MEMORANDUM OPINION AND ORDER
This matter is before the court after argument on plaintiffs Motion To Dismiss the Counterclaims of Defendant the United States of America for failure to state claims for which relief can be granted pursuant to RCFC 12(b)(6) and failure to properly plead fraud under RCFC 9(b). Plaintiffs motion calls into question the level of proof required for each of defendant’s five counts of fraud, implicating both statutory and common-law remedies, and, specifically, whether receipt of kickbacks from a subcontractor by employees of a prime contractor states a claim under the Special Plea in Fraud or the Forfeiture of Fraudulent Claims Act, 28 U.S.C. § 2514 (2006) (the “forfeiture statute”) (Count I), the Anti-Kickback Act, 41 U.S.C. §§ 53, 55 (2006) (the “AKA”) (Count II),
FACTS
I. Background
This dispute has its genesis in a United States Army (the “Army”) Logistics Civil Augmentation Program (“LOGCAP”) Contract Number DAAA09-02-D-0007 (the “LOGCAP III contract”) with Brown & Root Services. The contract was novated and transferred to Kellogg Brown & Root Services, Inc. (“KBR” or “plaintiff’), on August 1, 2003. LOGCAP III was an umbrella contract to implement logistics support services for the Army in Kuwait and Iraq prior to and during Operation Iraqi Freedom. The logistics support services provided by plaintiff included dining facility (“DFAC”), morale and welfare, laundry, and fuel delivery services. The LOGCAP III contract was a cost-plus-award-fee agreement that incorporated the provisions of 48 C.F.R. (FAR) § 52.216-7 (2000), whereby the Army would reimburse KBR for all costs it incurred in contract performance, including payments to subcontractors, along with a fee determined by subcontract costs.
Beginning in October 2002, Terry Hall was KBR’s Regional Food Services Manager for Kuwait and Iraq. Mr. Hall and his staff were responsible for ensuring that subcontractors providing DFAC services were competent, to help craft statements of work for those subcontractors, requisitioning DFAC services— including cost estimates from subcontrac
One of the DFAC subcontractors under Mr. Hall’s purview was Tamimi Global Company (“Tamimi”). When Mr. Hall was hired by KBR in 2002, Tamimi already was a KBR subcontractor under the LOGCAP III contract performing DFAC services in Kuwait at Camp Arifjan. In November 2002 Mr. Hall and his superiors at KBR considered terminating Tamimi’s subcontract because of an electrical fire at Camp Arifjan for which Tamimi was faulted. However, KBR continued to subcontract with Tamimi.
1. Tamimi’s kickback scheme
For purposes of plaintiffs motion to dismiss, all well-pleaded allegations of defendant’s affirmative defense and counterclaims are accepted as true. In November 2002 Tamimi’s vice-president and chief of operations, Mohammad Shabbir Khan, offered Mr. Hall a kickback, stating that they could “ ‘make a lot of money together.’ ” Def.’s Am. Answer & Counterels. filed Mar. 15, 2011, ¶ 114 (“Counterels.”). At that time Mr. Hall did not accept money from Mr. Khan, but he also did not report the kickback offer to anyone. However, eventually, both Messrs. Hall and Holmes did accept kickbacks from Mr. Khan.
Beginning in late 2002 through the end of 2003, Messrs. Hall and Holmes received a combined $45,000.00 in cash kickbacks from Mr. Khan. “Mr. Hall understood that the money was being provided so that Tamimi would remain in KBR’s good graces and continue to get DFAC contracts from KBR.” Id. ¶ 115. In 2003 Messrs. Hall and Holmes each accepted $5,000.00 in cash that Mr. Khan delivered to them at an airport in Kuwait. Mr. Khan also gave Mr. Hall an automated teller machine (“ATM”) card to withdraw cash from a bank account into which Mr. Khan had deposited another $5,000.00. Mr. Hall used the ATM card to withdraw $3,500.00 in cash. Mr. Holmes withdrew the remaining $1,500.00. Mr. Holmes accepted an additional $10,000.00 in cash from Mr. Khan, which Mr. Holmes gave to his secretary. Towards the end of 2003, Mr. Hall accepted $20,000.00 from Mr. Khan, which purportedly was to be used as an investment in a “Golden Corral” restaurant. However, Mr. Hall made no such investment, and Mr. Khan did not request that the money be paid back.
2. Award of Master Agreement S to Tam-imi
KBR awarded “master agreement” subcontracts under the LOGCAP III contract to perform DFAC services. When a master agreement was awarded to a subcontractor, KBR would order DFAC services by issuing work releases to the subcontractor. Contractors that were not awarded master agreements by KBR would not be eligible to operate DFACs for KBR. In June 2003 KBR convened a board to determine which subcontractors would be awarded these master agreements. The master agreement approval board included Messrs. Hall and Holmes, as well as other KBR employees. “As Regional Food Services Manager for KBR, had Mr. Hall objected to the award of a master agreement to a contractor, it would have been highly unlikely that such an award would be made.” Id. ¶ 117. While the board did not award master agreements to every contractor that sought them, KBR did award master agreements to five contractors, including Tamimi, which was awarded “Master Agreement 3.” Id.
In response to Army task orders issued upon the LOGCAP III contract, KBR issued numerous work releases to Tamimi under Master Agreement 3. These task orders include Task Order 59 issued by the Army on August 2003 — effective from June 2003 through April 2005 — and Task Order 89— effective from May 2005 through August 2006. KBR paid Tamimi approximately $466,290,328.00 for all of the work releases issued under Master Agreement 3. KBR submitted vouchers to the Army for reimbursement of payments made to Tamimi for amounts due under the work releases. In addition to reimbursement vouchers for these direct costs, KBR received a base fee of one percent of direct costs, an award fee of up to two percent of direct costs, as well as a fee for indirect costs. Id. ¶ 118.
In addition to Camp Arifjan, the Army chose KBR to take over performance of DFAC services at Camp Anaconda, Iraq, from Tamimi, the incumbent contractor. KBR decided to continue to use Tamimi to perform DFAC services at Camp Anaconda. The decision to subcontract with Tamimi initially was made by Daniel Petsche, KBR’s LOGCAP III subcontracts administrator in Iraq. Although at that time Mr. Petsche did not possess authority to commit KBR to significant contractual expenditures on any one subcontract, he could make provisional agreements with subcontractors and then seek ratification of any such action from his superiors at KBR who did possess the requisite authority. Notably, Mr. Petsche did not possess the authority to commit KBR to the contractual expenditures required by the Camp Anaconda DFAC contract. However, Mr. Petsche made the initial decision to award the Camp Anaconda subcontract to Tamimi, and he did so at the urging of Mr. Hall and his direct supervisor, Robert Gatlin. Mr. Petsche had considered awarding the subcontract to another contractor, but “changed his mind based upon the advocacy for Tamimi that he received from Mr. Hall.” Id. ¶ 120. Mr. Hall wrote and signed the procurement memorandum for KBR justifying the sole-source Camp Anaconda subcontract award to Tamimi.
