UNITED STATES OF AMERICA ex rel. HARRY BARKO, Plaintiff-Relator,
HALLIBURTON COMPANY, et al., Defendants.
OPINION & ORDER [Resolving Docs. Nos. 53 & 64]
JAMES S. GWIN, District Judge.
Plaintiff-Relator Harry Barko, a former subcontract administrator for Kellogg Brown and Root (KBR) in Iraq, brings this action alleging violations of the False Claims Act by Defendants KBR, its parent, Halliburton Company (Halliburton), related entities, and subcontractors Daoud & Partners, Inc. (Daoud) and EAMAR Company (EAMAR). Barko says that Defendants engaged in a scheme to defraud the United States by using a subcontracting procedure that vastly inflated the costs of constructing laundry facilities and providing laundry services on at least three American military bases in Iraq. The KBR and Halliburton Defendants move to dismiss the complaint, saying that Barko alleges only poor contracting practices, as opposed to actual false claims. Defendant Daoud also moves to dismiss the complaint, saying that this Court lacks personal jurisdiction over it, that Barko fails to state a claim upon which relief can be granted, and that the law at the time of the alleged violations shielded subcontractors from liability. For the following reasons, the Court DENIES both motions to dismiss. The Court also VACATES the existing protective order.
The facts as alleged in Barko's seventy-eight page complaint are accepted as true for the purposes of this opinion. In 2004, KBR, a private military contracting company, hired Barko to administer contracts pursuant to the third generation of the United States' Logistics Civil Augmentation Program (LOGCAP III). Under LOGCAP III, KBR provided "logistical services such as transportation, maintenance, facilities management, and dining facilities in support of military operations around the world."
KBR worked with subcontractor Daoud & Partners on multiple projects. On certain projects, Daoud was the only bidder. KBR and Daoud built and provided laundry services for several military bases in Iraq. KBR also hired Daoud to dig wells and construct a dormitory. The wells did not produce water, and the dormitory was poorly built. Barko learned about these projects while working for KBR in Iraq.
In 2005, Barko left Iraq and sued Defendants under the False Claims Act. Barko says that KBR and Daoud committed fraud by submitting false claims and faulty accounting to the United States under the LOGCAP III contract. KBR and Daoud deny Barko's allegations, and move this Court to dismiss the claims.
II. LAW & ANALYSIS
To survive a motion to dismiss, Barko's complaint "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." This Court must refrain from making any judgment about the probability of Barko's success. Rather, it must "assume all the allegations in the complaint are true (even if doubtful in fact) and must give [Barko] the benefit of all reasonable inferences derived from the facts alleged."
However, the allegations must allow this Court "to draw the reasonable inference that the defendant is liable for the misconduct alleged." "Facts that are merely consistent with a defendant's liability and demonstrate only a possibility, but not the plausibility, of relief fail to satisfy this standard."
To prove a violation of the False Claims Act, Barko must show that Defendants either (1) knowingly presented or caused to be presented to the government "a false or fraudulent claim for payment or approval;" or (2) knowingly made, used, or caused to be made or used, "a false record or statement to get a false or fraudulent claim paid or approved by the government." A claim includes "any request or demand... for money or property" made to a contractor doing work on the government's behalf. The knowledge requirement is satisfied if the person "has actual knowledge of the information" or if he "acts in deliberate ignorance" or "reckless disregard" of the truth or falsity of the information. Barko must allege that the false statements were material to the claim approval process.
The False Claims Act is an anti-fraud statute, and complaints brought under it must comply with specific pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure. Rule 9(b) requires that Barko "state with particularity the circumstances constituting fraud or mistake." "Thus, to satisfy Rule 9(b), a False Claims Act relator must state the time, place, and contents of the false representations, the facts misrepresented, and what was obtained or given up as a consequence of the fraud." While Rule 9(b) constitutes a "heightened pleading standard, " it is "still subject to the general short and plain statement command set out in Rule 8." Rule 9(b)'s particularity requirement "does not completely vitiate the liberality of Rule 8."
KBR and Daoud both ask this Court to dismiss Barko's claims. KBR says that Barko has failed to state a claim upon which relief can be granted, since he did not provide enough factual information to support his claims. Daoud also says that Barko has failed to properly state a claim. In addition, Daoud says that this Court lacks personal jurisdiction, that service was improper, and that the amendments to the False Claims Act cannot be applied retroactively. The Court considers each argument in turn.
A. KBR's Motion to Dismiss
Halliburton, KBR, and their related entities ask the Court to dismiss Barko's claims on behalf of the United States under Federal Rule of Civil Procedure 12(b)(6) for failing to state a claim upon which relief can be granted. KBR says that Barko failed to plead enough specific facts, as required by Rule 9(b). KBR says that Barko "does not allege facts suggesting that KBR knowingly defrauded the ...