United States v. Halliburton Co.

UNITED STATES OF AMERICA and BUD CONYERS, Plaintiffs, v. HALLIBURTON COMPANY andKELLOGG BROWN & ROOT INC. andKELLOGG BROWN & ROOT SERVICES INC., et al, Defendants.

CIVIL ACTION NO. 4:06-CV-04024

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

March 25, 2021

MEMORANDUM OPINION AND ORDER

I. INTRODUCTION

On January 8, 2014, the United States government (the "Government") intervened in this lawsuit and filed a complaint against Kellogg Brown & Root, and its affiliates (collectively, "KBR"), and two foreign subcontractors.¹ The foreign subcontractor defendants, Kuwaiti corporations First Kuwaiti Trading & Contracting, WLL and La Nouvelle General Trading and Contracting Co., have since been dismissed from this suit. The Government's complaint alleges that KBR and its former co-defendants committed varied acts of fraud and misconduct in the execution of an Army contract to provide logistical support services to the Army in Iraq between 2002 and 2005.

Pending before the Court is KBR's motion for summary judgment (Dkt. 336) and the Government's motion for partial summary judgment (Dkt. 337-1). KBR and the Government have both timely filed responses and replies to each other's respective motions. After having carefully considered the parties' motions, responses, replies, the record, and the applicable law, the Court determines that KBR's motion for summary judgment should be GRANTED IN PART and DENIED IN PART. Likewise, the Government's motion for partial summary judgment should be GRANTED IN PART and DENIED IN PART.

II. FACTUAL BACKGROUND

On December 14, 2001, the United States Department of the Army (the Army) entered into contract No. DAAA09-02-D-0007 with Brown & Root Services, then a division of Kellogg Brown & Root, Inc., pursuant to the federal Logistics Civil Augmentation Program (the "LOGCAP III" contract). On July 1, 2003, Kellogg Brown & Root Services, Inc. ("KBRSI") became the successor-in-interest to the LOGCAP III contract.² (For purposes of this opinion, the Court will refer to the Kellogg Brown & Root entities collectively as "KBR"). Under LOGCAP III, KBR would provide logistical support services for the Army's operations in Iraq. LOGCAP III was an "umbrella" contract under which the Government would execute individual Task Orders prescribing a particular scope of work (SOW) for the procurement of goods or services. The Task Orders at issue in this case had a "cost-plus-award-fee" structure, meaning that, in addition to being reimbursed for its costs, KBR would earn a one percent "base fee" and could earn up to a two percent performance-based "award fee." Each fee was calculated as a percentage of the Task Order's final "negotiated estimated costs" agreed upon by the Army and KBR.

KBR sought payment from the Army by submitting to the Defense Contract Audit Agency (DCAA) invoices called "public vouchers." A separate agency, the Defense Contract Management Agency (DCMA), was also involved in administering LOGCAP III. KBR's vouchers included the applicable Task Order number, the amount being billed, the date(s) that the goods or services were delivered, and line-item summaries that typically indicated the subcontractor that performed the job. The Government's allegations in this case concern vouchers submitted by KBR for services performed under LOGCAP III between 2002 and 2004.

KBR performed these services under three Task Orders issued by the Army. Task Order 43 required KBR to transport goods and supplies to U.S. troops throughout the war theater and, specifically, to provide refrigerated transportation of items such as food, ice, and medicine. Task Order 36 tasked KBR with providing tankers that would deliver and store diesel fuel at a military airport near Kuwait. Task Order 27 required KBR to construct and maintain Camp Arifjan, a facility in Kuwait that was to be used as a staging ground for Army personnel. KBR entered into subcontracts with local firms in order to complete these Task Orders. The allegations of misconduct by KBR's employees in connection with the subcontracting process, as detailed below, serve as the basis for the Government's lawsuit. The parties have filed competing summary judgment motions on the issues of liability only.

III. THE PARTIES' CONTENTIONS

In Count I, the Government alleges that KBR, acting through one of its employees, violated former section 53 (now section 8706(a)(2))³ of the federal Anti-Kickback Act (AKA) by including kickback fees in the contract price that KBR charged the Government for the costs ofSubcontracts 167 and 190. In its dueling motion, KBR contends that the AKA claims are barred by the statute of limitations or, alternatively, that KBR's employee lacked the requisite scienter for the Government to establish a violation of the statute.

