Contract – FCA Filing Bar Applies Despite Dismissals

U.S. ex rel. Benjamin Carter v. Halliburton Co. (Lawyers Weekly No. 001-161-17, 25 pp.) (Floyd, J.) No. 16-1262, July 31, 2017; USDC at Alexandria, Va. (Cacheris, J.) 4th Cir.

Holding: Although related False Claims Act suits against defendant Halliburton and other defense contractors were dismissed by two other federal courts and this particular relator’s FCA complaint had been amended, the “first-to-file” rule for bringing FCA action nevertheless required dismissal of this suit, the 4th Circuit says.

Pending Suits Dismissed

In June 2011, relator Benjamin Carter filed a qui tam complaint against defendant Kellogg Brown & Root Services Inc. (KBR) in the Eastern District of Virginia, alleging that KBR had violated the FCA by fraudulently billing the government in connection with its water purification services. At the time the Carter Action was brought, two allegedly related actions were already pending, one in Maryland and one in Texas. However, the Maryland Action was dismissed in October 2011 and the Texas Action was dismissed in March 2012.

In November 2011, the district court ruled that the Maryland Action was related to the later-filed Carter Action and the latter action was precluded by the first-to-file rule. The district court also held that all but one of the Carter Action’s claims fell outside the applicable six-year statute of limitations on civil actions, and all of its claims would fall outside the limitations period if Carter refiled. This court reversed the district court, holding that the Wartime Suspension and Limitations Act applied to civil actions and suspended the time for filing the Carter Action. We held that the dismissal of the Carter Action should have been without prejudice. The U.S. Supreme Court granted certiorari and reversed this court’s conclusion that the WSLA’s tolling provisions apply to civil actions like the Carter Action. The court acknowledged, however, that Carter had raised additional arguments that could render at least one claim timely on remand.

On remand from the Supreme Court, this court affirmed the district court’s refusal to equitably toll the statute of limitations, but also remanded the case to the district court for further proceedings under the first-to-file rule. On remand to the district court, that court rejected Carter’s efforts to sidestep the first-to-file rule through amendment, and also denied the motion to amend on futility grounds.

Operation of Rule

The appropriate reference point for a first-to-file analysis is the set of facts in existence at the time the FCA action under review is commenced. Facts that may arise after commencement of the relator’s action, such as the dismissals of earlier-filed, related actions pending at the time suit was filed, do not factor into this analysis. Contrary to Carter’s argument, this analysis has not been undermined by the Supreme Court’s intervening decision in this case.

Congress could certainly have enacted a revival mechanism in the first-to-file rule statute notwithstanding repose and staleness concerns, but it has not done so, and we are not at liberty to create one. Because the Carter Action violated the first-to-file rule and because the only remedy for such a violation is dismissal, the district court was correct to dismiss the Carter Action. Carter’s proposed amendment likewise was properly denied.

Judgment affirmed.

Concurrence

Wynn, J.: I agree with the majority opinion’s conclusion that the dismissal of all earlier-filed, related actions does not, by operation of law, lift the first-to-file bar on a later-filed action. The majority opinion further concludes that the district court did not abuse its discretion in denying relator leave to amend. I write separately to emphasize the narrow scope of that conclusion. In particular, the majority opinion finds that the district court did not reversibly err in denying relator leave to amend solely on grounds that his proposed amendment did not address any matters potentially relevant to the first-to-file rule, such as the dismissals of the earlier-filed, related actions.

The majority opinion simply holds that a proposed amendment or supplement to a complaint cannot cure a first-to-file defect when the amendment or supplement does not reference the dismissal of publicly disclosed, earlier-filed related actions.