United States of America v. Kellogg Brown & Root Services Inc et al
Filing
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ORDER entered by Judge Sara Darrow on July 19, 2017. The Court ADOPTS in full the Magistrate Judge's 157 Report & Recommendation. The Government's 149 Motion for Injunction under the All Writs Act is DENIED. (RS1, ilcd)
E-FILED
Wednesday, 19 July, 2017 04:51:59 PM
Clerk, U.S. District Court, ILCD
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
ROCK ISLAND DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
v.
KELLOGG BROWN & ROOT SERVICES,
INC., et al.,
Defendants.
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Case No. 4:12-cv-04110-SLD-JEH
ORDER
Before the Court is a motion, ECF No. 149, by Plaintiff the United States of America
(“the Government”) seeking an injunction of administrative proceedings currently pending in the
Armed Services Board of Contract Appeals (“ASBCA” or “the Board”), against Defendants
Kellogg Brown & Root Services, Inc., Kellogg Brown & Root, LLC, and Overseas
Administrative Services, Ltd. (collectively, “KBR”). The Magistrate Judge issued a Report &
Recommendation, ECF No. 157, on April 28, 2017. The Government filed its Objections to the
Report and Recommendation (“R & R”), ECF No. 169, on May 12, 2017. For the following
reasons, the Court ADOPTS the R & R and DENIES the Government’s Objections.
BACKGROUND1
In the early days of the Government’s military involvement in Iraq, the United States
Army entered into a contract with KBR, a government contractor, to provide housing trailers to
American military bases via a subcontract with First Kuwaiti Trading Company (“First
Kuwaiti”). The contract, entered in December 2011 and identified as the Logistics Civil
Augmentation Program III (“LOGCAP III”), was valued originally at approximately $150
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Facts underlying the action are assumed and taken largely from the Amended Complaint, ECF No. 3; those
pertinent to the Court’s decision in this Order are recounted here.
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million. After incurring approximately $50 million in extra cost paid to First Kuwaiti, allegedly
the result of Government delay, KBR sought to have the extra costs reimbursed by the
Government. What followed was a multi-year back-and-forth dispute over the payments, in
which KBR filed a claim with the Armed Services Board of Contract Appeals, and, in turn, the
Government filed suit against KBR in the federal district court, under the False Claims Act
(“FCA”), 31 U.S.C. §§ 3729–3733, and the anti-fraud provisions of the Contract Disputes Act
(“CDA”), 41 U.S.C. §§ 7101–7109.
In August 2011, after its requests for reimbursement had been denied by review of
various layers of government review, KBR filed an appeal to the Board. The Government filed
the Complaint in this federal district court case on November 19, 2012, almost immediately
thereafter moving to suspend or dismiss the ASBCA proceeding. The Board granted the
Government’s motion to dismiss on February 20, 2013, giving KBR a three year-window within
which it could reinstate the claims in front of the Board. KBR moved to reopen the case right
around the three-year mark, on February 17, 2016, after three years of discovery issues that
delayed the production of pertinent data. The Board reinstated the action. The Government
moved once again to stay the proceeding, but the Board denied that motion, as well as the
Government’s following motion to reconsider. Discovery continued in the Board proceeding
and the district court. The Board set a trial date for September 18, 2017, more than 6 months
before the trial date in the district court, which is set in March 2018. The Government now seeks
relief from this Court, requesting that it invoke its power under the All Writs Act (“AWA”) to
stay the ASBCA proceeding.
In his Report and Recommendation (“R & R”), the Magistrate Judge expressed doubt that
the AWA provides a means by which the Court could issue a writ halting an administrative
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proceeding such as the one at issue here, and in any case, that such an injunction is not warranted
in the circumstances of this case. R & R 4. In its Objections, the Government argues that the
Court does, in fact, have authority under the AWA to grant an injunction to halt the ASBCA
proceeding, Obj. 5; it further posits that the Court should utilize that authority because it is
necessary and appropriate to avoid the ASBCA staging a “takeover of the fraud claim” when it
determines the contract claim within its jurisdiction. Obj. 11.
DISCUSSION
District Court’s Review of a Report and Recommendation
I.
A district court reviews de novo any portion of a magistrate judge’s report and
recommendation to which written objections have been made. See Fed. R. Civ. P. 72(b)(3).
“The district judge may accept, reject, or modify the recommended disposition; receive further
evidence; or return the matter to the magistrate judge with instructions.” Id.
II.
Motion for Injunction Under the All Writs Act
The All Writs Act (“AWA”), 28 U.S.C. § 1651(a), establishes that “(a) The Supreme
Court and all courts established by Act of Congress may issue all writs necessary or appropriate
in aid of their respective jurisdictions and agreeable to the usages and principles of law.” The
AWA provides an interstitial source of authority by which a federal court can address an issue
that is not otherwise controlled by statute. See Godoski v. United States, 304 F.3d 761, 763 (7th
Cir. 2002).