Work Release 3 of Master Agreement 3 (“Work Release 3”) was the relevant work release through which KBR authorized Tami-mi’s DFAC services at Camp Anaconda and was effective from August 2003 through December 2005. KBR paid Tamimi approximately $307,630,344.00 under Work Release 3, which KBR sought reimbursement for from the Army, plus its additional fees and indirect costs.
Toward the end of December 2003, KBR fired Mr. Petsche for accepting a gift from another subcontractor — not Tamimi. In February 2004 Mr. Petsche was contacted by David Hadcock, another KBR employee who was reviewing KBR’s Camp Anaconda DFAC procurement files for the proper authorization and cost justification for Work Release 3. In an e-mail to Mr. Hadcock, Mr. Petsche characterized the Camp Anaconda DFAC subcontract as “ ‘the mother of all DFAC drug deals’ ” because of its irregularities and described it as “‘predestined and out of control from the start.’ ” Id. ¶ 124. Because Tamimi’s pricing for Camp Anaconda was “‘very close to the [amount in the internal KBR] requisition,’ ” Mr. Petsche opined that the work release award had been agreed to by other executives at KBR and Tamimi, but he decided not to question it. Id. (alteration in original). Mr. Petsche’s email explained that he drafted a work release for Tamimi, but did not sign it because he believed he needed more data justifying Tamimi’s costs. Mr. Petsche wrote, “ T did not execute the Work Release. I did not do a Price Reasonableness write-up on it. I could not present it with the data and support [that] I had.’ ” Id. Mr. Petsche concluded, cryptically, that “ ‘[t]here is a whole lot more to this story.’ ” Id.
Mr. Hadcock forwarded Mr. Petsche’s email to several KBR senior executives, including William Jonas, KBR’s head of procurement, and Charlie Carr, the head of KBR’s “DFAC team,” which exercised oversight over all DFACs in Kuwait and Iraq. Id. ¶ 125. None of these individuals, or any other KBR employee, took any action to inquire about or investigate Mr. Petsche’s allegations of irregularities surrounding the Camp Anaconda DFAC subcontract. In March 2004 Mr. Hadcock drafted a price-justification memorandum for Work Release 3. Following Mr. Hadcoek’s price-justification memorandum, Work Release 3 officially was ratified by KBR executives who possessed the requisite authority.
II. Procedural history
On June 2, 2009, plaintiff filed its complaint in the United States Court of Federal Claims seeking approximately $41,070,624.00 in unpaid costs incurred under the LOGCAP III contract for DFAC services at Camp Anaconda from July through December 2004. On July 27, 2009, defendant requested a ninety-day enlargement of time to “evaluate the appropriateness of special pleadings and counterclaims involving fraud, which are currently being considered in this case,” Def.’s
Defendant, upon learning of the kickbacks Mr. Hall allegedly received, see Def.’s Mot. filed Nov. 9, 2010, at 3 (“[W]e were unaware of the evidence provided by Mr. Hall until late last week, despite our diligent efforts to remain apprized of investigative efforts related to Tamimi and KBR.”), requested on November 9, 2010, a 120-day extension of time for discovery in order to pursue a possible fraud counterclaim, see id. at 1. The court expedited briefing, see Order entered Nov. 9, 2010, and plaintiff filed its opposition the next day, see Pl.’s Br. filed Nov. 10, 2010. Defendant replied on November 15, 2010. On November 17, 2010, the court granted defendant’s motion, instructing defendant to file promptly any amended answer or counterclaim and limiting any new discovery to defendant’s allegations of fraud. See Order entered Nov. 17,2010, ¶¶ 1-2.
On December 20, 2010, plaintiff filed a motion to compel the production of documents “reflecting any act(s) of fraud, kickbacks, or bribery related to Master Agreement 3 Work Release 3.” Pl.’s Mot. filed Dec. 20, 2010, at 2. Defendant had asserted that these documents were protected by the investigative files privilege. See Def.’s Br. filed Jan. 6, 2011, at 2. On January 20, 2011, the court granted plaintiffs motion in part by ordering defendant to file any counterclaim in fraud by March 15, 2011. See Order entered Jan. 20, 2011, at 1-2 (noting that defendant did not seek protective order suspending its obligations to respond to discovery requests relating to fraud and “failed to assert the investigative files privilege timely or adequately”). On March 15, 2011, defendant filed Defendant’s Amended Answer and Counterclaims. Plaintiff filed its motion to dismiss the counterclaims on April 6, 2011, and briefing was completed on April 26, 2011.
III. The parties’ arguments
Affirmatively defending against plaintiffs claim for breach of the LOGCAP III contract, defendant argues that the contract is unenforceable because it is tainted by kickbacks. See Countercls. ¶ 103. Defendant grounds all its counterclaims on the alleged kickback scheme, primarily the roles of Messrs. Hall and Holmes in the award of Master Agreement 3 to Tamimi, the influence that Mr. Hall exerted on Mr. Petsche to award Work Release 3 to Tamimi while receiving kickbacks from Tamimi, and the innuendo of impropriety contained in the Petsche e-mail.
Defendant argues that the Special Plea in Fraud statute, 28 U.S.C. § 2514, mandates the forfeiture of claims where “fraud is practiced during the performance of the contract.” Id. ¶ 129. Under defendant’s theory, fraud “tainted” the contract when Messrs. Hall and Holmes received kickbacks while sitting on the board that awarded Master Agreement 3 and when “they took actions to encourage the issuance of Work Release 3.” Id. ¶ 130.
Defendant would also hold plaintiff liable under a theory of respondeat superior for violating the AKA, 41 U.S.C. §§ 53, 55, due to the $45,000.00 in kickbacks paid by Mr. Khan to Messrs. Hall and Holmes. Specifically, defendant alleges a “knowing violation” of the AKA under 41 U.S.C. § 55(a)(1). Further, the kickback scheme also constitutes a violation of the FCA, 31 U.S.C. § 3729(a)(1), because “Mr. Hall and Mr. Holmes knew, when they accepted their kickbacks from Mr. Khan, that KBR would file vouchers with the United States seeking reimbursement for any Tamimi subcontracts_ Mr. Hall and Mi’. Holmes also knew or had reason to know that the kickbacks that they received would lead to inflated contract prices from Tami-mi.” Countercls. ¶ 118. Defendant would impute the “knowledge” possessed by Messrs. Hall and Holmes to KBR to the end that plaintiff knew that “the award of Master Agreement 3 and the work releases upon it, including but not limited to Work Release 3, were tainted by kickbacks.” Id. ¶ 137. Similarly, defendant’s common-law fraud claims, which seek rescission and disgorgement of
Plaintiff argues that defendant’s AKA counterclaim fails to state a violation of the AKA because plaintiff, as a prime contractor, cannot be held vicariously liable for a knowing violation of the AKA based only on the wrongful conduct of its employees under 41 U.S.C. § 55(a)(1), when § 55(a)(2) provides for separate no-fault vicarious liability for contractors whose employees violate the AKA Holding plaintiff vicariously liable under § 55(a)(1) thus would render § 55(a)(2) superfluous.
