United States ex rel. Vavra v. Kellogg Brown & Root, Inc.

Decision Date08 February 2011
Docket NumberCivil Action No. 1:04–CV–42.
Citation903 F.Supp.2d 473
CourtU.S. District Court — Eastern District of Texas
PartiesUNITED STATES of America ex rel. David R. VAVRA and Jerry Hyatt, Plaintiffs, v. KELLOGG BROWN & ROOT, INC., Bob Bennett, Wesco International, Inc., Phil Elders, and Panalpina, Inc., Defendants.

OPINION TEXT STARTS HERE

Michael Wayne Lockhart, U.S. Attorney's Office, Greg M. Dykeman, Michael Thomas Bridwell, Strong Pipkin Bissell & Ledyard, Mitchell A. Toups, Weller Green Toups & Terrell LLP, Beaumont, TX, Stanley E. Alderson, U.S. Department of Justice, Washington, DC, for Plaintiffs.

Karl S. Stern, Vinson & Elkins, Houston, TX, Craig D. Margolis, J. Randall Warden, Vinson & Elkins LLP, Washington, DC, for Defendants.

MEMORANDUM AND ORDER

MARCIA A. CRONE, District Judge.

Pending before the court is Defendant Kellogg Brown & Root, Inc.'s (KBR) Motion to Dismiss the Complaint of the United States (# 51). KBR seeks dismissal of the United States' claims pursuant to Federal Rules of Civil Procedure 9(b), 12(b)(1), and 12(b)(6). Having considered the pending motion, the submissions of the parties, the complaint, and the applicable law, the court is of the opinion that KBR's motion should be GRANTED IN PART and DENIED IN PART.

I. Background

On January 21, 2004, Relators David Vavra and Jerry Hyatt (collectively, Relators) filed this qui tam action against numerous defendants, including Kellogg Brown & Root, Inc.1 Relators allege that KBR, which provides logistical support to the United States Army in Iraq, Afghanistan, and Kuwait under a government contract known as LOGCAP III,2 engaged in numerous kickback schemes involving the award and performance of subcontracts to subcontractors Eagle Globe Logistics (“EGL”) and Panalpina, Inc. (Panalpina), in violation of the False Claims Act (“FCA”).3 Specifically, Relators claim that from January 2002 to April 2005, KBR's Corporate Traffic Supervisor, Robert Bennett (Bennett), and other KBR employees accepted kickbacks of, inter alia, money, fees, gifts, meals, golf outings, and tickets to sporting and entertainment events (collectively, the “kickbacks”) from EGL employee Kevin Smoot (“Smoot”) and others in return for awarding subcontracts to EGL for the transport of U.S. military equipment and supplies into Iraq.4 Relators similarly assert that Bennett accepted kickbacks from Panalpina's Grant Wattman and other employees.

On May 5, 2010, the United States filed a Notice of Election to Intervene “in that part of the action that alleges unlawful payments to employees of” KBR by EGL and Panalpina and, on August 2, 2010, filed its complaint-in-intervention asserting several causes of action.5 Specifically, the United States alleges that KBR: (1) violated the False Claims Act (“FCA”) by billing the United States for subcontract costs that were tainted by kickbacks; (2) knowingly violated the AKA; (3) breached its contract with the Army by accepting kickbacks; (4) was unjustly enriched by its statutory violations; and (5) received payment from the government for its subcontract costs, which the United States mistakenly believed were for services provided in accordance with the contract's terms and applicable law.

KBR filed the instant motion to dismiss on October 1, 2010. KBR argues that the United States' complaint should be dismissed pursuant to the provisions of the FCA because it fails to: (1) link the alleged kickbacks to a false claim for payment made to the government; (2) allege the particular details of a scheme by KBR to submit false claims; or (3) plead the requisite scienter. KBR also claims that the United States improperly asserts an AKA violation under 41 U.S.C. § 55(a)(1), which KBR maintains does not apply to prime contractors. KBR further contends that the United States' common law claims for breach of contract, unjust enrichment, and payment by mistake fall under the exclusive jurisdiction of the Armed Services Board of Contract Appeals (“ASBCA”) or the Court of Federal Claims pursuant to the Contract Disputes Act (“CDA”). Finally, KBR avers that the United States' quasi-contract claims for unjust enrichment and payment by mistake should be dismissed because an express contract exists between the parties.

II. AnalysisA. KBR's Attack on the Court's Jurisdiction

‘When a Rule 12(b)(1) motion is filed in conjunction with other Rule 12 motions, the court should consider the Rule 12(b)(1) jurisdictional attack before addressing any attack on the merits ....’ In re Great Lakes Dredge & Dock Co., 624 F.3d 201, 209 (5th Cir.2010) (quoting Ramming v. United States, 281 F.3d 158, 161 (5th Cir.2001), cert. denied,536 U.S. 960, 122 S.Ct. 2665, 153 L.Ed.2d 839 (2002)); Hitt v. City of Pasadena, 561 F.2d 606, 608 (5th Cir.1977) (holding that when there is both a want of jurisdiction under Rule 12(b)(1) and a failure to state a claim on which relief can be granted under Rule 12(b)(6), the trial court should dismiss on the jurisdictional ground without reaching the question of failure to state a claim). “This requirement prevents a court without jurisdiction from prematurely dismissing a case with prejudice.” Ramming, 281 F.3d at 161 (citing Hitt, 561 F.2d at 608);accord In re Great Lakes Dredge & Dock Co., 624 F.3d at 209. KBR avers that this court lacks subject matter jurisdiction over the United States' claims for breach of contract (count three), unjust enrichment (count four), and payment by mistake (count five) because these common law contractual claims are subject to the exclusive jurisdiction of the ASBCA and the Court of Federal Claims under the CDA. The United States responds that these claims “involve fraud” and, therefore, fall within this court's jurisdiction.

