United States v. Kellogg Brown & Root, Inc.

• Decision Date: 13 April 2015
• Docket Number: CIVIL ACTION NO. 1:04-CV-42
• Citation: 161 F.Supp.3d 423
• Court: U.S. District Court — Eastern District of Texas
• Parties: United States of America, Plaintiff, v. Kellogg Brown & Root, Inc., Defendant.

161 F.Supp.3d 423

United States of America, Plaintiff,

v.Kellogg Brown & Root, Inc., Defendant.

CIVIL ACTION NO. 1:04-CV-42

United States District Court, E.D. Texas.

Signed April 13, 2015

Michael Wayne Lockhart, US Attorney's Office, Greg M. Dykeman, Michael Thomas Bridwell, Strong Pipkin Bissell & Ledyard LLP, Mitchell A. Toups, Weller Green Toups & Terrell LLP, Beaumont, TX, Stanley E. Alderson, Samuel J. Buffone, Jr., United States Department of Justice, Washington, DC, for Plaintiff.

Tirzah Lollar, Christine N. Roushdy, Craig D. Margolis, Vinson & Elkins LLP, Washington, DC, David Bradford Gaultney, Mehaffy Weber, PC, Austin, TX, Karl S. Stern, Quinn Emanuel Urquhart & Sullivan, Amy Catherine Dinn, Gardere Wynne Sewell LLP, Houston, TX, Patricia Diane Chamblin, Mehaffy & Weber, Beaumont, TX, Mary Carter Andrues, Arent Fox LLP, Los Angeles, CA, for Defendant.

MEMORANDUM AND ORDER

MARCIA A. CRONE, UNITED STATES DISTRICT JUDGE

Pending before the court is the government's Motion for Partial Summary Judgment (#130), wherein the government seeks summary judgment as to Defendant Kellogg Brown & Root, Inc.'s (“KBR”) liability for forty alleged violations of the Anti-Kickback Act (the “AKA”), 41 U.S.C. §§ 51 -58.¹ Having considered the pending motion, the submissions of the parties, and the applicable law, the court is of the opinion that the government's motion should be DENIED.

I. Background

On January 21, 2004, Relators David Vavra and Jerry Hyatt filed this action against KBR claiming, among other things, that from January 2002 until April 2005, KBR's Corporate Traffic Supervisor, Robert Bennett (“Bennett”), and other KBR employees accepted kickbacks of money, fees, gifts, meals, golf outings, and tickets to sporting and entertainment events (collectively, the “kickbacks”) from Eagle Global Logistics (“EGL”) employees Kevin Smoot (“Smoot”)² and Thomas Kessner (“Kessner”) in connection with subcontracts awarded to EGL for the transport of United States military equipment and supplies into Iraq.³ The government subsequently intervened in the action, and, after this court's February 8, 2011, Memorandum and Order (#71), granting in part and denying in part KBR's Motion to Dismiss the United States' Complaint, the government voluntarily dismissed its remaining claims and filed an appeal with the United States Court of Appeals for the Fifth Circuit. On September 23, 2013, the Fifth Circuit reversed this court's dismissal for failure to state an AKA claim under § 55(a)(1), on the grounds that § 55(a)(1) permits employers to be held vicariously liable for their employees' kickback-related conduct and that the government pleaded facts sufficient to hold KBR liable for this conduct.

Upon remand, the government amended its complaint, maintaining only one claim against KBR: that KBR, acting through its employees, including Bennett and others, violated the AKA by “knowingly solicit[ing], accept[ing], or attempt[ing] to accept kickbacks from EGL and Panalpina in connection with subcontracts awarded to EGL and Panalpina under LOGCAP III.” KBR, in turn, amended its answer, denying the government's claim and asserting various affirmative defenses.

The government filed the instant motion on November 17, 2014, arguing that there is no genuine issue of material fact as to KBR's liability for forty violations of the AKA because (1) Bennett acted with apparent authority while knowingly accepting forty kickbacks from employees of EGL and (2) KBR is vicariously liable for each of these violations. The government estimates the total amount of the kickbacks to be $6,000 and requests that the court assess a civil penalty of $452,000 against KBR. In response, KBR denies the government's assertions, contending that: (1) there is no evidence that Bennett and, therefore, KBR, accepted a single illegal kickback; (2) Bennett had no apparent authority to accept kickbacks; (3) Bennett's knowledge cannot be imputed to KBR to establish a knowing violation; and (4) the government's estimation of the statutory penalty is inflated and speculative.

II. Analysis

A. Summary Judgment Standard

A party may move for summary judgment without regard to whether the movant is a claimant or a defending party. See Apache Corp. v. W & T Offshore, Inc. , 626 F.3d 789, 794 (5th Cir.2010) ; CQ, Inc. v. TXU Mining Co., L.P. , 565 F.3d 268, 272 (5th Cir.2009). Rule 56(a) of the Federal Rules of Civil Procedure provides that summary judgment shall be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and identifying those portions of the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Technical Automation Servs. Corp. v. Liberty Surplus Ins. Corp. , 673 F.3d 399, 407 (5th Cir.2012). Where, as here, “the movant bears the burden of proof on an issue, either because he is the plaintiff or as a defendant he is asserting an affirmative defense, he must establish beyond peradventure all of the essential elements of the claim or defense to warrant judgment in his favor.” Fontenot v. Upjohn Co. , 780 F.2d 1190, 1194 (5th Cir.1986) (emphasis in original); see Addicks Servs., Inc. v. GGP – Bridgeland, LP , 596 F.3d 286, 293 (5th Cir.2010).

