Engineer/whistleblower allowed to refile claim over construction of new One World Trade Center, other projects

By John O'Brien | Mar 11, 2014

NEW YORK (Legal Newsline) - A whistleblower will have a chance to refile his False Claims Act lawsuit against his former employers that he alleged conducted a fraudulent billing scheme during construction of the new One World Trade Center.

On March 10, the U.S. Court of Appeals for the Second Circuit ruled that engineer Magdy M. Youssef's lawsuit against Tishman Construction and Turner Construction should have been dismissed without prejudice, overruling a lower court decision that dismissed it with prejudice.

Youssef filed his qui tam complaint in 2010 and sought to voluntarily dismiss it in December 2011. He and his lawyers did not learn it was dismissed with prejudice until late August 2012.

Youssef's dismissal request said he did not wish to pursue the matter any further after both the New York Attorney General's Office and the U.S. Attorney's Office declined to join the lawsuit.

"(W)e disagree with the district court that the statement by plaintiff's counsel that Youssef would not 'pursue this matter any further' constituted 'the plain English equivalent of a request that the Court dismiss the claim with prejudice," the Second Circuit ruled.

"The plain language of the letter supplies on reason to conclude that the plaintiff's counsel was requesting a dismissal with prejudice. By stating that the plaintiff would not 'pursue this matter any 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."

Youssef's complaint says the construction companies fraudulently billed the owners of major publicly-financed construction projects.

They allegedly submitted bills for hours that were not actually performed. Those hours represented guaranteed payments mandated under union collective bargaining agreements, the complaint says.

"Labor that is not actually performed is not an allowable cost on government contracts, and claims that sought reimbursement for such costs cheated the federal and state governments out of many millions of dollars in project expenses that should have never been paid," the complaint says.

After New York Attorney General Eric Schneiderman and the federal government declined to intervene, Youssef's lawyer sent a letter to the district court indicating he wished to dismiss the action.

The court dismissed it with prejudice as to Youssef, but without prejudice as to the federal government and New York in case they wished to pursue claims later.

However, Youssef's lawyer says he didn't receive a copy of that order until eight months after it was issued. The dismissal was not entered on the docket until Sept. 18, 2012, nine months after he sent the dismissal letter.

On Aug. 3, 2012, Youssef re-filed his claim after learning the federal government had begun an investigation. When he did, he learned that his first lawsuit had been dismissed with prejudice.

U.S. District Judge Kevin Castel refused to change his mind, leading to the appeal.

Youssef is represented by Daniel J. Kaiser and Geoffrey R. Kaiser of Kaiser Saurborn & Mair in New York City.

From Legal Newsline: Reach editor John O'Brien at jobrienwv@gmail.com.

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