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United States of America v. Kellogg Brown & Root Services

August 3, 2011

UNITED STATES OF AMERICA, PLAINTIFF,
v.
KELLOGG BROWN & ROOT SERVICES, INC. DEFENDANT.



The opinion of the court was delivered by: Royce C. Lamberth, Chief Judge

MEMORANDUM OPINION

I. INTRODUCTION

In the midst of the Civil War, Congress passed the False Claims Act to stop the "plundering of the public treasury" that had resulted from the "frauds and corruptions practiced in obtaining pay from the Government during the present war." Act of Mar. 2, 1863, ch. 67, § 1, 12 Stat. 696; United States v. McNinch, 356 U.S. 595, 599 (1958); Cong. Globe, 37th Cong., 3d Sess. 955--56 (1863) (statement of Sen. Jacob M. Howard).*fn1 Invoking the twenty-first century iteration of the statute, 31 U.S.C. § 3729, the United States brings this action against Kellogg Brown & Root Services, Inc. ("KBR") to recover civil penalties and treble damages on more than $100 million in allegedly false claims arising from "the present war" in Iraq. The government also sues under breach of contract, unjust enrichment, and payment by mistake causes of action. KBR, citing a lack of clarity in the contract and its support for the military amid daunting security conditions in Iraq, moves to dismiss the complaint. For the reasons set forth below, that motion will be denied with respect to the False Claims Act and breach of contract counts and granted on the unjust enrichment and payment by mistake counts.

II. BACKGROUND

A. Factual History

1. The LOGCAP III Contract

On December 14, 2001, the Army awarded KBR a contract to provide logistical services such as "transportation, maintenance, facilities management, and dining facilities" in "support of military operations around the world." Compl. ¶ 5, Apr. 1, 2010, ECF No. 1; see Def.'s Mot. Dismiss ["D.'s Mot."], Ex. 2, ECF No. 3-3 (reproducing contract) ["LOGCAP III"]. The contract, known as LOGCAP III-an acronym for the Army's Logistics Civil Augmentation Program-operates on an "indefinite delivery/indefinite quantity" basis. Compl. ¶¶ 5--6. In other words, the contract does not specify a fixed amount of work. Rather, the government assigns tasks to KBR through a series of individual orders and then reimburses the contractor for the costs of performing each order, plus a one percent fee. Id. ¶ 6. KBR can also earn an award fee of up to two percent, based on the government's evaluation of its performance. Id. If KBR allocates work to a subcontractor, as it frequently does, KBR pays the subcontractor and then submits its costs to the government for reimbursement. Id. ¶ 7; see also United States ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 373--74 (4th Cir. 2008) (explaining and interpreting the LOGCAP contract in a different dispute); United States ex rel. McBride v. Halliburton Co., No. 05-828 (HHK), WL 1954441, at *1 (D.D.C. July 5, 2007) (same).

After the war in Iraq commenced in 2003, KBR received task orders to provide services to American troops deployed there. Compl. ¶ 7; D.'s Mot. 17. The government alleges that some of the claims KBR submitted based on task orders between 2003 and 2006 included false statements in violation of the False Claims Act ("FCA"). Specifically, the United States charges that KBR knowingly billed the government for the cost of private security contractors in Iraq, an expense the government argues is forbidden by the contract and thus a false claim under the statute. 31 U.S.C. § 3729(a)(1); Compl. ¶ 34.

Several provisions of the LOGCAP III contract are directly relevant to this allegation. All are drawn from "Section H, Special Contract Requirements," which "addresses the deployment of contractor personnel into a theater of operations in support of a contingency or exercise." LOGCAP III, § H, at 96. The contract notes that the guidance in this section "is not all-inclusive nor are all items required for all situations . . . . Each contingency will evolve differently depending upon theatre commander's guidance impacting on the deployment. Id.

Clause H-16, titled "Force Protection," provides:

While performing duties [in accordance with] the terms and conditions of the contract, the Service Theater Commander will provide force protection to contractor employees commensurate with that given to Service/Agency (e.g. Army, Navy, Air Force, Marine, [Defense Logistics Agency]) civilians in the operations area unless otherwise stated in each task order.

Id. ¶ H-16, at 98.

Clause H-21, titled "Weapons and Training," provides, in relevant part:

Whether contractor personnel will be permitted to carry a government furnished weapon for self-defense purposes in the Area of Operations (AO) is at the discretion of the Theater Commander. However, contractor personnel will not possess personally owned firearms in the AO. The government may at its discretion issue weapons and ammunition (M9 Pistols) for self-defense to the contractor employees. . . . The contractor shall ensure that its employees adhere to all guidance and orders issued by the Theater Commander or his/her representative regarding possession, use, safety, and accountability of weapons and ammunition.

