Contract – Government Contract – Qui Tam – False Claims Act

Two former employees of KBR, a civilian government contractor in Iraq, cannot turn their wrongful discharge case into a qui tam action on a claim that the contractor fraudulently induced the U.S. to award it an Army task order in connection with its work in Iraq, the 4th Circuit ruled in U.S. ex rel David L. Wilson, James Warren v. Kellogg Brown & Root (Lawyers Weekly No. 001-098-08) (17 pages).
The plaintiff employees also allege several employment-related claims stemming from their termination. Since initiating this litigation, plaintiff relators have consistently sought to shoehorn what is, in essence, a breach of contract action into a claim that is cognizable under the False Claims Act. This misguided journey must come to an end. If every dispute involving contractual performance were to be transformed into a qui tam False Claims Act suit, the prospect of litigation in government contracting would literally have no end.
This case concerns the contractual relationship between KBR and the U.S. government. In December 2001, KBR entered into a Logistics Civil Augmentation Program contract with DOD. The agreement called for KBR to provide operational support to the U.S military in wartime situations. Under the LOGCAP contract, the military requested specific services or commodities through various task orders. In task order 43, the Army called for KBR to provide transportation services.
In September-October 2003, KBR hired the two ex-employees, David Wilson and James Warren, to drive supply trucks in Iraq. Their employment contracts contained an arbitration clause in which each agreed to participate in the company’s Dispute Resolution Program and arbitrate any and all claims the employee might have against KBR related to employment, including termination. They claim they were terminated in spring 2004 because of their complaints to management about poor maintenance and security.
On May 21, 2004, the plaintiffs filed suit against KBR under the qui tam provision of the False Claims Act, 31 U.S.C. Sects. 3729-3733. Their suit also alleged counts of wrongful termination, quantum meruit and retaliatory termination. The crux of their claim as qui tam relators is a contract form signed by KBR in July 2003. The plaintiffs contend that when KBR signed this DOD Form 1155 and thereby accepted the task order subject to its term and conditions, KBR knew it had not and would not fulfill the applicable maintenance and safety requirements under the contract.
The plaintiffs contend the completed form constituted a fraudulent representation by KBR to the U.S. in order to receive payment under task order 43. Because such payments were contingent on KBR’s execution of the DOD Form 1155, relators contend that KBR fraudulently induced the U.S. in violation of the FCA.
Relators do not claim the maintenance provisions in the contract set forth anything resembling a specific maintenance program for the convoy trucks. Likewise, they make no contention that representations were made concerning specific acts of maintenance that KBR knew it lacked the capacity to perform. KBR’s alleged defalcations involve several general and relatively vague maintenance provisions, such as keeping vehicles in a safe operating condition and good appearance. These sorts of claims do not qualify as objective falsehoods and thus do not constitute false statements under the FCA. An FCA relator cannot base a fraud claim on nothing more than his own interpretation of an imprecise contractual provision.
Relators’ fraudulent inducement claim suffers from a second flaw: the completed form was not “material.” The District Court acted correctly in dismissing the relators’ qui tam claims. Also, because the parties clearly and explicitly agreed to arbitrate the relators’ employment claims and because the agreements are enforceable under Texas state law, the District Court correctly held that arbitration was required.
Judgment affirmed.
U.S. ex rel David L. Wilson, James Warren v. Kellogg Brown & Root (Lawyers Weekly No. 001-098-08) (17 pages) (Wilkinson, J.) (4th Circuit) Appealed from the U.S. District Court for the District of Virginia at Alexandria, Lee, J.; Andrew Grosso for appellant; John M. Faust for appellee (No. 07-1516) (May 16, 2008).