Category: David M. Nadler

David M. Nadler

Last week the U.S. Supreme Court answered two critical questions regarding when a case may be filed under the False Claims Act (FCA). Kellogg Brown & Root Serv., Inc., et al. v. U.S. ex rel. Carter, No. 12-1497 (May 26, 2015). In KBR, the Court unanimously held that the Wartime Suspension of Limitations Act (WSLA) applies only to criminal fraud cases, and thus does not suspend the civil FCA’s statute of limitations. The Court also held that the FCA’s first-to-file bar only applies while previously-filed related claims are undecided and still active on the court’s docket. Once a case is dismissed or settled, however, it is no longer a “pending action” and a second case alleging the same misconduct can be filed.

The KBR case found itself at the High Court after a long and arduous procedural history. The relator, Carter, worked for KBR in Iraq as a water purification unit operator. He filed a qui tam complaint (Carter I), alleging that KBR had fraudulently billed the government for water purification services that were not performed or not performed properly. The district court dismissed Carter I without prejudice due to an earlier-filed pending qui tam suit (Thorpe) which alleged similar claims. Carter appealed, and while his appeal was pending the Thorpe suit was dismissed. Carter immediately filed a new qui tam complaint (Carter II), which the district court dismissed without prejudice because Carter I was still pending. Finally, Carter dismissed his Carter I appeal and filed his third complaint—the complaint at issue in this case—Carter III, more than six years after the alleged fraud. The district court dismissed Carter III with prejudice due to another earlier-filed pending case, noting that all but one of Carter’s claims were untimely filed given the FCA’s six-year statute of limitations. Continue reading “The Supreme Court Issues Landmark Ruling That Limits When a False Claims Act Case May Be Filed”

David M. Nadler

On July 1, 2014, the Supreme Court granted the petition for certiorari in Kellogg Brown & Root Services v. United States ex rel. Carter, and now has the opportunity to determine the proper application of the False Claims Act’s first-to-file bar, as well as the inapplicability of the Wartime Suspension of Limitations Act (WSLA) to the civil FCA due to the WSLA’s criminal law context, two critical issues of statutory interpretation that have become increasingly problematic to FCA litigation over the last several years.

The Supreme Court will address two questions presented, which are: (1) whether the WSLA applies to civil FCA claims brought by private relators “in a manner that leads to indefinite tolling,” and (2) whether the FCA’s first-to-file bar, which prohibits parasitic claims, creates a race to the courthouse and encourages relators to promptly disclose fraud, instead “functions as a ‘one-case-at-a-time’ rule allowing an infinite series of duplicative claims so long as no prior claim is pending at the time of filing.” Petition for Writ of Certiorari at *I, Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, 2013 WL 3225969 (U.S. June 24, 2013) (No. 12-1497).

There is a reasonable chance the Supreme Court will reverse the Fourth Circuit on both issues. The petitioners are seeking review of the Fourth Circuit decision United States ex rel. Carter v. Halliburton Co., 710 F.3d 171 (4th Cir. 2013), which suspended the FCA statute of limitations in the civil context through its application of the WSLA, and also transformed the FCA’s first-to-file bar into a “one-case-at-a-time” rule. The defendants petitioned the Supreme Court in June 2013 after a petition to the Fourth Circuit for rehearing was denied. The Court’s decision to grant the petition runs contrary to the recommendation of the Solicitor General, who filed a brief on May 27, 2014 requesting that the petition be denied and defending the Fourth Circuit rulings. Continue reading “Supreme Court Grants Petition for Review in Carter; Will Address FCA First-to-File Bar and Wartime Suspension of Limitations Act”

David M. Nadler, David Yang, and Christian N. Curran

Recently, the U.S. District Court for the District of Columbia ruled that a company’s work product created during an internal mandatory disclosure investigation was not protected by the attorney-client privilege or attorney work-product doctrines. During discovery in United States ex. rel. Barko v. Halliburton Co. et al., KBR sought to withhold internal investigation reports relating to alleged fraudulent activities during its performance of the Logistics Civil Augmentation Program (LOGCAP III) contract in Iraq. The ruling casts doubt on whether documents created pursuant to internal investigations are protected by the attorney-client privilege or work-product doctrines and could significantly impact how companies conduct internal investigations, including their mandatory disclosure practices.

The Barko Case

The relator filed his case against KBR under the False Claims Act (FCA) in 2005, alleging that KBR had overcharged the government in a variety of ways under KBR’s LOGCAP III contract. During discovery, the relator requested that KBR produce documents relating to internal audits and investigations of alleged misconduct that was reported by KBR employees under LOGCAP III. KBR asserted that the material was protected by the attorney-client privilege and work-product doctrine. After the relator moved to compel, the court conducted an in camera review of the documents. Continue reading “KBR Ruling Threatens Privilege in Mandatory Disclosure Investigations”

David M. Nadler

On November 8, 2012, the U.S. Department of Justice (DOJ) announced its intention to continue expanding the False Claims Act’s (FCA) reach by intervening in a lawsuit against Fluor Hanford Inc. and its parent company, Fluor Corporation (collectively Fluor), in the U. S. District Court for the Eastern District of Washington. In this case, DOJ is using the rarely invoked Byrd Amendment as the hook to pursue FCA claims. The complaint alleges that Fluor used federal contract funds to pay for lobbying services in violation of the Byrd Amendment and therefore, violated the FCA and subjected itself to treble damages. 31 U.S.C. § 3729 et seq. (FCA); 31 U.S.C. § 1352 (Byrd).

As discussed below, there have been few prosecutions under the Byrd Amendment, and FCA liability predicated on false certifications of compliance with the Byrd Amendment is a novel approach. The Fluor case highlights that government contractors must be aware of the lobbying restrictions under the Byrd Amendment as well as the type of conduct that could expose them to liability and treble damages under the FCA. DOJ’s decision to intervene in this case also underscores the government’s increased scrutiny and willingness to prosecute cases involving an alleged misappropriation of public funds. It also demonstrates DOJ’s continued efforts to expand the reach of the FCA by pursuing actions based on conduct that falls within the scope of independent statutes that carry their own civil penalties. Instead of seeking penalties via the underlying statute (here, the Byrd Amendment), DOJ has elected to proceed under the FCA where it can recover treble damages as well as civil penalties. Continue reading “Government Contractors Beware—DOJ Is Now Using the Byrd Amendment to Bring FCA Cases for Alleged Lobbying Violations”