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United States of America v. Kellogg Brown & Root Services

April 23, 2012

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

Before the Court is plaintiff's Motion [61] to Dismiss KBR's Counterclaim and to Strike KBR's First Affirmative Defense. Upon consideration of the Motion, Opposition, Reply, the entire record, and the applicable law, the Court will grant plaintiff's Motion, dismiss defendant's first counterclaim without prejudice, and strike its first affirmative defense.

I.BACKGROUND

As is explained more fully in an earlier opinion of this Court, the United States sued Kellogg Brown & Root Services, Inc. ("KBR") to recover civil penalties and treble damages on over $100 million in allegedly false claims arising from the war in Iraq. See U.S. v. Kellogg Brown & Root Servs., Inc., 800 F. Supp. 2d 143, 146--47 (D.D.C. 2011). The government alleges that, in violation of a logistical services contract awarded to KBR in 2001 (the "LOGCAP III" contract), the company knowingly billed the government for the cost of private security contractors in Iraq. Id. at 147. Early in the case, KBR filed a Motion to Dismiss, which the Court granted in part by dismissing the government's claims for unjust enrichment and payment by mistake. Id. at 161. However, the Court denied KBR's Motion as to the government's False Claims Act and breach of contract claims. Id.

In August 2011, shortly after the Court ruled on KBR's Motion to Dismiss, KBR answered the Complaint, asserting as an affirmative defense that the government materially breached the LOGCAP III contract by "failing to provide the contractually-required force protection." Answer [58] ¶39, Aug. 17, 2011. KBR also brought a counterclaim for recoupment, "arising out of the Government's failure to provide the requisite force protection, in breach of the Government's obligations under LOGCAP III." Id. ¶86. The United States then filed the instant Motion, asking the Court to dismiss KBR's counterclaim and to strike its first affirmative defense. Pl.'s Mot. Dismiss [61] 1, Sept. 12, 2011. The government asserts a number of independent barriers to KBR's counterclaim and affirmative defense, including judicial estoppel, the political question doctrine, failure to exhaust administrative remedies, and failure to state a claim. Pl.'s Mem. [61] 1--3.

II.ANALYSIS

The Court finds that KBR's recoupment counterclaim must be dismissed for failure to exhaust administrative remedies and for failure to state a claim. The Court also finds that KBR's first affirmative defense of material breach must be struck as precluded by the LOGCAP III contract. However, anticipating that KBR may correct the jurisdictional and other defects in its counterclaim and seek leave to amend its answer to include a revised version of that claim, the Court will briefly address other arguments in the parties' briefs, not necessary to the Court's decision, that may emerge again at a later stage of this case, should KBR amend its pleading.

A.KBR's Counterclaim and First Affirmative Defense Are Not Barred by Judicial Estoppel.

The government's principal argument in its Motion to Dismiss concerns the doctrine of judicial estoppel. Both KBR's recoupment counterclaim and first affirmative defense of material breach depend upon the allegation that the government breached LOGCAP III by failing to provide adequate force protection. See Answer [58] ¶¶39, 45, 47, 50, 86, 88. The government argues that KBR is "judicially estopped from disputing the adequacy of the military's measures for the provision of force protection for KBR and its subcontractors in Iraq" based upon positions it has taken, allegedly inconsistent with its present position, in previous cases. Pl.'s Mem. [1] 1. The Court disagrees.

As is well known, judicial estoppel "is an equitable doctrine invoked by a court at its discretion." New Hampshire v. Maine, 532 U.S. 742, 750 (2001) (quoting Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990)); see also Moses v. Howard Univ. Hosp., 606 F.3d 789, 792 (D.C. Cir. 2010). Its purpose is to "protect the integrity of the judicial process" by "prohibiting parties from deliberately changing positions according to the exigencies of the moment." New Hampshire, 532 U.S. at 750 (citations omitted).

"[S]everal factors typically inform the decision whether to apply the doctrine in a particular case." Id.

(1) "First, a party's later position must be 'clearly inconsistent' with its earlier position." Id.

(2) "Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party's earlier position, so that judicial acceptance of an inconsistent position in a later proceedings would create 'the perception that either the first or the second court was misled.'" Id. (citations omitted).

(3) "A third consideration is whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped."

Id. at 751. These factors are not "inflexible prerequisites," and "[a]additional considerations may inform the doctrine's application in specific factual contexts." Id.

In light of these factors, the Court finds that exercising its discretion to estop KBR from challenging the government's performance of its force protection obligation in the LOGCAP III contract would be inappropriate. KBR's position in this litigation is not "clearly inconsistent" with its position in the tort cases cited by the government, where KBR successfully argued that the political question doctrine barred judicial scrutiny of the military's judgments regarding the provision of force protection in wartime. See, e.g., Carmichael v. Kellogg, Brown & Root Servs., Inc., 572 F.3d 1271, 1282--83 (11th Cir. 2009); see also Pl.'s Ex. 1 [61-1] at 4--5). Carmichael, for example, involved negligence claims brought against KBR by the wife of a U.S. soldier who was seriously injured in Iraq while providing convoy protection. See Carmichael, 572 F.3d at 1275--76. KBR persuaded both the district court and the court of appeals that since, at trial, the district could not adjudicate the plaintiff's claims "without reexamining numerous core military decisions"-such as the convoy commander's decisions concerning how fast the convoy would move and the route it would take-the case would unavoidably ...


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