Plaintiff attacks defendant’s “taint” theory as insufficient to state a claim for commonlaw fraud or a violation of the FCA, let alone as the predicate for an affirmative defense. These counterclaims fail because (1) they do not allege any causal link between the kickbacks and any inflated claim or scheme to defraud the Government; (2) the facts pleaded lack the requisite scienter; (3) the facts do not allege any causal nexis between the award of Master Agreement 3 or Work Release 3 and the kickbacks; and (4) the counterclaims do not support corporate vicarious liability because they do not allege that the kickbacks were accepted with any intent to benefit KBR or that they did benefit KBR. According to plaintiff, the Special Plea in Fraud does not state a claim for relief in that defendant does not allege that plaintiff possessed the specific intent to defraud the Government. Further, the forfeiture statute proscribes fraud in the prosecution of a claim, which defendant does not allege, not fraud in the performance of a contract.
The court resolves plaintiff’s motion as to each of defendant’s counterclaims in sequential order, but discusses defendant’s affirmative defense of “taint” following defendant’s common-law fraud theories. These supply the legal analysis for this novel affirmative defense.
DISCUSSION
I. Standard of review
1. Failure to state a claim
Plaintiff moves pursuant to RCFC 12(b)(6) to dismiss defendant’s affirmative defense and counterclaims for failure to state claims upon which relief can be granted. See RCFC 12(b)(6). “The purpose of [RCFC 12(b)(6) ] ... is to allow the court to eliminate actions that are fatally flawed in their legal premises and destined to fail.” Advanced Cardiovascular Sys., Inc. v. Scimed Life Sys., Inc.,
In resolving a RCFC 12(b)(6) motion, the court must assess whether defendant’s Amended Answer and Counterclaims adequately state a claim for relief under each implicated statute and common-law theory and whether defendant has made “allegations plausibly suggesting (not merely consistent with)” a showing of entitlement to relief. Bell Atl. Corp. v. Twombly,
2. Failure to plead fraud with specificity
“In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” RCFC 9(b). Rule 9(b)’s “heightened pleading standard,” Juniper Networks, Inc. v. Shipley,
II. Special Plea in Fraud
Count I of defendant’s counterclaims pleads a Special Plea in Fraud for the forfeiture of plaintiffs claims. See Counterels. ¶¶ 127-131. The forfeiture statute provides, as follows:
A claim against the United States shall be forfeited to the United States by any person who corruptly practices or attempts to practice any fraud against the United States in the proof, statement, establishment, or allowance thereof.
In such cases the United States Court of Federal Claims shall specifically find such fraud or attempt and render judgment of forfeiture.
28 U.S.C. § 2514. A predicate for forfeiture under this statute is the establishment of fraud, although the statute itself does not articulate the elements of fraud.
1. Scope of targeted conduct
Pivotal to defendant’s contention for Special Plea in Fraud is the scope of the prohibited conduct targeted by the statute. Defendant has failed to state a claim under this statute if the conduct alleged does not fall within the regulatory ambit of 28 U.S.C. § 2514, which mandates the forfeiture of an asserted claim by a person “who corruptly practices or attempts to practice fraud against the United States in the proof, statement, establishment, or allowance thereof.”
The parties diverge on whether the conduct targeted by the statute includes any and all fraudulent conduct in the performance of the contract, or whether the qualifying phrase — “fraud ... in the proof, statement, establishment, or allowance thereof’ — limits the prohibited activity to the prosecution of a claim. For the instant case, the issue is decisive because plaintiff contends that defendant has failed to allege fraud in the prosecution of a claim. See Pl.’s Br. filed Apr. 6, 2011, at 28. Defendant has not connected the action of accepting a kickback to the “proof, statement, establishment, or allowance” of a claim, except insofar as the allegation that Messrs. Hall’s and Holmes’s acceptance of kickbacks “tainted” the entire contract with fraud. Plaintiff asserts that this allegation alone will not implicate the forfeiture statute, which is aimed at punishing fraud in the prosecution of a claim.
Defendant appears to agree with plaintiffs assessment of the facts, while demurring on plaintiffs, and this court’s, interpretation of the law. Defendant contends that the statute requires forfeiture when plaintiff engages in any fraudulent activity in the performance of a contract, regardless of its relationship to the presentation of a claim. See Def.’s Br. filed Apr. 21, 2011, at 18-21. Under this theory any fraud “places a stigma upon the contract at issue ... and on all the claims arising under the eontract-in-suit, sufficient to deem [a claim] unenforceable due to public policy considerations.” Supermex, Inc. v. United States,
Several Court of Federal Claims decisions state that “[t]he words of the statute make it apparent that a claim against the United States is to be forfeited if fraud is practiced during the contract performance or in the making of a claim.” Crane Helicopter Servs., Inc. v. United States,
Although these decisions interpret precedent to expand the obvious contours of the qualifying phrase, at least one Court of Federal Claims ease recognizes a disconnect between the limitation in the language of the statute — the suggestion that “fraud will cause a claim to be forfeited only if the fraud is in the very claim for money being brought before the court” — and the application of the statute to “situations outside [its] strict terns.” Am. Heritage Bancorp v. United States,
The lineage of United States Court of Claims binding precedents relied upon by American Heritage and the other Court of Federal Claims decisions discussed does not stand for the proposition that fraud in the practice of a contract alone constitutes a valid cause of action under the forfeiture statute. Rather, “[t]he statutory language has been construed [in precedential cases] as proscribing fraud in the prosecution of claims against the United States, not fraud in the performance of the contract.” Veridyne,
In 1908 the Court of Claims examined the proof required under the predecessor forfeiture statute. See N.Y. Mkt. Gardeners’, Ass’n v. United States,
In Kamen Soap Products Co. v. United States,
Two of the cases most frequently cited in the Court of Federal Claims opinions that are relied on by defendant are Little v. United States,
Little involved a claim that included falsified attendance records in a school for veterans in order to justify continued funding. The school contracted to provide qualified veterans with courses, books, supplies, and related equipment. Little,
The plaintiff brought suit for a payment period for which no fraud was alleged. Id. at 87. However, a previously submitted claim for payment of the period in which the plaintiff had falsified attendance records had been paid, and, accordingly, the Government counterclaimed for recovery of these overpay-ments. Id. In declaring the claim at bar void, the court stated, as follows:
It is true that the forfeiture statute quoted above was not intended to forfeit an otherwise valid claim of a claimant merely because, in some other related transaction, he had defrauded the Government. But where, as in the present case, fraud was committed in regard to the very contract upon which the suit is brought, this court does not have the right to divide the contract and allow recovery on part of it. Since plaintiffs claims are based entirely upon contract V3020V-241, a contract under which he practiced fraud against the Government, all of his claims under the contract will be forfeited pursuant to 28 U.S.C. § 2514.
Id. at 87-88.
