(CN) - Halliburton and KBR must face claims that they falsely billed the U.S. for services at military bases in Iraq while the U.S. was at war, the 4th Circuit ruled.
During his time with KBR, a former Halliburton subsidiary previously known as Kellogg Brown & Root, Benjamin Carter worked for its reverse-osmosis water-purification unit (ROWPU) in Iraq.
Carter sued the contractor and Halliburton in the Eastern District of Virginia under the False Claims Act (FCA), alleging that they had billed the government for water-purification services on U.S. military bases in Iraq that they never performed.
Carter said Halliburton and KBR "knowingly made, used or cause to be made or used, false records or statements to get false or fraudulent claims paid or approved by the government."
U.S. District Judge James Cacheris dismissed Carter's allegations with prejudice in December, under the first-to-file rule and statute of limitations.
A three-judge panel of the 4th Circuit reversed Monday, holding that the U.S. was "at war" under the Wartime Suspension of Limitations Act (WSLA) when the alleged fraud occurred.
"Under either version of the [WSLA], the United States was at war when the acts at issue occurred," Judge Henry Floyd wrote for the Richmond, Va.-based panel. "We find that the Act does not require a formal declaration of war for several reasons. First, had Congress intended the phrase 'at war' to encompass only declared wars, it could have written the limitation of 'declared war' into the Act as it has in numerous statutes.
"Next, we believe that requiring a declared war would be an unduly formalistic approach that ignores the realities of today, where the United States engages in massive military campaigns resulting in enormous expense and widespread bloodshed without declaring a formal war. In fact, the United States has not declared war since World War II. However, there have been extensive military engagements in Vietnam, Korea, Kosovo, Afghanistan, and twice in Iraq. Indeed, the Supreme Court has found that the laws of war apply to non-declared wars, for example the war in Afghanistan. Surely these circumstances result in situations in which fraud can easily be perpetuated against the United States just as much as a formally declared war. The purpose of the WSLA-to combat fraud at times when the United States may not be able to act as quickly because it is engaged in 'war'-would be thwarted were we to find that the United States must be involved in a declared war for the Act to apply."
The lower court also held improperly that the provision that tolls the statute of limitations in False Claims Act cases does not apply to actions in which the government is not a party, citing United States ex rel. Sanders v. North American Bus Industries Inc.
"The district court's reasoning for relying on Sanders was that if the WSLA applied to a relator's claims this would 'allow fraud [claims] to extend perhaps indefinitely,'" Floyd wrote. "This is incorrect. The WSLA tolls the applicable period for a specified and bounded time while the country is at war. By offering this rationale, it appears the court was critiquing the purpose of the WSLA itself and not providing a valid basis for excluding relator-initiated claims from the WSLA. Accordingly, we are unpersuaded that relator-initiated claims are excluded from the ambit of the WSLA. Thus, Carter's action is not time barred."
Though it found that the first-to-file rule and the statute of limitations do not bar Carter's claims, the federal appeals court withheld ruling on KBR's request that the case be dismissed under the FCA's public disclosure bar, since Carter allegedly was not the original source of his claims.