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July 1 (Bloomberg) -- The U.S. Supreme Court agreed to review a lawsuit accusing KBR Inc. and Halliburton Co. of overbilling the federal government for work in Iraq, taking up a clash over the deadlines for fraud suits against government contractors.

The companies contend that a federal appeals court in Richmond, Virginia, effectively eliminated the time limits imposed by the U.S. False Claims Act for whistle-blower lawsuits.

The appeals court said Benjamin Carter, a former company employee, could press claims that KBR and Halliburton overbilled the U.S. for work on water-purification projects at two camps in Iraq.

The Obama administration urged the Supreme Court to reject KBR’s appeal, saying the lower court reached the right conclusion.

The False Claims Act lets whistle-blowers sue on behalf of the federal government and collect a portion of any damages awarded. That law normally requires suits to be filed within six years of the alleged fraud.

The legal fight centers in part on the Wartime Suspension of Limitations Act, which extends the deadlines for lawsuits when the U.S. is at war. The companies say the appeals court’s reasoning would mean that deadline won’t occur until years after the president or Congress formally terminates the conflicts in Iraq and Afghanistan.

The companies also contend that Carter’s suit was barred because an earlier lawsuit in California had made similar allegations.

The case is Kellogg Brown & Root v. United States ex rel. Carter, 12-1497.

To contact the reporter on this story: Greg Stohr in Washington at

To contact the editors responsible for this story: Patrick Oster at Mark McQuillan, Laurie Asseo

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