Several decisions have seized upon this language as justification that all claims must be forfeited by a contract that is “tainted” by fraud, without regard to the alleged fraud’s connection to a submitted claim. See, e.g., Brown Constr. Trades, Inc. v. United States,
In O’Brien,
The issue before the Court of Claims in O’Brien was whether the suit for redetermi-nation constituted a “claim” under the forfeiture statute. The court ultimately adopted an expansive definition of a “claim,” stating that a “ ‘[ejlaim’ is a word of many meanings, to be determined in the context of the purpose of the statute in which it is found.” Id. at 678. This opinion did not dispose of the requirement that the alleged fraud relate to the “proof, statement, establishment, or allowance” of a claim. In fact, much of the language used in O’Brien and the legislative history discussed in O’Brien reaffirm this concept of the forfeiture statute’s requirements. See, e.g., id. at 672 (“When these records, shot through with fraud, were presented by plaintiff in support of its ease in this court, a further, specific object was added — the proof by fraud of the claim here made.” (emphasis added)); id. at 678 n. 7 (quoting Cong. Globe, 37th Cong., 2d Sess. 1674 (1862), as follows: “[I]t is very wisely provided that if there be any fraud practiced, or attempted to be practiced, upon the part of any claimant against this Government in the demand or establishment of his claim, such act of fraud upon his part shall forever forfeit his claim, no matter what it may be.” (emphasis added)); id. at 678 (“No intention can be surmised that some who committed fraud in the proof of their demand would be exempt from the forfeiture provided in section 11 by reason of some narrow definition of the word ‘claim.’ ” (emphasis added)); id. at 681 (ultimately holding: “The contention that the renegotiation proceeding is not a claim against the United States within the meaning of 28 U.S.C. § 2514 is rejected, and fraud having been found to be practiced in the proof of the claim, the claim is forfeited, and the petition is dismissed.” (emphasis added)).
This initial expansion of the forfeiture statute’s targeted conduct can be traced back to the later decision in Brown Construction,
This expansion has affected a relatively small number of cases, but represents a departure from the law based on incorrect citation to precedent, which has been carried forward in internal citations. Brown Construction, misinterpreting Kamen Soap, Little, and New York Market, initially expanded the scope of the targeted conduct in 1991. See Brown Constr.,
This interpretation again was cited by Supermex,
Supermex was followed by UMC,
Most recently, in 2004 American Heritage cited O’Brien and Little as evidence that “the Federal Circuit and this court [have applied] the forfeiture statute to situations outside the strict terms of the statute, as logic has dictated.” Am. Heritage,
Not only does this expansion depart from Court of Claims precedent, it does not comport with the Federal Circuit’s articulation of the legal requirement of the forfeiture statute: to prevail on a counterclaim alleging fraud under 28 U.S.C. § 2514, defendant “ ‘is required to establish by clear and convincing evidence that the contractor knew that its submitted claims were false, and that it intended to defraud the government by submitting those claims.’ ” Glendale Fed. Bank,
In relying on a hospitable line of nonbinding trial court cases that beg to be distinguished, defendant’s theory of the case not only misinterprets binding precedent, but ignores the explicit statutory requirement that “the contractor knew that its submitted claims were false.” Glendale Fed. Bank,
2. Application to defendant’s counterclaim
Defendant has not cited any Federal Circuit or Court of Claims precedent to support an expansion of the plain — and limited— language of the forfeiture statute. The forfeiture statute is aimed at proscribing fraud in the prosecution of claims against the United States, not any and all fraud in the performance of the contract. Defendant’s argument that Messrs. Hall and Holmes “tainted” Master Agreement 3 “by the fraud of the kickbacks” when they “sat on upon the board that awarded Master Agreement 3,” Coun-tercls. ¶ 130, “[rjegardless of ... whether Tamimi might have, nevertheless, still been awarded the exact same contracts even without [Messrs. Hall’s and Holmes’s] advocacy,” Def.’s Br. filed Apr. 21, 2011, at 21, circumvents the stated objective of the statute. The mere “taint” of the kickback is insufficient to state a claim under the forfeiture statute when it is not alleged that the kickback is related to the “proof, statement, establishment, or allowance” of a claim. Defendant has not alleged that the kickbacks were in any way related to the required performance under the contract or to the proof of that performance submitted with plaintiffs claim.
The parties should not interpret this ruling as a statement that causes of action involving bribes, kickbacks, and fraud in the performance of the contract are not redressable; they are. The court has examined case law at the trial court level in order to show that each statutory tool is designed to address specific conduct and that the coui’t must not exceed the statutorily expressed boundaries. For example, as discussed infra, the AKA prohibits a contractor from offering, soliciting, or accepting a kickback or including the amount of a kickback in its contract price charged to the Government. 41 U.S.C. § 53. The AKA provides specific civil penalties for
More fundamental, however, is the problem that several of the Court of Federal Claims decisions received summary affir-mance or were affirmed on other grounds. Although not precedential, loose language can be adopted inadvertently on review. This is detrimental to the integrity of precedent, and plaintiff justifiably is concerned that the Court of Federal Claims could become a preferred forum for government fraud claims. See Transcript of Proceedings, Kellogg Brown & Root Servs. Inc. v. United States, No. 09-351C, at 39-40 (Fed.Cl. May 3, 2011). What should not occur — but be stopped in its tracks — is the exportation of judge-made law, exemplified in Ab-Tech, wherein the court proclaimed that the claim “arises out of the very contract relationship that [the plaintiffs] deceptive dealings ... helped falsely to maintain,”
III. Anti-Kickback Act
Count II of defendant’s counterclaims alleges that through the kickback scheme plaintiff violated the AKA. See Countercls. ¶¶ 132-135. The AKA’s prohibition against kickbacks provides, as follows:
It is prohibited for any person—
(1) to provide, attempt to provide, or offer to provide any kickback;
(2) to solicit, accept, or attempt to accept any kickback; or
(3) to include, directly or indirectly, the amount of any kickback prohibited by clause (1) or (2) in the contract price charged by a subcontractor to a prime contractor or a higher tier subcontractor or in the contract price charged by a prime contractor to the United States.
41 U.S.C. § 53.
(1) The United States may, in a civil action, recover a civil penalty from any person who knowingly engages in conduct prohibited by section 53 of this title. The amount of such civil penalty shall be—
(A) twice the amount of each kickback involved in the violation; and
(B) not more than $10,000 for each occurrence of prohibited conduct.
(2) The United States may, in a civil action, recover a civil penalty from any person whose employee, subcontractor or subcontractor employee violates section 53 of this title by providing, accepting, or charging a kickback. The amount of such civil penalty shall be the amount of that kickback.
Id. § 55(a).
Count II of defendant’s counterclaims alleges that, “[b]y virtue of accepting funds from Mr. Khan in return for their favorable treatment of Tamimi and in reward of that treatment, Mr. Holmes and Mr. Hall both violated the Anti-Kickback Act.” Countercls. ¶ 134. The AKA violations by Messrs. Hall and Holmes are attributable to KBR “because the two were acting as KBR’s agents at the time they accepted the kickbacks.” Id. ¶ 135. While defendant does not specify which subsection of § 53 plaintiff violated, the court construes Count II as alleging a violation of § 53(2). Defendant seeks penalties and damages against KBR both for a knowing violation under § 55(a)(1) and under the strict liability provision of § 55(a)(2). See Def.’s Br. filed Apr. 21, 2011, at 15-16 (“The Government cited section 55, which necessarily encompasses both subsections .... [SJeeking double the amount of the kickbacks necessarily includes a request for a single amount of the kickbacks. The complaint plainly states facts and cites the correct statute to allege violations of both section 55(a)(1) and section 55(a)(2).”).
