False Claims Act Suit Over WTC May Be Refiled

(CN) - An engineer can refile claims that construction companies defrauded the government while working on the new One World Trade Center and other projects, the 2nd Circuit ruled.

Filed under seal in the Southern District of New York, Magdy Youssef's 2010 complaint accused Tishman Construction Corp. and Turner Construction Co. of running a "fraudulent billing scheme" on a number of publicly financed construction projects, including the new One World Trade Center.

A structural engineer for both companies, Youssef filed the suit under the False Claims Act. He sought to dismiss the action in 2011, however, when both the New York and U.S. attorneys general declined to intervene.

Unbeknownst to Youssef, U.S. District Judge Kevin Castel dismissed the claims with prejudice as to Youssef and without prejudice as to the attorneys general.

Youssef learned about this only after he tried to refile in the Eastern District of New York upon learning that the government was investigating similar claims.

Castel refused to modify the dismissal as to Youssef based on the plaintiff's earlier indication that he did not want to pursue the matter any further at that time.

A three-judge panel of the 2nd Circuit vacated the order Monday after finding that a voluntary dismissal does not bar a new suit based upon the same claim.

"By stating that the plaintiff 'would not pursue this matter further,' counsel may just as well have been indicating an intention simply to stop pressing the complaint that was currently before the district court for any number of reasons having nothing to do with the merits of the claim," Judge Robert Sack wrote for the court.

"Furthermore, when read in context, it is clear that the letter expressed no opinion on the merits of the action, or on the res judicata effect of any dismissal. As the letter explained, the decision to dismiss the claim arose from 'the government's decision not to intervene,' which itself does not appear to address the government's views as to the ultimate merits of the claim. In this context, the statement that the plaintiff 'has decided not to pursue' the issue further is most naturally read to reflect a pragmatic decision, not necessarily connected to the substance of the case, and not a request for dismissal with prejudice."

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