1. Rule 12(b)(1) Standard

A motion to dismiss filed under Rule 12(b)(1) of the Federal Rules of Civil Procedure challenges the subject matter jurisdiction of the federal district court. SeeFed. R. Civ. P. 12(b)(1). Federal courts are courts of limited jurisdiction and, absent jurisdiction conferred by statute or the Constitution, lack the power to adjudicate claims. See Rasul v. Bush, 542 U.S. 466, 489, 124 S.Ct. 2686, 159 L.Ed.2d 548 (2004); Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); Griffin v. Lee, 621 F.3d 380, 388 (5th Cir.2010); Johnson v. United States, 460 F.3d 616, 621 n. 6 (5th Cir.2006); Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir.), cert. denied,534 U.S. 993, 122 S.Ct. 459, 151 L.Ed.2d 377 (2001). A case is properly dismissed for lack of subject matter jurisdiction when the court lacks the statutory or constitutional power to adjudicate the case.” CleanCOALition v. TXU Power, 536 F.3d 469, 473 (5th Cir.2008) (quoting Home Builders Ass'n of Miss., Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir.1998) (quoting Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182, 1187 (2d Cir.1996))); see Krim v. PcOrder.com, Inc., 402 F.3d 489, 494 (5th Cir.2005); John Corp. v. City of Houston, 214 F.3d 573, 576 (5th Cir.2000). [S]ubject-matter jurisdiction cannot be created by waiver or consent.” Howery, 243 F.3d at 919;accord Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278, 284 (5th Cir.2007); In re TXNB Internal Case, 483 F.3d 292, 298 n. 6 (5th Cir.), cert. denied,552 U.S. 1022, 128 S.Ct. 613, 169 L.Ed.2d 393 (2007).

The burden of establishing federal jurisdiction rests on the party seeking to invoke it. See Hertz Corp. v. Friend, 559 U.S. 77, 94–96, 130 S.Ct. 1181, 1194, 175 L.Ed.2d 1029 (2010); DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 342, 126 S.Ct. 1854, 164 L.Ed.2d 589 (2006); SmallBizPros, Inc. v. MacDonald, 618 F.3d 458, 461 (5th Cir.2010). Indeed, “there is a presumption against subject matter jurisdiction that must be rebutted by the party bringing an action to federal court.” Coury v. Prot, 85 F.3d 244, 248 (5th Cir.1996) (citing Strain v. Harrelson Rubber Co., 742 F.2d 888, 889 (5th Cir.1984)); accordHowery, 243 F.3d at 916 (citing Kokkonen, 511 U.S. at 377, 114 S.Ct. 1673).

In ruling on a Rule 12(b)(1) motion, a court may consider (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts.’ Spotts v. United States, 613 F.3d 559, 565 (5th Cir.2010) (quoting St. Tammany Parish v. Fed. Emergency Mgmt. Agency, 556 F.3d 307, 315 (5th Cir.2009)); Freeman v. United States, 556 F.3d 326, 334 (5th Cir.), cert. denied,558 U.S. 826, 130 S.Ct. 154, 175 L.Ed.2d 39 (2009); New Orleans & Gulf Coast Ry. Co. v. Barrois, 533 F.3d 321, 327 (5th Cir.2008); Lane v. Halliburton, 529 F.3d 548, 557 (5th Cir.2008). When deciding a Rule 12(b)(1) motion, [the district court] must accept all factual allegations in the plaintiff's complaint as true.” Den Norske Stats Oljeselskap As v. HeereMac V.O.F., 241 F.3d 420, 424 (5th Cir.2001), cert. denied,534 U.S. 1127, 122 S.Ct. 1059, 151 L.Ed.2d 967 (2002); see Lane, 529 F.3d at 557.

2. Summary of the CDA

The CDA applies to contracts entered into by an executive agency of the United States and a contractor. See41 U.S.C. § 602. Federal district courts lack jurisdiction over government contract claims that are subject to the Act. See United States v. Rockwell Int'l Corp., 795 F.Supp. 1131, 1134 (N.D.Ga.1992) (citing McDonnell Douglas Corp. v. United States, 754 F.2d 365, 370 (Fed.Cir.1985)). Accordingly, under the CDA, claims between the United States and government contractors must first be decided by the contracting officer. 41 U.S.C. §§ 601(3), 605(a). The officer's decision may then be appealed to an agency board of contract appeals or the Court of Federal Claims. 41 U.S.C. §§ 607(d), 609(c). The Act contains an exception, however, for “claims involving fraud,” making such claims subject to the jurisdiction of federal district courts. 41 U.S.C. § 605(a). The dispute between the parties here centers upon whether the United States' contractual...

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