Plaintiff resists the proposition that Count II can state a claim pursuant to RCFC 12(b)(6) because plaintiff defendant has only pleaded a violation of § 55(a)(1). See Pl.’s Br. filed Apr. 6, 2011, at 36 (“Count II of the Counterclaim seeks damages for a knowing violation of the AKA.”). Plaintiff argues that under the AKA, § 55(a)(2) provides for sepa-
rate no-fault vicarious liability for contractors whose employees violate the AKA; therefore, a “prime contractor cannot be held liable for a knowing violation based solely on the acts of its employees” under § 55(a)(1). Id. at 36-37. The two provisions do not set forth merely different remedies, but require different elements of proof. “Under [defendant’s] approach, every violation of the AKA by a prime contractor’s employee would necessarily result in corporate liability under § 55(a)(1) because the individual who accepted the kickback presumably ‘knows’ he is doing so and, under the Government’s theory, that knowledge would then be imputed to the company.” Id. at 38-39. Plaintiff submits that such a result renders § 55(a)(2) superfluous.
“In construing a statute, we begin with its literal text, giving it its plain meaning.” USA Choice Internet Servs., LLC v. United States,
The AKA’s text leads the court to conclude that § 55(a) incorporates the doctrine of respondeat superior in both civil penalty provisions of § 55(a). Section 55(a)(1) directs that a civil penalty may be recovered from any “person,” which term the statute defines as including individuals, corporations, and other business associations. See 41 U.S.C. § 52(3). Moreover, the AKA’s definition of a kickback includes “compensation of a kind provided to prime contractor employee, subcontractor, or subcontractor employee.” Id. § 52(2). The statute’s text thus plainly manifests a congressional intent that employers would be held vicariously liable under § 55(a)(1). However, plaintiffs cite to a contrary determination reached by the district court in United States ex rel. Vavra v. Kellogg Brown & Root, Inc., No. 04-cv-42, slip op. at 23 (E.D.Tex. Feb. 8, 2011). In Vavra the court concluded that such an interpretation renders “Congress’s reference to fraud committed by an ‘employee, subcontractor, or subcontractor employee,’ which only appears in § 55(a)(2), superfluous.” Id. (emphasis added). The court held that “the plain language of § 55(a) indicates that corporate vicarious liability is subject only to the limited penalty contemplated in § 55(a)(2).” Id. This court disagrees because the statute’s text is clear. Section 52(a)(1) necessarily includes the definition of “person” and, in doing so, establishes liability for a “corporation.” See 41 U.S.C. § 52(3). To hold otherwise would strip the term “person” of its plainly intended definition.
If an arbiter can be of assistance, the AKA’s legislative history manifests Congress’s intent that the doctrine of respondeat superior should apply to both sections:
Section [55(a)(1)] is meant to permit a civil recovery against anyone who knowingly engages in kickback activities.... It is intended to subject not only subcontractors and kickback recipients to civil liability, but also prime contractors, independent sales representatives and others who knowingly participate in kickback activities. It is also intended to reach companies whose employees engage in kickbacks, under the doctrine of respondeat superior.
132 Cong. Rec. S16,311. The Senate report accompanying the proposed 1986 amendments also explained that an earlier draft of the amendments provided for double penalties for both §§ 55(a)(1) and 55(a)(2). However, prime contractors complained that “they often unknowingly pass on kickback costs resulting from misconduct between lower tier subcontractors, where no prime contractor employee was involved in the fraud.” S.Rep. No. 99-435, at 16 (1986) (emphasis added). “Recognizing that prime contractors can be unwitting participants in lower tier kickback schemes and that the provision for double damages and forfeitures represents a significant civil liability,” id. at 16-17, the Senate agreed to restrict the recovery of “double damages and forfeitures only [to] instances of knowing violations of the Act,” id. at 16. If § 55(a)(2) contemplates liability in situations where no prime-contractor employees are involved in a kickback scheme, § 55(a)(1), by negative implication, must apply to situations in which prime-contractor employees are involved in such schemes and their wrongful conduct can be imputed to the prime contractor under the doctrine of re-spondeat superior.
Plaintiff is underinclusive in the remedy that it argues is applicable, but defendant overinclusively argues that it can validly plead a claim for damages under both § 55(a)(1) and § 55(a)(2). “[Sjeeking double the amount of the kickbacks necessarily includes a request for a single amount of the
A prime contractor can be held vicariously liable under either subsection for an employee’s kickback, but it cannot be liable for both simultaneously. A principal is liable for an agent’s knowing violation that is imputed to it under principles of respondeat superior pursuant to § 55(a)(1), or, as an alternative, where it cannot be shown that the principal engaged in a knowing violation, the principal is strictly and vicariously liable under § 55(a)(2).
The AKA’s legislative history confirms this interpretation, revealing that the purpose of both civil penalty provisions is compensatory. Compare 132 Cong. Rec. S16,310 (“By providing for civil recovery of twice the kickback amount plus $10,000 per instance of wrongdoing, [§ 55(a)(1)] provides a mechanism that will more nearly compensate the Government for all of its damages. For example, the provision will enable the United States to recoup the kickback amount; the amount that the subcontractor inflated its contract price beyond the kickback payment; the costs of detecting and investigating the kickback; the interest lost to the Government during the time of the fraud; and for other excess charges and performance problems that may be caused by a corrupt subcontractor.”), with id. at S16, 311 (explaining that goal of § 55(a)(2) is to encourage prime contractors to stop kickbacks “within their operations” and to “provide partial compensation to the Government for kickback costs included in Federal contracts”). Senator Levin approvingly cited Peterson v. Richardson,
1. Application to defendant’s counterclaim
The factual predicate of the AKA counterclaim is explicit that from late 2002 through the end of 2003 KBR employees Hall and Holmes received a combined $45,000.00 in cash kickbacks from Mr. Khan, Tamimi’s vice-president and chief of operations. See Counterels. ¶ 115. “Mr. Hall understood that the money was being provided so that Tami-mi would remain in KBR’s good graces and continue to get DFAC contracts from KBR.” Id. During this period Messrs. Hall and Holmes, in their capacities as employees of KBR, were involved in decisions that benefit-ted Tamimi, including sitting on a board that awarded Master Agreement 3 to Tamimi. Id. ¶ 117. “As Regional Food Services Manager for KBR, had Mr. Hall objected to the award of a master agreement to a contractor, it would have been highly unlikely that such an award would be made.” Id. Moreover, Count II of defendant’s counterclaims recites:
By virtue of accepting funds from Mr. Khan in return for their favorable treat*506 ment of Tamimi and in reward of that treatment, Mr. Holmes and Mr. Hall both violated the Anti-Kickback Act.
The violations of the Anti-Kickback Act by Mr. Hall and Mr. Holmes ai’e attributable to KBR because the two were acting as KBR’s agents at the time that they accepted the kickbacks.
Id. ¶¶ 134-35.
Because Messrs. Hall and Holmes were KBR employees when they accepted the kickbacks, these allegations are sufficient to state a claim for a violation of § 53(2) — for accepting a kiekbaek-and the civil penalty provisions of § 55(a)(1) — for doing so knowingly — under a theory of respondeat superi- or. Construing all inferences in defendant’s favor, the court holds that defendant has also stated, alternatively, a claim for a violation of the strict liability provision of § 55(a)(2), should defendant fail to prove KBR’s vicarious liability under § 55(a)(1).
