United States Ex Rel. Vavra v. Kellogg Brown & Root, Inc.
2017 U.S. App. LEXIS 2049
| 5th Cir. | 2017Background
- KBR held a LOGCAP III prime contract and subcontracted freight forwarding to EGL; relators filed a qui tam FCA suit in Jan 2004 and the Government intervened in Aug 2010.
- The Government alleged KBR violated the Anti-Kickback Act (AKA), 41 U.S.C. §§ 8701–07, by employees Robert and James Bennett knowingly accepting kickbacks from EGL employees.
- The district court held, after a bench trial, that both Bennetts accepted kickbacks and imputed their knowledge to KBR under Section 8706(a)(1), exposing KBR to enhanced civil penalties.
- On appeal the Fifth Circuit reviewed three novel questions: (1) the proper test for imputing an employee’s knowledge to a corporation under Section 8706(a)(1); (2) whether the AKA requires a link between a gratuity and specific favorable treatment; and (3) whether the Government’s AKA claims relate back to the 2004 qui tam complaint under 31 U.S.C. § 3731(c).
- The court affirmed imputation and liability as to Robert Bennett, reversed imputation as to James Bennett, held that a kickback must be linked to obtaining or rewarding some improper action (not merely general goodwill), and allowed relation back of the Government’s AKA claims to the qui tam filing where the claims arise from the same operative facts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Imputing employee knowledge to corporate defendant under AKA §8706(a)(1) | Apply apparent-authority standard (per prior Vavra) to impute employee knowledge to corporation | Use LLA/Hellenic managing-agent multifactor test (more demanding) to limit imputation | Adopt intermediate corporate-law test: impute only when employee’s authority/responsibility/managerial role makes their knowledge the corporation’s; applied to hold Robert’s knowledge imputable but not James’s (James finding reversed) |
| Meaning of “to improperly obtain or reward favorable treatment” in "kickback" definition | AKA covers generalized efforts to build goodwill; no need to tie gratuity to a particular act; "improperly" is broad | Require a connection between the gratuity and specific favorable treatment (analogous to Sun-Diamond limiting gratuity statute) | A kickback requires a link to some sought or rewarded action (improper favorable treatment) — more than abstract goodwill; applied to affirm that gratuities to Robert sought improper forbearance/overlooking performance issues |
| Relation-back of Government’s AKA claims to 2004 qui tam under 31 U.S.C. §3731(c) | §3731(c) permits the Government to add any additional claims and they relate back if they arise from the same conduct/transactions/occurrences set forth in the qui tam | §3731(c) should be read to permit only additional FCA claims, not separate statutory claims like AKA | §3731(c) allows relation back of additional claims (including non-FCA) so long as they arise from the same core operative facts; Government’s AKA claims related back to the 2004 qui tam filing |
Key Cases Cited
- United States ex rel. Vavra v. Kellogg Brown & Root, 727 F.3d 343 (5th Cir.) (discussing apparent-authority vicarious liability and setting stage for imputing knowledge under the AKA)
- In re Hellenic, Inc., 252 F.3d 391 (5th Cir. 2001) (announcing multifactor managing-agent test under Limited Liability Act; court distinguishes but finds principles informative)
- United States v. Sun-Diamond Growers of Cal., 526 U.S. 398 (1999) (construing illegal-gratuity statute to require connection to a particular official act; persuasive on limiting overbroad gratuity liability)
- Mayle v. Felix, 545 U.S. 644 (2005) (relation-back requires new claim be tied to common core of operative facts; applied analogously to §3731(c))
- In re Signal Int’l, LLC, 579 F.3d 478 (5th Cir. 2009) (endorses focus on an agent’s authority over the relevant sphere of activities when imputing corporate knowledge)
- McDonnell v. United States, 136 S. Ct. 2355 (2016) (Supreme Court decision reaffirming careful construction of "official act" in gratuity/bribery context and cited for limiting principles)