Stone & Magnanini Gains Favorable United States Supreme Court Decision On First-To-File In Widely Followed Case Against KBR And Halliburton

BERKELEY HEIGHTS, N.J., May 26, 2015 /PRNewswire/ -- Stone & Magnanini, a leading boutique complex litigation firm specializing in representing whistleblowers in False Claims Act cases, gains a favorable decision in a case of first impression.   The United States Supreme Court rejected Halliburton's attempt to strike a serious blow to the whistleblower community under the False Claims Act's First-to-File doctrine.  Following their loss in the Fourth Circuit Court of Appeals, Halliburton and KBR filed a Petition for Certiorari, captioned Kellogg Brown & Root Services Inc., et al. v. U.S. ex rel. Carter, case number 12-1497, which the Supreme Court granted over the objections of the whistleblower and Solicitor General.  The Complaint, filed by whistleblower Benjamin Carter on behalf of the United States, alleges that KBR fraudulently billed the U.S. Army for purifying and testing contaminated water for troops at military bases in Iraq.  While the Supreme Court ruled against Halliburton on the First-to-File issue, it did reverse the Fourth Circuit holding on the Wartime Suspension of Limitations Act ("WSLA") issue but the case may still go forward on certain claims and the rest of the case has been remanded to consider Carter's equitable tolling claim which survives the Supreme Court's ruling.  Recent Supreme Court rulings permitting statutes of limitations to be equitably tolled make this a strong possibility.

David Stone, Managing Partner of Stone & Magnanini and lead counsel, defended against Halliburton's challenge to the Fourth Circuit's holding that the Wartime Suspension of Limitations Act allows the tolling of the statute of limitations for the federal False Claims Act in fraud cases such as this.  David Stone also argued against Halliburton's interpretation of the term "pending" in the "First-to-File" provision of the False Claims Act, contending that Halliburton's reading of the provision frustrates the Act's purpose — to assist the Government to uncover and punish fraud — and that informed whistleblowers with direct evidence of fraud should be allowed to proceed with their cases despite the fact that another case was previously filed but poorly pled and dismissed on non-meritorious grounds. Other courts and at least one circuit court have held decisions on similar issues which could have ended those cases waiting for this crucial Supreme Court Ruling.

During oral argument before the Supreme Court, David Stone, arguing for whistleblowers everywhere, explained that this interpretation of the term "pending" in the First-to-File provision of the False Claims Act "makes sense, because if you look at the statutory scheme in which that provision is found, it's talking about while that action is pending, what the government can do."  The Supreme Court's ruling today that "the term 'pending' in the FCA" should be interpreted "in accordance with its ordinary meaning" is a victory for whistleblowers that could allow them to pursue cases where an earlier filed action has been dismissed.

As the Supreme Court noted, in Mr. Carter's situation, the case that caused Halliburton to raise the first-to-file rule had been dismissed on procedural grounds because the whistleblower failed to pursue the case -- there was no ruling on the merits.  The Supreme Court rejected Halliburton's claim that regardless of the quality of the first-filed complaint that a non-meritorious complaint would be construed as "pending" and forever bar subsequent related actions.  Indeed, the Supreme Court added that under the interpretation of "pending" advanced by Halliburton, the 1803 case of Marbury v. Madison and the 399 B.C. trial of Socrates would still be pending. 

"We are pleased to see that the Supreme Court recognized that what matters is the quality of what the whistleblower brings and not who wins the race to the courthouse," states David Stone.

The Supreme Court also ruled that the WSLA does not extend to civil fraud actions.  Even where the fraud occurs in connection with a war, as in Mr. Carter's case, the Supreme Court focused on the dictionary definition of the term "offense" and the Act's placement in Title 18 in construing it "to refer only to crimes."  David Stone added, "We are disappointed that the Supreme Court rejected this position and note that where war time frauds are discovered years after they occur, as often happens in these types of cases, it could now force the government to pursue defendants criminally as opposed to civilly."

Stone & Magnanini managing partner Robert Magnanini stated, "We hope that courageous citizens like the whistleblower in this action continue to speak out to protect the United States from fraud, and we are hopeful that we can successfully pursue this matter in the Fourth Circuit on equitable tolling grounds."

The Stone & Magnanini team which helped defend the case before the Supreme Court was led by Managing Partners David D. Stone and Robert A. Magnanini, and assisted by Amy Walker Wagner and Jason C. Spiro, all of whom previously worked together at legal powerhouse Boies, Schiller & Flexner LLP. 

ABOUT STONE & MAGNANINI LLP

Stone & Magnanini LLP is a nationally recognized boutique litigation firm founded by David Stone and Robert Magnanini. Their practice focuses on representing whistleblowers in False Claims Act cases, and other types of complex litigation.  Stone, who previously served as head of the False Claims Act Department at Boies, Schiller & Flexner LLP, has over twenty-five years experience in prosecuting whistleblower cases.

SOURCE Stone & Magnanini LLP