In United States ex rel. Carter v. Halliburton Co., No. 12-1011 (4th Cir. Mar. 18, 2013), the Fourth Circuit held that the statute of limitations for False Claims Act claims is suspended during times of war. The court also held that the rule barring a False Claims Act plaintiff (a “relator”) from bringing a claim if substantially similar claims have already been filed by another party (the “first-to- file” rule) does not apply after the first claim is dismissed.
Benjamin Carter worked as a water purification operator under a government contract in Iraq. On February 1, 2006 he filed a False Claims Act qui tam action against his employer. He alleged that, contrary to his employer’s representations to the government, it was not purifying water during the period Carter was employed. He also claimed that his employer forced him and other employees to complete time cards totaling 12 hours of work per day, no matter the amount of work actually performed.
The case was transferred from California to the Eastern District of Virginia where it was dismissed three separate times on various grounds. Finally, on June 2, 2011 the case was refiled for the fourth time. The District Court dismissed the case again. It held that Carter’s claims were barred because similar cases were already pending in Maryland and Texas when Carter filed the 2011 action. The court also held that Carter’s claims were barred by the False Claims Act’s six-year statute of limitations.
The Wartime Suspension Of Limitations Act Suspends The Statute Of Limitations For False Claims Act Claims During Times Of War
The Fourth Circuit overturned the District Court’s decision. It held that the Wartime Suspension of Limitations Act (“WSLA”) applied and suspended the statute of limitations applicable to Carter’s claims. The WSLA states that “when the United States is at war or Congress has enacted specific authorization for the use of the Armed Forces,” any statute of limitations applicable to “any offense involving fraud or attempted fraud against the United States” is “suspended until five years after the termination of hostilities as proclaimed by a Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress.” 31 U.S.C. § 3287.
Carter argued that the WSLA suspended the statute of limitations on his claims because the United States was at war with Iraq in 2005, when Carter claimed his employer made false claims to the government. The Fourth Circuit agreed, even though the United States had never issued a formal declaration of war in Iraq. The court held that to require a formal declaration of war would frustrate the purpose of the WSLA – to combat fraud at times when the US may not be able to act as quickly because it is engaged in a “war.” Therefore, the Authorization for the Use of Military Force against Iraq, issued by Congress on October 11, 2002, was sufficient to trigger the provisions of the WSLA.
The court also concluded that the WSLA applied even though the United States had elected not to intervene in the action. The court held that including claims in which the United States elected not to intervene furthered the WSLA’s purpose of rooting out fraud against the United States during times of war.
The First-To-File Rule Does Not Bar A Relator’s Claims Once The First Action Is Dismissed
Under the first-to-file rule, a court lacks subject matter over a relator’s False Claims Act claims if the claims have previously been filed by another relator. In Carter, the Fourth Circuit adopted the “same material elements test,” which a majority of circuits use to determine whether a complaint is similar enough to be barred by the first-to-file rule. The court held that the fraud alleged by Carter – submission of false time sheets in support of claims for false payment – contained the same material elements as the Maryland and Texas cases. Therefore, at the time Carter filed his complaint, his False Claims Act claims were barred by the first-to-file rule. However, the Fourth Circuit held that once a case is no longer pending, the first-to-file bar does not prevent a relator from filing a case. Because the Maryland and Texas cases had been dismissed by the time Carter filed, he was free to re-file his action.
The Fourth Circuit’s decision represents the first time a Court of Appeals has explicitly held that the WSLA applies to civil cases where the United States is not a plaintiff or intervenor in the qui tam action. Other False Claims Act relators have already started citing Carter in an effort to extend the statute of limitations applicable to their claims.
With no requirement of a formal declaration of war, the decision stands to have far reaching impact. For example, could a relator argue that the statute of limitations on his False Claims Act claim is suspended during the War on Terror, which began on September 14, 2001 when Congress issued the Authorization for Use of Military Force against those responsible for the attacks of September 11, 2001? Under Carter, termination of “war” requires a Presidential proclamation or concurrent resolution of Congress. Arguably, then, the statute of limitations on any False Claims Act claim relating to events occurring during the War on Terror could be tolled until five years after Congress or the President officially terminates the War on Terror.
In light of Carter, employers with government contracts in areas of active hostilities should consider revising their document retention policies to account for the potential for a longer statute of limitations for False Claims Act actions based on contracted work in those areas.