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KBR Whistle-Blower Has a Case, SCOTUS Finds

WASHINGTON (CN) - Halliburton and KBR failed Tuesday to have the U.S. Supreme Court kill a claim that it billed for bogus Iraq military-base services during wartime.

Benjamin Carter, a former employee of KBR's reverse-osmosis water-purification unit (ROWPU) in Iraq, is the relator of the False Claims Act claims against the military contractors. KBR had been known as Kellogg Brown & Root when it was a Halliburton subsidiary.

Carter accused the companies of having billed the U.S. government for water-purification services on military bases in Iraq that they never performed.

He 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."

The Supreme Court was unanimous Tuesday in finding that it was improper for the trial court to dismiss Carter's one live claim under the first-to-file rule.

This rule holds that "no person other than the government may intervene or bring a related action based on the facts underlying the pending action," and the justices explained that the normal interpretation means that "an earlier suit bars a later suit while the earlier suit remains undecided but ceases to bar that suit once it is dismissed."

Carter actually had three separate lawsuits dismissed under the first-to-file rule.

His first failed because a man named Todd Thorpe had a similar pending in California.

Though Carter refiled his suit when Thorpe's case was dismissed for failure to prosecute, the trial court dismissed the second case because Carter's first suit was still pending on appeal.

The complaint at issue, Carter's third, was filed in 2011, more than six years after the alleged fraud.

U.S. District Judge James Cacheris invoked the statute of limitations to dismiss all but one of Carter's claims as untimely. The final claim he dismissed with prejudice under the first-to-file rule, since similar cases had been filed in the intervening years in Maryland and Texas.

The Supreme Court agreed Tuesday that most of Carter's claims are untimely, but it said the dismissal with prejudice under the first-to-file rule was "not called for."

In this case, KBR had tried to argue that "the first-filed action remains 'pending' even after it has been dismissed, and it forever bars any subsequent related action."

"Not only does petitioners' argument push the term 'pending' far beyond the breaking point, but it would lead to strange results that Congress is unlikely to have wanted," Justice Samuel Alito wrote for the court.

"Why would Congress want the abandonment of an earlier suit to bar a later potentially successful suit that might result in a large recovery for the government?" he added.

A three-judge panel of the 4th Circuit had rejected the trial court's interpretation of pending claims as well but it had also reversed based on the Wartime Suspension of Limitations Act (WSLA), saying that law delayed the statute of limitations since the United States was "at war" when the alleged fraud occurred.

On this point, the Supreme Court reversed Tuesday, saying "the act applies only to criminal offenses," and all but one of Carter's civil claims was filed more than six years after the alleged wrongdoing.

The decision notes that Carter actually filed his lawsuit a fourth time, and that this case was dismissed since his petition for certiorari in the case at hand was still pending.

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