KBR Defeats FCA Litigation at Fourth Circuit
In a major win for Vinson & Elkins client KBR, Inc., the U.S. Court of Appeals for the Fourth Circuit has rejected False Claims Act (FCA) litigation accusing KBR of overbilling the government for water purification services provided in Iraq.
On July 31, 2017, the Fourth Circuit ruled that the FCA’s
“first to file bar” blocked Benjamin Carter’s case, affirming a November 2015
decision issued by the U.S. District Court for the Eastern District of Virginia
to dismiss the lawsuit.
In affirming U.S. District Judge James C. Cacheris’ ruling,
the Fourth Circuit held that Carter’s case had to be dismissed because related
lawsuits making similar allegations against KBR were already pending in
Maryland and Texas when Carter filed the most recent iteration of his case in
Although the two earlier cases were later dismissed,
Carter’s lawsuit nonetheless ran afoul of the FCA’s “first to file bar” because
what matters is whether those related cases were pending as of the date he
filed suit, the Fourth Circuit ruled. The appeals court additionally rejected
Carter’s bid to overcome the first-to-file bar by amending his complaint. The court was also not sympathetic Carter’s complaint that forcing him to
dismiss and refile his lawsuit would likely lead his case to be prohibited by
the FCA’s statute of limitations.
“The first-to-file rule’s
statutory text … plainly bars the bringing of actions while related actions are
pending, and affords courts no flexibility to accommodate an improperly filed
action when its earlier-filed counterpart ceases to be pending,” the Fourth
Circuit wrote in its 25-page opinion. “We follow this text today, and
decline to manufacture such flexibility, even if it may raise statute of
limitations problems for certain FCA relators.”
For further analysis of the Fourth Circuit’s decision, click here. The ruling is the
latest in a string of wins for KBR in the long running battle with Carter.
The Supreme Court handed a separate blow to Carter in May
2015, when it ruled that the Wartime Suspension of Limitations Act, a criminal
code provision first enacted during the two world wars, is inapplicable to
civil litigation brought under the FCA.
Carter had unsuccessfully attempted to rely upon the WSLA
and other equitable tolling arguments when Judge Cacheris dismissed his suit
under the “first to file bar” for the first time in 2011. But he argued
successfully to the Fourth Circuit in 2013 that World War II-era amendments to
the WSLA expanded the scope of the statute to encompass civil fraud claims.
The Supreme Court reversed, with Associate Justice Samuel
Alito writing that the “text, structure, and history of the WSLA show
that the act applies only to criminal offenses.”
The V&E team consisted of partners John
Elwood, Jeremy Marwell, Craig Margolis, Tirzah Lollar, and
associates Kathleen Cooperstein and Ralph Mayrell.