United States v. Halliburton, No. 12-1011 (4th Cir. Mar 18, 2013)

Over a vigorous dissent, the United States Court of Appeals for the Fourth Circuit recently held that the Wartime Suspension of Limitations Act (WSLA) tolls the False Claims Act’s (FCA) six-year statute of limitations in a case brought by a qui tam plaintiff involving alleged fraudulent billing for services provided to U.S. military forces in Iraq. United States ex rel. Carter v. Halliburton, No. 12-1011 (4th Cir. Mar. 18, 2013). The court’s decision could have significant implications for future FCA defendants by curtailing the statute of limitations as a defense against claims based on wartime conduct.

Benjamin Carter, a former employee of Kellogg Brown & Root Services (KBR), sued Halliburton and its subsidiaries, including KBR, alleging that the company submitted false claims for services provided to the military in Iraq during his employment at KBR from January through April 2005. The complaint alleged that KBR charged the government for water purification services that it had not actually performed and that it instructed employees to bill twelve hours of work per day regardless of time actually worked.

Carter filed his original complaint in February 2006. After several dismissals, Carter filed his fourth and most recent complaint on June 2, 2011. The district court dismissed that complaint, finding that it was barred by the FCA’s “first to file” requirement and by the six-year statute of limitations. It rejected Carter’s argument that the WSLA tolls the statute of limitations in civil FCA actions where the government has not intervened.

Originally enacted in 1942, the WSLA provides:

When the United States is at war or Congress has enacted specific authorization for the use of Armed Forces, … the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States … shall be suspended until three years after the termination of hostilities as proclaimed by the President or by a concurrent resolution of Congress.

18 U.S.C. § 3287 (2006). The tolling period was extended to five years by the 2008 Wartime Enforcement of Fraud Act, which amended the WSLA. Pub. L. No. 110-417 § 855, codified at 18 U.S.C. § 3287 (2011).

The district court held that the WSLA’s tolling provision is limited to war-related suits filed by the government or to qui tam actions in which the government has intervened. The court also found that the complaint was barred by the “first to file” requirement because similar claims, since dismissed, had been pending at the time Carter’s most recent case was filed. The district court dismissed Carter’s complaint with prejudice.

The Fourth Circuit reversed. It held that the WSLA applies to allegations of fraud, including civil fraud, against the United States during wartime regardless of whether the United States filed or intervened in the action and that, as a result, the FCA’s statute of limitations was tolled as applied to Carter’s claim. The Court further held that the FCA does not require a formal declaration of war and that the United States was “at war” in Iraq for purposes of the WSLA from October 11, 2002, when Congress authorized the President to use military force in Iraq. The Court did not directly address whether the WSLA suspends the statute of limitations for FCA claims brought during a time of war where the claims are unrelated to the war.

The Fourth Circuit also held that the district court erred in dismissing Carter’s complaint with prejudice due to the pending, related claims. The Court agreed with other circuit courts that have adopted a “same material elements test” and concluded that Carter’s claim was sufficiently similar to then-existing actions to warrant dismissal. However, Carter was now free to re-file because the other cases had since been dismissed.

In dissent, Judge Agee disagreed with the majority’s application of the WSLA to actions in which the government is not a party. The dissent argues that it constitutes an unprecedented expansion of the WSLA and that the original purpose of the Act was to free the government from engaging in fact-intensive fraud investigations during wartime. He concludes that no such reasoning applied to private actors, expressing serious concern that the court’s interpretation may result in a near-indefinite statute of limitations and create financial incentives for relators to delay filing in order to increase potential recovery.

The case was reversed and remanded to the district court to consider whether plaintiff’s suit was barred by original source provisions of the FCA because the allegations were publicly disclosed. Defendants have since filed a petition seeking rehearing en banc.