejecting the relator’s argument that the Wartime Suspension of Limitations Act, 18 USC 3287, did not apply to non-intervened qui tam cases. The whistleblower appealed.
The Fourth Circuit first considered the application of the Wartime Suspension of Limitations Act (WLSA). It recounted the history of the law, first passed in 1942, but amended in 2008 to expressly include periods “[w]hen the United States is at war or Congress has enacted specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b)).” Noting that the courts were split on whether to apply the 2008 amendments retroactively, and whether the pre-amendment WLSA required a formal declaration of war (vs. the authorization for the use of military force, as was passed after 9/11), the Fourth Circuit concluded it was unnecessary to address retroactivity because the WLSA did not require an actual declaration of war. Looking at the conflict in Iraq, the Court decided that it satisfied the standard, and that the country remained at war for purposes of the WLSA until the President, by proclamation, or Congress, by concurrent resolution, proclaimed the war over.
The Fourth Circuit went on to reject KBR’s argument that the WLSA doesn’t apply to civil cases, and to reject Judge Cacheris’s conclusion that it doesn’t apply to non-intervened qui tam cases on the ground that in such actions, the U.S. is not a party. The application of the WLSA, the Court reasoned, does not turn on who brought the case, but on the existence of a state of war.
The Court next rejected the defendant’s first-to-file challenge to the whistleblower’s case. The Court first adopted the “same material elements” test - already accepted in the Third, Fifth, Sixth, Ninth, Tenth, and D.C. Circuits:
Under this test, a later suit is barred if it is based upon the “same material elements of fraud” as the earlier suit, even though the subsequent suit may “incorporate somewhat different details.”
Applying that test to the two 2007 qui tam actions, the Court concluded that they were sufficiently related to bar the relator’s case, and that it must look to the facts as they existed in 2011 when the relator refiled his case (both 2007 actions remained pending then). “However,” the Court wrote, “this does not end our inquiry.” After reviewing cases in other Circuits regarding the effect of a dismissed case on the future filing of a related qui tam, the Court concluded:
We agree that once a case is no longer pending the first-to-file bar does not stop a relator from filing a related case. In this case, both of the original actions have been dismissed. Because of this, the first-to-file bar does not preclude Carter from filing an action. The first-to-file bar allows a plaintiff to bring a claim later; this is precisely what a dismissal without prejudice allows a plaintiff to do as well. Therefore, Carter’s only impediment at the moment is the district court’s dismissal with prejudice. And, as we have already concluded the district court erred in dismissing Carter’s complaint with prejudice.
The Fourth Circuit declined to address KBR’s public disclosure argument, on the grounds that Judge Cacheris should first be given a chance to address it.