2. Vicarious liability
Plaintiff denies that the counterclaims support holding plaintiff vicariously liable for the misconduct of Messrs. Hall and Holmes because no allegation has been made that the “money provided to Hall and Holmes was accepted with any intent to benefit KBR or did in fact benefit KBR.” PL’s Br. filed Apr. 6, 2011, at 34 (citing Long Island,
In Long Island the Federal Circuit addressed the issue of imputation of an agent’s fraud to the principal, holding that the adverse interest exception to the general common-law rule of agency (that “ ‘a principal is not affected by knowledge of an agent in a transaction in which the agent secretly is acting adversely to the principal and entirely for his own or another’s purposes’ ”) applies only where the agent “ ‘ secretly is acting adversely to the principal and entirely for his own or another’s purposes.’ ” Long Island,
Plaintiffs reliance on Long Island is misplaced, as that ease stands for the proposition that Messrs. Hall and Holmes had to engage in fraudulent conduct entirely to benefit Tamimi or themselves in order for the adverse interest exception to apply. Defendant correctly argues that KBR in fact bene-fitted by Messrs. Hall and Holmes’s selection of Tamimi in that Tamimi “did provide necessary services to KBR — operating DFACs.” Def.’s Br. filed Apr. 21, 2011, at 7 (“And whatever other motivations that Hall and Holmes had, this is enough under the Long Island Savings Bank test.”). Defendant has stated a valid claim for imputation of knowledge to KBR.
IV. False Claims Act
Count III of defendant’s counterclaims alleges that plaintiff violated the FCA, 31 U.S.C. § 3729(a)(1). The FCA recognizes a cause of action when any person “knowingly presents, or causes to be presented,” to the Government “a false or fraudulent claim for payment or approval.” Id. Such a person “is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person.” Id.
“The government must establish a violation of the False Claims Act by a preponderance of the evidence.” Daewoo Eng’g,
In order to recover damages for violation of the False Claims Act, the government must establish that
(1) the contractor presented or caused to be presented to an agent of the United States a claim for payment;
(2) the claim was false or fraudulent;
(3) the contractor knew the claim was false or fraudulent; and
(4) the United States suffered damages as a result of the false or fraudulent claim.
Young-Montenay,
Defendant alleges that KBR’s reimbursement vouchers “were false or fraudulent both because they were inflated by kickbacks and because they were submitted upon a kickback-tainted contract.” Def.’s Br. filed Apr. 21, 2011, at 25-26. With respect to the first ground, defendant bootstraps onto its FCA claim a legal presumption — that the cost of kickbacks is passed on to the Government— that arises under the AKA, contending that the “law has long presumed that the costs of kickbacks are included in the costs of contracts, and KBR’s invoices are therefore facially false.” Id. at 26 (citing United States v. Acme Process Equip. Co.,
In support of the second ground, defendant charges that plaintiff “knowingly submitted invoices that were the product of, and tainted by, fraudulent and illegal conduct that struck at the integrity of the procurement system.” Id. at 27 (citing United States v. Neifert-White Co.,
Defendant pleads that an illegal conflict of interest existed because Messrs. Hall and
Alternatively, defendant contends that the court can infer KBR’s knowledge that its reimbursement vouchers were false or fraudulent based on the allegations contained in Mr. Petsche’s e-mail. See id. at 32-33. “[T]he FCA’s scienter requirement is satisfied by ‘ostrich-like conduct which can occur in large corporations’ where ‘corporate officers ... insulate themselves from knowledge of false claims submitted by lower-level subordinates.’ ” Id. at 33 (quoting United States v. Sci. Applications Int’l Corp.,
Plaintiff counters that, as pleaded, defendant’s “taint” theory does not establish the necessary causal link between the kickbacks and any false or inflated claim. See PL’s Br. filed Apr. 6, 2011, at 18-19 (citing, inter alia, Gen. Dynamics,
1. Defendant cannot bootstrap a legal presumption applicable to the AKA onto its FCA claim
While the case law is sparse, several decisions hold that the costs of a kickback are presumed to be passed on to the Government under the AKA or at common law. See, e.g., Acme,
A unanimous Supreme Court ruled in Acme that the United States could cancel its contract with Acme, the prime contractor, because three of Acme’s principal employees had accepted kickbacks in the form of negotiated price commissions for awarding related subcontracts in violation of the AKA. See Acme,
The Supreme Court reversed on the basis of the AKA’s general policy against kick
In Davio the trial court explained that “English courts have conclusively presumed that the prices are loaded in secret commission cases, even if the price paid is the market price. Thus, the Government has a common law right of action for recovery of the kickbacks paid by defendants irrespective of the fact that there was no proof that ... the Government, as the ultimate beneficiary of the subcontract ... suffered any pecuniary damages as a result of the kickbacks.” Davio,
In its 1986 AKA amendments, Congress literally stripped from the AKA’s text the “conclusive presumption,” explaining that, “[f]or technical reasons ... the legislation uses a ‘civil penalty’ rather than the existing ‘conclusive presumption’ to achieve the desired result.” 132 Cong. Ree. S16, 310. However, Senator Levin was careful to explain that Congress did not intend this change to make any substantive change in the law:
In practical terms, the bill’s use of a civil penalty in place of a conclusive presumption has and is intended to make no substantive change in the United States’ right to recover civil damages in kickback cases. Contrasting the civil actions authorized by current law and the bill illustrate this point. To recover civilly under the current Anti-Kickback Act, the United States is required to establish the payment of a kickback. Upon making this showing, through the “conclusive presumption,” the Government is automatically deemed to have been injured and to be entitled to damages equal to the amount of the kickback. The bill works in a similar way. To recover under the proposed legislation, the United States must prove that a kickback was paid, accepted or included in a contract price. Upon making this showing, the United States is entitled to recover a “civil penalty.”