Both parties also move for summary judgment as to Counts II and III, which implicate Subcontracts 167, 190, 39, and Change Order 1 to Subcontract 167. KBR, but not the Government, also moves for summary judgment on these two counts as to Subcontract 11. On Counts II and III, respectively, the Government alleges that KBR violated the federal False Claims Act (FCA) by (i) knowingly presenting, or causing to be presented to the Government, false claims for payment or approval; and (ii) knowingly making, using, or causing to be made or used, false records or statements to get false claims paid or approved by the Government. KBR asserts that the Government cannot create a fact issue as to three elements of its FCA claims, and, for Subcontract 39, as to the requirements for a "claim."

KBR also moves for summary judgment on Counts IV, V, and VI. Counts IV and V allege that, as to each subcontract at issue, KBR violated the FCA by conspiring with its former co-defendants to defraud the Government by getting a false claim paid. Id. As to Count VI, the Government's common law fraud claim, KBR asserts arguments similar to those made against the FCA claims, along with an argument that such a claim is time-barred.

Finally, the parties present cross summary judgment motions on Count VII, the Government's claim that KBR breached the LOGCAP III contract by claiming costs that were not allowable under the contract's terms. KBR responds that the Court lacks jurisdiction over the contract claim and, alternatively, that the Government cannot establish that the costs KBR submitted for Subcontracts 11, 39, 167, and 190 were unreasonable.

IV. APPLICABLE LAW

a. Summary Judgment Standard

Rule 56 of the Federal Rules of Civil Procedure authorizes summary judgment against a party who fails to make a sufficient showing of the existence of an element essential to the party's case and on which that party bears the burden at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). The movant bears the initial burden of "informing the Court of the basis of its motion" and identifying those portions of the record "which it believes demonstrate the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323; see also Martinez v. Schlumber, Ltd., 338 F.3d 407, 411 (5th Cir. 2003). Summary judgment is appropriate where "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c).

"If the dispositive issue is one on which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in the record contains insufficient proof concerning an essential element of the nonmoving party's claim." Norwegian Bulk Transport A/S v. International Marine Terminals Partnership, 520 F.3d 409, 412 (5th Cir. 2008). If the movant meets its burden, the burden shifts to the nonmovant to "go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial." Stults v. Conoco, Inc., 76 F.3d 651, 656 (5th Cir. 1996) (citing Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995). "To meet this burden, the nonmovant must 'identify specific evidence in the record and articulate the 'precise manner' in which that evidence support[s] [its] claim[s].'" Stults, 76 F.3d at 656 (citing Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994), cert. denied, 513 U.S. 871, 115 S. Ct. 195, 130 L. Ed.2d 127 (1994)). It may not satisfy its burden "with some metaphysical doubt as to the material facts, by conclusory allegations, byunsubstantiated assertions, or by only a scintilla of evidence." Little, 37 F.3d at 1075 (internal quotation marks and citations omitted). Instead, it "must set forth specific facts showing the existence of a 'genuine' issue concerning every essential component of its case." Am. Eagle Airlines, Inc. v. Air Line Pilots Ass'n, Intern., 343 F.3d 401, 405 (5th Cir. 2003) (citing Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir. 1998)).

"A fact is material only if its resolution would affect the outcome of the action, . . . and an issue is genuine only 'if the evidence is sufficient for a reasonable jury to return a verdict for the [nonmovant].'" Wiley v. State Farm Fire and Cas. Co., 585 F.3d 206, 210 (5th Cir. 2009) (internal citations omitted). When determining whether a genuine issue of material fact has been established, a reviewing court is required to construe "all facts and inferences . . . in the light most favorable to the [nonmovant]." Boudreaux v. Swift Transp. Co., Inc., 402 F.3d 536, 540 (5th Cir. 2005) (citing Armstrong v. Am. Home Shield Corp., 333 F.3d 566, 568 (5th Cir. 2003)). Likewise, all "factual controversies [are to be resolved] in favor of the [nonmovant], but only where there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts." Boudreaux, 402 F.3d at 540 (citing Little, 37 F.3d at 1075 (...