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United States ex rel McBride v. Halliburton Co.

July 5, 2007

UNITED STATES EX REL. JULIE MCBRIDE, PLAINTIFF,
v.
HALLIBURTON CO., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Henry H. Kennedy, Jr. United States District Judge

MEMORANDUM OPINION AND ORDER

This action is brought by plaintiff-relator Julie McBride, a former employee of Service Employees International, Inc. ("SEII"), against defendants Halliburton Co., SEII, and Kellogg Brown & Root Inc. (collectively, "KBR") for alleged violations of the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq., breach of contract, and false imprisonment.*fn1 The claims arise out of defendants' performance of their duties under LOGCAP (Logistics Civil Augmentation Program) III, an umbrella contract pursuant to which KBR provides support services to the military. McBride claims to have observed, while she was working in Iraq for SEII as a Morale, Welfare and Recreation ("MWR") director, fraudulent activity giving rise to the submission of false claims by KBR to the government for its LOGCAP costs. She also claims she was terminated in retaliation for acting as a whistleblower regarding the alleged fraud, and that KBR falsely imprisoned her following her termination.

Before the court are three motions: McBride's motion pursuant to Fed. R. Civ. P. 15 for leave to file a second amended complaint and to add additional relators [#11];*fn2 defendants' motions to compel arbitration, to sever, and to stay arbitrable claims [#23 & #26]; and defendants' motion to dismiss McBride's FCA claims [#24]. Upon consideration of the motions, the oppositions thereto, and the record of the case, the court concludes that (1) the new relators may not join the action; (2) McBride's employment, retaliation and tort claims are arbitrable; and (3) McBride's complaint must be dismissed as to all claims except her allegation that KBR inflated its "Sit Rep" usage statistics at its Morale, Recreation and Welfare facilities in Iraq.

I. BACKGROUND

Defendants provide a variety of services to the United States military, including support services for the United States' ongoing military campaign in Iraq, pursuant to LOGCAP III. LOGCAP III is structured such that the KBR defendant entities receive payment (via nonparty Kellogg Brown & Root Services, Inc. ("KBRSI"), the direct contracting entity with the government) for their costs under the contract. KBRSI is then awarded a negotiated "fee award" over and above those costs from the government. Relevant to this suit, defendants' LOGCAP services to the military in Iraq have included MWR services for U.S. troops (such as recreation facilities and activities); housing construction; and dining services, particularly in Fallujah.

As the public generally is well aware, KBR has come under intense scrutiny for its performance under LOGCAP III, and a litany of allegations have surfaced regarding alleged KBR improprieties. This suit adds more allegations to the general clamor. Specifically, the current and proposed amended complaints allege, inter alia, that KBR (1) billed the government for meals not served to U.S. troops at its dining ("DFAC") facilities in Fallujah; (2) sold housing containers (colloquially referred to as "hooches") at exorbitant prices to the military; (3) inflated headcounts (collected via "situation reports," commonly referred to as "Sit Reps") documenting usage of its MWR facilities in Iraq and billed the government for "costs" that were calculated based on those inflated headcounts; and (4) made requisitions for supplies for the troops and then siphoned those supplies to KBR employees.

Julie McBride obtained employment with SEII in November 2004, and she worked as an MWR coordinator at Camp Fallujah, a military installation in Iraq, until March 2005. Putative relator Denis Mayer likewise served as an MWR coordinator at Camp Fallujah from May 2004 until August 2005. Putative relator Linda Warren was an MWR Tech at the same facility from January 2004 through January 2005. Putative relator Frank Cassaday was an Ice Plant Operator for KBR at Camp A1 Asad and Camp Fallujah from July 2004 until May 2005. These relators collectively allege that while working for KBR entities in Iraq, they observed, either directly or indirectly, KBR engage in the aforementioned alleged fraudulent activity.

II. STATUTORY BACKGROUND

FCA allows private persons ("relators") to bring qui tam actions alleging violations of the Act on behalf of the government and for themselves. 31 U.S.C. § 3730(b)(1). The phrase qui tam is short for the Latin phrase qui tam pro domino rege Guam pro se ipso in hac parte sequitur, which means "who pursues this action on our Lord the King's behalf as well as his own." See Vermont Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 769 n.1 (2000). A qui tam complaint is initially filed under seal, and the government is then granted a period of time to investigate the allegations in the complaint. 31 U.S.C § 3730(b)(2). The government may then either pursue the action in its own right or decline to intervene. Id. § 3730(b)(4). If the government declines to intervene, the relator is granted leave to litigate the action. Id. §§ 3730(b)(4)(B), (c). When an action is successful or a settlement is reached, the relator receives a percentage of the government's recovery. Id. §§ 3730(d)(1)--(2).

FCA also creates a right of action, pursuant to which plaintiffs who are retaliated against for attempting to bring fraudulent practices to the government's attention may sue the parties who retaliate against them. Id. § 3730(h).

III. PROCEDURAL HISTORY

McBride filed her initial complaint under seal on April 26, 2005. The United States declined to intervene in propria persona as to the qui tam claims in the complaint on June 26, 2006, and thereby allowed McBride to proceed on behalf of the government on her own. See id. § 3730(b)(4)(B). On November 24, 2006, McBride file the present motion to amend her complaint, and she filed her "supplement" to that motion on December 7, 2006. The four defendants who are proper parties to this action (they waived service and the other named defendants have not been served), in addition to opposing the motion for leave to amend the complaint, thereafter filed a motion to compel arbitration of some of McBride's claims and a motion to dismiss her other claims.

IV. ANALYSIS

The central questions before the court are (1) whether under FCA, McBride may invite other ex-KBR employees to join her suit and add their allegations of wrongdoing to the complaint; (2) whether these allegations are sufficiently new - i.e., whether they bring to light frauds upon the government about which the public is not already aware; (3) whether McBride and her putative co-relators are sufficiently connected to the allegations to pursue their claims; (4) whether McBride and would-be relator Warren, who signed arbitration agreements with KBR entities when they were hired, must arbitrate some of their claims, including their FCA retaliation claims; and (5) whether the complaint sufficiently alleges that KBR has violated FCA at all. The court will first address McBride's request to add new relators and then will address the question of arbitration. Finally, the court will assess the motion to dismiss.

A. New Relators

McBride seeks to add three new relators to her suit pursuant to Rule 15. Defendants challenge this request on two grounds: first, they argue that the new relators are barred from joining the suit by FCA § 3730(e)(4)(A); second, they contend that the new relators are barred by the so-called "first-to-file" rule,31 U.S.C.§ 3730(b)(5). The former argument is dispositive, and the new relators may not join the suit.*fn3

FCA forecloses subject matter jurisdiction "over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless . . . the person bringing the action is an original source of the information." Id. § 3730(e)(4)(A).*fn4 This provision is often referred to as creating a "public disclosure bar" to would-be qui tam relators. See Rockwell Int'l Corp. v. United States, __ U.S. __, 127 S.Ct. 1397, 1405 (2007). Whether the bar is triggered in a particular case depends upon the meanings of various terms in the statute, including ...


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