Kellogg Brown & Root Services, Inc. v. United States
2011 U.S. Claims LEXIS 1333
| Fed. Cl. | 2011Background
- This case arises from a LOGCAP III contract between the Army and Kellogg Brown & Root Services, Inc. and Tamimi subcontracting DFAC services in Kuwait and Iraq.
- Kickbacks were allegedly paid by Tamimi’s vice-president Mohammad Shabbir Khan to KBR employees Hall and Holmes to influence Master Agreement 3 and related Work Release 3 awards.
- KBR paid Tamimi approximately $466,290,328 under Master Agreement 3 and sought government reimbursement; Work Release 3 paid Tamimi about $307,630,344 under Camp Anaconda.
- Plaintiff filed suit seeking unpaid costs; defendant counterclaims premised on a tainted contracting process and various statutory and common-law theories of fraud and forfeiture.
- The court granted in part and denied in part plaintiff’s motion to dismiss, addressing the Special Plea in Fraud, Anti-Kickback Act (AKA), False Claims Act (FCA), and common-law fraud claims, as well as an affirmative defense of taint.
- Proceedings included discovery disputes, a March 2011 amended counterclaim, and a January 2011 re-codification note about the AKA provisions analyzed under the pre-2011 text.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of the forfeiture statute | 2514 covers fraud in the prosecution of a claim, not taint in performance. | Taint from kickbacks taints Master Agreement 3 and all related claims, fitting § 2514. | Ta i nt not sufficient; no claim under § 2514; must show fraud in proof/establishment/allowance of a claim. |
| Anti-Kickback Act liability | Corporations aren’t vicariously liable under § 55(a)(1) for knowledge of employees; § 55(a)(2) provides no-fault liability and is not redundant. | Respondeat superior applies to § 55(a)(1) and § 55(a)(2) liability; dual theories available. | Count II survives; § 53(2) vicarious liability asserted; alternative § 55(a)(2) viable; cannot be double recovery but both theories are possible. |
| False Claims Act viability | Taint alone cannot establish an FCA claim; no causally false claim shown and no knowledge of falsity. | Kickback-tainted conduct can render claims false and support FCA liability. | FCA claim dismissed for lack of specific falsity linking kickbacks to submitted claims; no proper causation/knowledge shown. |
| Common-law fraud and rescission/disgorgement | No direct nexus between kickbacks and contract formation supports common-law fraud; no void-ab-initio basis. | Conflict of interest and taint in award decisions support rescission and disgorgement. | Common-law fraud claim viable; issues of causation and extent of relief to be resolved at trial; rescission/disgorgement remain unresolved at this stage. |
| Affirmative defense taint | Taint-based defense is improper and should be struck as vague or unfounded. | Taint is a legitimate affirmative defense addressing the contract’s enforceability. | Affirmative defense struck; taint defense deemed insufficient to bar claims at this stage. |
Key Cases Cited
- Glendale Fed. Bank, FSB v. United States, 239 F.3d 1379 (Fed. Cir. 2001) (requires proof of knowledge and intent for § 2514 forfeiture)
- Young-Montenay, Inc. v. United States, 15 F.3d 1040 (Fed. Cir. 1994) (set forth FCA damages standards and scienter requirements)
- Commercial Contractors v. United States, 154 F.3d 1357 (Fed. Cir. 1998) (false claims standard under FCA; knowledge and damages aspects)
- Daewoo Eng’g & Constr. Co. v. United States, 557 F.3d 1332 (Fed. Cir. 2009) (forfeiture and fraud standards; clear and convincing evidence)
- Kamen Soap Prods. Co. v. United States, 124 F.Supp. 608 (Ct.Cl. 1954) (fraud in the presentation of a claim under § 2514)
- Little v. United States, 152 F.Supp. 84 (Ct.Cl. 1957) (fraud in the contract tainting related claims; establishment of taint)
- Hess v. United States, 317 U.S. 543 (Supreme Court 1943) (false claims and collusive bidding leading to inflated prices)
- Neifert-White Co. v. United States, 390 U.S. 228 (Supreme Court 1968) (false certification and FCA applicability)
- General Dynamics Corp. v. United States, 19 F.3d 772 (2d Cir. 1994) (FCA relation to kickbacks and inflated costs)
- Godley v. United States, 5 F.3d 1473 (Fed. Cir. 1993) (causation in conflict-of-interest/fraud cases)