Id. ¶ H-21, at 101.

Clause H-13, titled "Management," provides, in relevant part:

The contractor shall ensure that all personnel hired by or for the contractor will comply with all guidance, instructions, and general orders applicable to U.S. Armed Forces and DoD civilians as issued by the Theater Commander or his/her representative. This will include any and all guidance and instructions issued based upon the need to ensure mission accomplishment, force protection, and safety, unless directed otherwise in the task order . . . . The contractor shall comply, and shall ensure that all deployed employees, subcontractors, subcontractors employees, invitees, and agents comply with pertinent Service and Department of Defense directives, policies, and procedures, as well as federal statutes, judicial interpretations and international agreements . . . applicable to U.S. Armed Forces or U.S. citizens in the area of operations.

Id. ¶ H-13, at 96.

The government argues that this clause incorporates U.S. Central Command ("CENTCOM") General Order No. 1A, issued in December 2000, and CENTCOM General Order No. 1B, issued in March 2006. Compl. ¶¶ 14, 17; D.'s Mot., Exs. 20 & 21, ECF No. 3-21 ["Gen. Ord. 1A"] & ECF No. 3-22 ["Gen. Ord. 1B"]. These orders apply to "civilians serving with, employed by, or accompanying the Armed Forces of the United States," Gen. Ord. 1A, at 1; Gen. Ord. 1B, at 1, and prohibit the "purchase, possession, use or sale of privately owned firearms, ammunition, explosives, or the introduction of these items into" CENTCOM's area of responsibility, which includes Iraq. Gen. Ord. 1A, ¶ 2(a); Gen. Ord. 1B, ¶ 2(a).

In November 2005, KBR and the Army revised the LOGCAP III contract to incorporate Defense Federal Acquisition Regulation Supplement ("DFARS") § 252.225-7040 (June 6, 2005). Compl. ¶ 18; D.'s Mot., Ex. 25, Nov. 2, 2005, ECF No. 3-26 ["Mod. 12"]. The amendment, labeled Modification 00012, reiterates KBR's responsibility to comply with all applicable "United States regulations, directives, instructions, policies, and procedures," Mod. 12 at ¶ I-6(c)(3)(d)(3), and "orders, directives, and instructions issued by the Combatant Commander related to force protection, security, health, [and] safety . . . ." Id. at ¶ I-6(c)(3)(d)(4). The modification also provides: "If the Contractor requests that its personnel performing in the theater of operations be authorized to carry weapons, the request shall be made through the Contracting Officer to the Combatant Commander. The Combatant Commander will determine whether to authorize in-theater contractor personnel to carry weapons and what weapons will be allowed." Id.

2. Related Regulations

In addition to the LOGCAP III contract, CENTCOM General Orders, and contract modification described above, several related regulations are relevant to this case.

The Coalition Provisional Authority ("CPA"), which was the official governing authority of Iraq from the fall of Saddam Hussein's regime in April 2003 to the return of sovereignty to the new Iraqi government in June 2004, Compl. ¶ 20 n.1, issued Order No. 3: Weapons Control on December 31, 2003. Compl. ¶ 20; D.'s Mot., Ex. 22, Dec. 31, 2003, ECF No. 3-23 ["CPA Order 3"]. Section 3 of the Order, titled "Authorized Possession and Use of Firearms and Military Weapons," provides that "[g]roups and individuals who have been authorized to carry weapons in the course of their duties by the CPA or Commander, Coalition Forces or their duly authorized delegates" are authorized to "possess and use issued Firearms and Military Weapons, including Special Category Weapons." CPA Order 3, § 3, ¶ 1(c). The Order also provides that "[p]rivate security firms may be licensed by the Ministry of the Interior to carry weapons and use licensed Firearms and Military Weapons, excluding Special Category Weapons, in the course of their duties, including in public places," id. ¶ 2, and that "[i]ndividuals not otherwise authorized to possess or use Firearms or Military Weapons by this or any other CPA instrument may apply for weapons authorization" through a licensing system "administered by the Ministry of Interior."

Id. § 5.

On June 26, 2004, the CPA issued Memorandum Number 17: Registration Requirements for Private Security Companies (PSC) to "provide[] guidance for PSC that intend to operate within Iraq." Compl. ¶ 20; D.'s Mot., Ex. 23, § 1, June 26, 2004, ECF No. 3-24 ["CPA Mem. 17"]. The memorandum requires private security contractors to obtain a business license and an operating license or a temporary operating license from the Iraqi Ministry of Interior. Id. § 2. "Where an Operating License is granted . . . , the MOI shall issue Weapons Cards to those ...


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