Id. (emphasis added). Thus, the legislative history is clear that Congress intended its incorporation of a “conclusive presumption” to apply to the “United States’ right to recover civil damages in kickback cases” arising under the AKA. See id. There is no evi
The great weight of authorities cited by the parties requires an FCA claimant to plead facts showing that, as a consequence of the fraudulent activity, something false or fraudulent was included in the claim submitted. Not one of these authorities stands for the proposition that an FCA claim can be predicated on a presumption. While dicta in Acme speak to kickbacks being passed on to prime contractors and then to the Government, the language is in the context of explaining that this situation was precisely what occurred. See Acme,
No presumption applies to the FCA that would relieve defendant of its burden to plead facts supporting the elements of an FCA claim. Defendant must claim the threshold requirements under the FCA, i.e., that a false or fraudulent claim was submitted and that plaintiff had knowledge of its falsity. See Young-Montenay,
2. Policy considerations for what constitutes a false or fraudulent claim in case law vs. actual holdings of the cases
The court’s review of the sufficiency of defendant’s FCA claim is guided by both the precedential and non-precedential decisions cited by the parties. Several eases relied upon by defendant support giving a broad construction of what constitutes a false or fraudulent claim on public policy grounds. For example, in a particularly thorough review of the law, in Harrison,
The court in Harrison divided the body of ease law into two principal categories: false certification eases, wherein liability lies “only if compliance with the statutes or regulations was a prerequisite to gaining a benefit, and the defendant affirmatively certified such compliance,” id. at 787, and fraud-in-the-in-
Fraud-in-the-indueement cases include claims involving collusive bidding, bid-rigging; contracts obtained due to false information, fraudulent pricing or inflated cost estimates; or false representations about the ability to perform. Id. at 787-88. In Hess the Supreme Court broadly construed the predecessor statute to the current FCA. See Hess,
The government’s money would never have been placed in the joint fund for payment to respondents had its agents known the bids were collusive. By their conduct, the respondents thus caused the government to pay claims of the local sponsors in order that they might in turn pay respondents under contracts found to have been executed as the result of the fraudulent bidding. This fraud did not spend itself with the execution of the contract. Its taint entered into every swollen estimate which was the basic cause for payment of every dollar paid by the P.W.A into the joint fund for the benefit of respondents. The initial fraudulent action and every step thereafter taken, pressed ever to the ultimate goal — payment of government money to persons who had caused it to be defrauded.
Id. at 543-44,
In Neifert-White,
In General Dynamics,
At the time the kickbacks in General Dynamics were paid, the pre-1986 amended AKA did not provide for prime-contractor liability, and the district court held that the AKA preempted remedies against the prime contractor under the FCA and common-law fraud. Id. at 772. The court framed the legal question narrowly — “whether a remedial scheme provided by ... the AKA, precludes remedies potentially available to the government under both a previously enacted federal statute, the FCA, and federal common law.” Id. at 773. The court held that it did not, explaining that the AKA’s text and legislative history evince a strong public policy against kickbacks. See id. at 774. “[T]his legislative history provides no basis to bar the operation of the FCA in situations where it clearly does provide a remedy, as when a claim that is falsely inflated by kickback payments is directly submitted to the government by a prime contractor....” Id. at 775 (noting available remedies under FCA and common law are not limited to amount of kickbacks, but include consequential damages resulting from payment of kickbacks).
Some courts have underscored the requirement that a false claim must be submitted. In United States v. Southland Management Corp.,
Similarly, in United States ex rel. Aflatooni v. Kitsap Physicians Serv.,
3. Application to defendant’s FCA claim
The court acknowledges defendant’s emphasis on the public policy against kickbacks and the potential for damage to the procurement system that fraudulent conduct creates that were highlighted in Neifert-White, Hess, Harrison, and General Dynamics. Nevertheless, however strong the policy concerns may be that are implicated by this fraudulent conduct, they are not a substitute for the specific requirements that defendant allege facts showing the falsity of a claim and plaintiffs knowledge of that falsity under § 3729(a)(1). Merely alleging a conflict of interest created by the kickback, without more, is not sufficient to state a claim under the FCA
Plaintiff correctly argues that “[i]n each of [the cases cited by defendant] ... there was fraudulent conduct causally linked to a government contract, such as price inflation, false certifications, or fraudulent statements that induced the Government to pay out money it would not have paid but for the misrepresentations.” PL’s Br. filed Apr. 26, 2011, at 6-7. In these cases something specifically false was shown to be connected to a claim for payment. See, e.g., Neifert-White,
In addition, plaintiff has sound case law in Southland Management and Aflatooni for the statement that “fraudulent schemes are not actionable under the FCA unless a false claim for payment results.” Pl.’s Br. filed Apr. 6, 2011, at 11; cf. Gen. Dynamics,
Defendant must allege facts showing that the costs actually inflated the contract price. The facts alleged are too attenuated to show that a false claim was submitted, and defendant has not claimed that plaintiff made a false certification. No allegation is made that Tamimi’s prices to KBR were actually inflated, even by the amount of the kickback. See Godley v. United States,
Alternatively, even if KBR’s reimbursement vouchers were inflated by the amount of the kickbacks, defendant has not alleged facts tending to show that anyone at KBR, including Messrs. Hall and Holmes, knew of that inflation. Defendant merely recites that Mr. Hall “knew or should have known” that the prices would be passed on through KBR’s vouchers, without buttressing this claim with facts that would allow the court to infer such knowledge. As it stands, this is the sort of eonclusory allegation that is not entitled to a presumption of truth. See BP Lubricants,
V. Common-law fraud,
Count IV of defendant’s counterclaims calls for rescission of Master Agreement 3 and disgorgement of all funds previously paid to Tamimi under this agreement. Coun-terels. ¶ 140. Similarly, by Count V the Government seeks disgorgement of all fees paid to KBR pursuant to Task Order 59. Id. ¶ 143. These counts articulate the remedies for a general common-law fraud claim.
Common-law fraud is a cause of action separate from the forfeiture statute that must be analyzed apart from defendant’s Special Plea in Fraud. See Long Island,
A contract that is “tainted from its inception by fraud is void ab initio.” J.E.T.S., Inc. v. United States,
According to plaintiff, defendant’s failure to allege common-law fraud is a consequence of its failure to plead a “necessary nexus between kickbacks and the award of the subcontract.” Pl.’s Br. filed Apr. 6, 2011, at 29. In order for a contract to be subject to rescission and disgorgement, “ ‘the record must show some causal link between the fraud and the contract.’ ” Id. at 13 (quoting Long Island, 503 F.3d at 1250). Defendant’s riposte is that the key to its common-law fraud claim is Messrs. Holmes’s and Hall’s “participation ... in important contractual decision-making that imbues the contracts with fatal taint, regardless of whether the misconduct directly caused the contractual decision.” Def.’s Br. filed Apr. 21, 2011, at 12. The issue is whether the alleged conduct, without more, is sufficient to state a common-law fraud claim.
1. Case law dynamics
The decisional law does not support defendant’s assertion that the “taint” of fraud alone, without also alleging a causal connection between the contract award and the fraudulent conduct, is sufficient to render the contract void ab initio. To show that a contract is void ab initio because of a false statement, defendant must show that the “the contractor ... obtained the contract by ... knowingly ... making a false state
In Godley the Federal Circuit emphasized the issue of causation in analyzing a conflict of interest, noting that in Mississippi Valley “the illegality [of violating the Federal conflict of interest statute] permeated the contract. Without the [contracting officer’s] illegal participation, the Court stated, ‘no contract would have been made.’ ” Godley,
Defendant champions K & R Engineering,
However, a link between the fraudulent action and the contract, whether a false statement or conflict of interest, still is required, even if financial loss is not shown. The Godley court noted in Mississippi Valley that “corruption” affected the contract in that the contractor was an officer of and shared the profits of the financing institution. Godley,
While the court departs from defendant’s attempt to create a cause of action based on the taint of fraud, untethered to its other common-law elements, in the case sub judice the court nevertheless concludes that the facts as pleaded state a claim for common-law fraud.