A genuine issue of material fact exists “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; accord Poole v. City of Shreveport , 691 F.3d 624, 627 (5th Cir.2012) ; Bayle v. Allstate Ins. Co. , 615 F.3d 350, 355 (5th Cir.2010). Once a proper motion has been made, the nonmoving party “may not rest upon mere allegations or denials” in the pleadings but must present affirmative evidence, setting forth specific facts, to demonstrate the existence of a genuine issue for trial. Celotex Corp. , 477 U.S. at 322 n. 3, 106 S.Ct. 2548 (quoting Fed. R. Civ. P. 56(e) ); Anderson , 477 U.S. at 256, 106 S.Ct. 2505 ; Distribuidora Mari Jose, S.A. de C.V. v. Transmaritime, Inc. , 738 F.3d 703, 706 (5th Cir.2013). “[T]he court must review the record ‘taken as a whole.’ ” Reeves v. Sanderson Plumbing Prods., Inc. , 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ). All the evidence must be construed in the light most favorable to the nonmoving party, and the court will not weigh the evidence or evaluate its credibility. Reeves , 530 U.S. at 150, 120 S.Ct. 2097 ; Downhole Navigator, L . L . C . v. Nautilus Ins. Co. , 686 F.3d 325, 328 (5th Cir.2012). The evidence of the nonmovant is to be believed, with all justifiable inferences drawn and all reasonable doubts resolved in its favor. Groh v. Ramirez , 540 U.S. 551, 562, 124 S.Ct. 1284, 157 L.Ed.2d 1068 (2004) (citing Anderson , 477 U.S. at 255, 106 S.Ct. 2505 ); Cotroneo v. Shaw Env't & Infrastructure, Inc. , 639 F.3d 186, 192 (5th Cir.2011), cert. denied , ––– U.S. ––––, 133 S.Ct. 22, 183 L.Ed.2d 675 (2012).

Nevertheless, “only reasonable inferences in favor of the nonmoving party can be drawn from the evidence.” Mills v. Warner – Lambert Co. , 581 F.Supp.2d 772, 779 (E.D.Tex.2008) (citing Eastman Kodak Co. v. Image Technical Servs., Inc. , 504 U.S. 451, 469 n. 14, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992) ); accord Cannata v. Catholic Diocese of Austin , 700 F.3d 169, 172 (5th Cir.2012). “If the [nonmoving party's] theory is ... senseless, no reasonable jury could find in its favor, and summary judgment should be granted.” Eastman Kodak Co. , 504 U.S. at 468–69, 112 S.Ct. 2072 ; accord Shelter Mut. Ins. Co. v. Simmons , 543 F.Supp.2d 582, 584–85 (S.D.Miss.), aff'd , 293 Fed.Appx. 273 (5th Cir.2008). Summary judgment may not be thwarted by conclusional allegations, unsupported assertions, or presentation of only a scintilla of evidence.” McFaul v. Valenzuela , 684 F.3d 564, 571 (5th Cir.2012) ; see Lujan v. Nat'l Wildlife Fed'n , 497 U.S. 871, 888, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990) ; accord Stauffer v. Gearhart , 741 F.3d 574, 581 (5th Cir.2014).

B. The Anti Kickback Act

The AKA was amended in 1986 “to enhance the government's ability to prevent and prosecute kickback practices” in connection with contracts of the federal government. H.R. Rep. NO. 99-964, at 4 (1986). The Act prohibits the acceptance or payment of a kickback, as well as the inclusion of any kickback in the cost of a contract. See 41 U.S.C. § 51 et seq. ; H.R. Rep. NO. 99-964, at 4 (1986). Under the Act, a kickback is defined as:

any money, fee, commission, credit, gift, gratuity, thing of value, or compensation of any kind which is provided, directly or indirectly, to any prime contractor, prime contractor employee, subcontractor, or subcontractor employee for the purpose of improperly obtaining or rewarding favorable treatment in connection with a prime contract or in connection with a subcontract relating to a prime contract.

41 U.S.C. § 52(2). The Act also provides:

(1) The United States may, in a civil action, recover a civil penalty from any person who knowingly engages in conduct prohibited by section 53 of this title. The amount of such civil penalty shall be—

(A) twice the amount of each kickback involved in the violation; and

(B) not more than $[11,000]⁴ for each occurrence of prohibited conduct.

(2) The United States may, in a civil action, recover a civil penalty from any person whose employee, subcontractor, or subcontractor employee violates section 53 of this title by providing, accepting, or charging a kickback. The amount of such civil penalty

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