The Government argues in support of its motion that the AWA injunction is appropriate
where “the action of an administrative tribunal threatens to deprive an Article III court of the
ability to consider matters properly within its jurisdiction,” Mem. Supp. Injunction 8, ECF No.
149-1, and reiterated this argument in its Objections to the R & R. Obj. 2. The Government
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argues that KBR and the Magistrate Judge erred by relying on the law concerning writs of
mandamus in § 13 of the Judiciary Act of 1789, which is more limited in its application than the
“all writs” power granted in § 14 of the Act. Obj. 3. The Government also argues that there is
no way for the ASBCA to separate the facts related to the determination of the fraud allegations
to those regarding the contract dispute, and that therefore the administrative proceeding should
be stayed. Obj. 7.
It is uncontested by the parties that the Board, limited in its jurisdiction by the Contract
Disputes Act, may not adjudicate the fraud claims alleged here by the Government. Martin J
Simko Constr., Inc. v. United States, 852 F.2d 540, 545 (Fed. Cir. 1988). However, by its very
nature, the Board certainly must be competent to adjudicate contract claims in which fraud is a
component of the dispute—even a thoroughly intertwined one. See Supreme Foodservice, 2016
ASBCA LEXIS 201 at *64–65 (finding that the Board has the authority to “decide . . . contract
rights even when fraud has been alleged” and has jurisdiction to “evaluate misrepresentations of
fact,” and engaging in nuanced analysis of how to separate fraud allegations); BAE Sys. Tactical
Vehicle Sys. LP, ASBCA Nos. 59491, 60433 (2016) at *5–11 (denying a stay premised on the
Government’s argument that confusion of issues and judicial inefficiency would result from
parallel FCA proceedings on a similar set of facts in district court). The Government has not
provided a compelling reason why the facts at issue here are so extraordinary that they are
outside of the general purview of the cases considered by the Board, such that allowing the
Board’s proceeding to continue would present special difficulties that might cause confusion in
the later district court proceeding. The Board suggested as much when it reinstated the
proceeding in 2016 after the lengthy stay: it found that the similarities of “facts, witnesses, and
some issues” between the two proceedings—including facts and issues with which the Board is
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very familiar—to be “insufficient to dismiss the appeal again.” Admin. Op. on Gov’t Mot.
Suspend Appeal 2, ECF No. 149-6.
The Court shares the Magistrate Judge’s doubt that the Court’s jurisdiction comes under
attack by allowing the administrative proceeding to go forward; insofar as the Court could grant
the writ, it appears to be neither “necessary” nor “appropriate.” As previously discussed, the
Board is well aware of its duty to operate within its statutorily-defined powers, no party is
attempting to evade the jurisdiction of the district court, and the Government does not allege that
KBR is seeking nefarious ends by pursuing the ASBCA proceeding. Cf. United States v. Int’l
Bhd. of Teamsters, Chauffeurs, Warehousemen and Helpers of America, AFL-CIO, 911 F.Supp.
743, 752–53, (S.D.N.Y. 1996) (holding that an injunctive writ under the AWA to limit suits in
other district courts was necessary when third parties could attempt to actively forum shop across
the country and/or purposefully frustrate the issuing court’s oversight of its consent decree).
Simply put, the AWA provides a safety valve in the exceedingly rare occasions when a court
must search for an “extraordinary remed[y],” and this is not such a situation. Penn. Bureau of
Corr. v. U.S. Marshals Serv., 474 U.S. 34, 43 (1985) (noting that the AWA “does not authorize
[federal courts] to issue ad hoc writs whenever compliance with statutory procedures appears
inconvenient or less appropriate.”).
Further, the Court agrees with the Magistrate Judge that the Government’s motion
conflates the Court’s ability to exercise jurisdiction over the claims with its ability to parse the
relevant facts and law and make legal determinations on the issues it encounters. The
Government argues that “pure contract facts” must be identifiable to avoid the Board’s
usurpation of “de facto fraud jurisdiction,” Obj. 11, but as the Magistrate Judge noted:
the better time to address any potential conflict is after it has arisen, when the Court
knows the precise nature of any conflict; the Court has familiar and well-established legal
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principles for dealing with conflicts after they have arisen; and a decision by the Board
has the potential of benefitting this litigation, rather than complicating it.
R & R 7. The Court does not agree with the Government that allowing the proceeding to go on
will “seriously impair the federal court’s flexibility and authority to decide [the] case[,]” Atlantic
Coast Line R.R. Co. v. Bhd. Of Locomotive Engineers, 398 U.S. 281, 295 (1970), and therefore
adopts the Magistrate Judge’s recommendation that an injunction under the All Writs Act be
denied.
CONCLUSION
The Court ADOPTS in full the Magistrate Judge’s Report & Recommendation, ECF No.
157. The Government’s Motion for Injunction under the All Writs Act, ECF No. 149, is
DENIED.
Entered July 19, 2017.
s/ Sara Darrow
SARA DARROW
UNITED STATES DISTRICT JUDGE
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