2. Analysis
Defendant alleges the existence of a conflict of interest during the award of Mas
made the decision to acquiesce to the award of the Camp Anaconda subcontract to Tamimi based in large part upon the pressure supporting the award that he received from Mr. Hall. Indeed, Mr. Petsche had contemplated having the Camp Anaconda DFAC subcontract be awarded to a different subcontractor than Tamimi, but changed his mind based upon the advocacy from Tamimi that he received from Mr. Hall.
Id. ¶ 120. But for Mr. Hall’s advocacy, Mr. Petsche would have chosen a different subcontractor for the contract that he described as “‘the mother of all DFAC drug deals.’” Id. ¶ 124. Accordingly, defendant has pleaded a claim based on common-law fraud for the rescission and disgorgement of Master Agreement 3, Work Release 3 and the disgorgement of Task Order 59 because the kickbacks were made to alleged decisionmak-ers in the process of awarding Master Agreement 3. The level of participation by Messrs. Holmes and Hall in each decision, i.e., whether a trae conflict of interest existed or whether false statements about Tamimi were proffered to induce the award and whether a disgorgement or rescission remedy is warranted — each requiring a high standard of proof — implicates issues that will be resolved at trial. Compare Miss. Valley,
VI. Defendant’s affirmative defense
Defendant contends that “[plaintiff's claim is unenforceable because of the taint of ‘kickbacks.’ ” Countercls. ¶ 103. This claim is redolent of defendant’s reliance on the Court of Federal Claims eases that predicate forfeiture on taint. Defendant does not buttress it with any case law. The claim merits dismissal, if not a ban from the arsenal of options for charging fraud available to the Government. Any equitable remedies can be explored sufficiently in the structure of the count for common-law fraud.
CONCLUSION
Accordingly, based on the foregoing,
IT IS ORDERED, as follows:
1. Plaintiffs motion to dismiss Count I of defendant’s counterclaims for forfeiture of plaintiffs breach of contract claim is granted.
2. Plaintiffs motion to dismiss Count II, defendant’s AKA counterclaim for double the amount of damages of kickbacks given to Messrs. Hall and Holmes, is denied. Defendant has stated a claim based on an AKA violation of 41 U.S.C. § 53(2) due to the acceptance of the kickbacks and a claim under 41 U.S.C. § 55(a)(1). Alternatively, defendant has stated a claim under §§ 53(2)
3. Plaintiffs motion to dismiss Count III of defendant’s counterclaims for a violation of the FCA is granted.
4. Plaintiffs motion to dismiss Count IV of defendant’s counterclaims for rescission of the portion of the LOGCAP III contract affected by the award of Master Agreement 3 to Tamimi and for disgorgement of all moneys paid to KBR related to any work release upon Master Agreement 3 is denied.
5. Plaintiffs motion to dismiss Count V of defendant’s counterclaims for disgorgement of all moneys paid to plaintiff related to Task Order 59 is denied.
6. Plaintiffs motion to strike defendant’s affirmative defense is granted.
7. Plaintiffs motion to dismiss for failure to plead fraud with specificity is denied because the remedy would be to allow defendant to amend its affirmative defense and counterclaims. In ruling on the legal sufficiency of the affirmative defense and counterclaims, the court has construed these in a light that pleads the most fulsome — and, hence, adequately stated, facts.
8. By July 1, 2011, the parties shall identify by brackets any material subject to redaction before this opinion issues for publication.
Notes
. On January 4, 2011, Congress re-codified Title 41 of the United States Code, resulting in a renumbering — with some materially different language — of the provisions of the AKA. See Act of Jan. 4, 2011, Pub.L. No. 111-350, § 3, ch. 87, 124 Stat. 3677, 3838-41 (to be codified at 41 U.S.C. §§ 8701-07). The prior §§ 52, 53 and 55 are now §§ 8701, 8702 and 8706, respectively. Id.; see also 41 U.S.C.A. §§ 8701, 8702, 8706 (West 2011). Because defendant's pleadings and plaintiff’s motion to dismiss both cite to the 2006 edition of Title 41 and the re-codified provisions of the AKA were not the subject of briefing or argument, the court proceeds to analyze defendant’s AKA counterclaim pursuant to 41 U.S.C. §§ 52, 53, 55.
. See supra note 2.
. The AKA defines a "kickback” as any money, fee, commission, credit, gift, gratuity, thing of value, or compensation of any kind which is provided, directly or indirectly, to any prime contractor, prime contractor employee,
41 U.S.C. § 52(2). "Person” includes "a corporation, partnership, business association of any kind, trust, joint-stock company, or individual.” Id. § 52(3).
. Section 5 of the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. § 2461 note (2006), authorizes Executive agency adjustments for inflation of civil fines and penalties. The Department of Justice, by regulation, has increased the penalties for AKA violations to a maximum of $11,000.00. See 28 C.F.R. § 85.3(a)(13) (2011).
. Defendant’s prayer for relief reads: "As to Count II, under the Anti-Kickback Act, 41 U.S.C. §§ 53, 55, against plaintiff, for damages in the amount of double the amount of the kickbacks given to Mr. Hall and Mr. Holmes, plus civil penalties as are allowable by law of $5,500 to $11,000 per violation.” Counterels. at 25.
. Section 5 of the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. 2461 note, authorizes Executive agency adjustments for inflation of civil fines and penalties. The Department of Justice, by regulation, has increased the penalties for FCA violations to a minimum of $5,500.00 and a maximum of $11,000.00. See 28 C.F.R. § 85.3(9).
. In its explication on the public policy "hostility” to kickbacks, the Court prognosticated:
The kickbacks here are passed on to the Government in two stages. The prime contractor rarely submits his bid until after he has tentatively lined up his subcontractors. Indeed, as here, the subcontractors frequently participate in negotiation of the prime contract. The subcontractor’s tentative bid will, of course, reflect the amount he contemplates paying as a kickback, and then his inflated bid will be reflected in the prime contractor's bid to the Government. At the renegotiation stage, where the prime contractor’s actual cost experience is the basis for price redetermination, any kickbacks, paid by subcontractors and passed on to the prime contractor after the prime contract is awarded, will be passed on to the Government in the form of price redetermination upward.
Acme,
. The court is mindful of the Federal Circuit’s guidance that the Supreme Court's analysis does not constitute dicta when it is "necessary to the Court’s analysis such that [courts] are bound to follow it.” DaimlerChrysler Corp. v. United States,
. The court below described the scheme as a
"conspri[acy] to rig the bidding on these projects. The pattern of the collusion was the informal and private averaging of the prospective bid which might have been submitted by each appellant. An appellant chosen by the others would then submit a bid for the averaged amount and the others all submitted higher estimates. The government was thereby completely defrauded in that it was compelled to contribute more for the electric work on the projects than it would have been required to pay had there been free competition in the open market.”
Hess,
. Defendant challenges that "KBR’s motion to dismiss does not address the Government’s separately pled affirmative defense.” Def.’s Br. filed Apr. 21, 2011, at 39. On April 14, 2011, plaintiff clarified that it "believefd] that it was implicit that its motion to dismiss also served as a motion to strike the Government’s affirmative defense under RCFC 12(f).” PL's Notice filed Apr. 14, 2011, at 1. This dispute is inconsequential. The court may strike an insufficient defense or redundant matter on its own. See RCFC 12(f)(1).