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Fourth Circuit Limits First-to-File Rule and Holds that FCA Statute of Limitations Tolls When “At War”

In a noteworthy decision affecting the first-to-file rule and the statute of limitation of the False Claims Act (FCA), the Fourth Circuit reversed a district court’s dismissal and remanded the whistleblower’s case back for additional review.

The case – Carter v. Halliburton – involved a lawsuit filed by plaintiff Ben Carter, in which Carter alleged that Halliburton and Kellogg Brown & Root Services, Inc. (KBR) had defrauded the government by overbilling the government for services provided by Carter and other employees. Carter had been employed as a water purification specialist for Halliburton and KBR in Iraq from January 2005 to April 2005, with the primary role of testing and purifying water for the troops in Iraq. According to Carter, however, KBR did not begin purifying water until May 2005 and the company had misrepresented to the U.S government the time and services that employees were providing in Iraq and had falsely billed the U.S government in violation of the FCA.

Shortly before the case was to go to trial, the parties were notified by the U.S. Department of Justice that lawsuits containing similar allegations had been previously been filed. Accordingly, the district court dismissed Carter’s case, finding that the case was barred by the FCA’s first-to-file rule and because it had been filed beyond the FCA’s six-year statute of limitations.

On appeal, the Fourth Circuit reasoned that, because the United States was “at war” in Iraq at the time of plaintiff’s employment with Halliburton and KBR for purposes of the Wartime Suspension of Limitations Act (WSLA), Carter’s complaint was not time-barred by the FCA’s six-year statute of limitations. Moreover, the court found that the WLSA is not limited to criminal offenses, but also applies to civil allegations of fraud.

Although the Fourth Circuit agreed with the district court’s assessment that Carter’s complaint would ordinarily be barred by the “same material elements test” of the first-to-file rule, because the previously-filed cases had since been dismissed and were no longer pending, they did not continue to act as a bar to Carter’s complaint.

Accordingly, the Fourth Circuit ruled that the district court had erred in dismissing Carter’s case with prejudice, reversed the district court’s decision, and remanded the case for further review.

The Fourth Circuit’s decision is particularly note-worthy for its application of the WLSA to toll the FCA statute of limitations and because it is one of the only appellate courts to hold that the first-to-file rule does not apply once a previously-filed case has been dismissed and is no longer pending.

The whistleblower attorneys at Goldberg Kohn are committed to fighting fraud against the government and protecting the rights of whistleblowers. If you would like to schedule a free, confidential appointment with one of our nationally-recognized whistleblower attorneys, please contact us at (312) 863-7222.

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