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United States v. Brown

United States District Court, C.D. Illinois, Rock Island Division

September 16, 2016

KELLOGG BROWN & ROOT SERVICES, INC., et al., Defendants.



         Defendant Kellogg Brown & Root Services, Inc. (“KBR”) has filed a motion, ECF No. 100, to compel the United States to respond to various discovery requests in this False Claims Act (sometimes abbreviated “FCA”) case. After considering all the briefing and evidence submitted by the parties, [1] the Court DENIES the motion to the extent it seeks a determination that 31 U.S.C. § 3731(b)(2) should be construed broadly. KBR is entitled, however, to discovery on its statute of limitations defense to the extent that discovery is relevant to the Department of Justice's Civil Division's knowledge of facts that would have put it on notice of a potential FCA claim against KBR.

         a. Factual and legal background

         The federal government contracted with KBR to provide logistical support for the United States Army during the Iraq war, in particular for KBR to supply among other things trailers for soldiers to live in. See Sept. 30, 2014 Order, ECF No. 75 (recounting the government's allegations in detail before denying KBR's motion to dismiss). KBR worked with a subcontractor called First Kuwaiti Trading Company, which allegedly inflated the bill it sent to KBR. KBR, in turn, submitted an allegedly inflated bill to the United States. KBR's reliance on First Kuwaiti's claimed bills, when KBR allegedly knew or should have known the figures were wildly inaccurate, forms the basis for the government's legal claims, which assert both violations of the False Claims Act and breach of contract, see Am. Compl. 30-33, ECF No. 3.[2]

         KBR intends to assert a statute of limitations defense to the United States' FCA claims, see Answer 34 ¶ 4, ECF No. 77-the alleged underlying false claims were submitted in 2004 but the government did not file its lawsuit until November 19, 2012. The government, for its part, relies on a tolling provisions built into the False Claims Act. To take advantage of that statutory provision, however, the government must waive its attorney-client and work product privileges to the extent they would protect information relevant to the factual question of when the United States knew or reasonably should have known of the falsity of KBR's claims.[3]

         The False Claims Act's statute of limitations states:

         A civil action under section 3730 may not be brought --

(1) more than 6 years after the date on which the violation of section 3729 is committed, or
(2) more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed, Whichever occurs last.

31 U.S.C. § 3731(b).

         Additionally, when the government sues for money damages on a breach of contract theory, as it has in this case, the judicial code requires the suit be filed “within six years after the right of action accrues or within one year after final decisions have been rendered in applicable administrative proceedings required by contract or by law, whichever is later . . . .” 28 U.S.C. § 2415(a). This rule is subject to exception as well; section 2416(c) tolls the statute of limitations on contract claims for money damages by the government if “facts material to the right of action are not known and reasonably could not be known by an official of the United States charged with the responsibility to act in the circumstances . . . .”[4]

         b. KBR's motion to compel and the government's response

         The parties disagree on the scope of discovery as to the statute of limitations issue, see KBR Mem. Exs. E, H (attorney correspondence), ECF Nos. 101-5, 101-8, so KBR has asked the Court to compel the government to respond to various interrogatories, requests for production, and topics covered by a Rule 30(b)(6) deposition notice.[5] See KBR Mem. 8-9, ECF No. 101. Although the motion to compel covers several individual discovery items, its resolution turns on the same dispositive issue-what is or is not relevant to KBR's statute of limitations defense, see Fed. R. Civ. P. 26(b)(1).

         KBR contends that “at least” three of the government's claims might be time-barred, including the claims arising out of: KBR's submission of allegedly false claims in August 2004, see Am. Compl. ¶ 93; KBR's alleged conspiracy with First Kuwaiti to violate the False Claims Act, see Id. ¶ 104; and KBR's alleged breach of contract, see Id. ¶ 110. KBR Mem. 5. KBR offers four arguments in support of its motion. See KBR Mem. 3-5. Its first argument is based on § 2416(c), the general government-as-plaintiff statute of limitations: information related to when various government officials became aware of KBR's false claims should be discoverable because it is directly relevant to the timeliness of the government's breach of contract claim. KBR's second and third arguments are based on the False Claims Act. KBR contends “the official of the United States charged with responsibility to act, ” see 31 U.S.C. 3731(b)(2), should be construed broadly-meaning it should include government workers outside the Department of Justice's Civil Division (“DOJ Civil”)-and thus information known by any federal government official who could conceivably act on knowledge of a false claim is discoverable. Also, KBR posits that because § 3731(b)(2) incorporates a “should have known” standard; even if the statutory term “the official . . . charged with responsibility to act” is construed narrowly, information held by agencies or officials outside DOJ Civil is still relevant to the ultimate factual issue of when DOJ Civil should have known about KBR's alleged fraud. KBR's last argument cites Federal Rule of Civil Procedure 26(b)(1), reminds the Court that “the bar for permissible discovery is low, ” and contends that information held by other agencies should be discoverable because information that shows DOJ Civil's knowledge could be found on, for example, email servers from other agencies.

         The United States' response ignores 28 U.S.C. § 2416(c), instead stating flatly that “the statute of limitations for the Government's contract claims is governed by 28 U.S.C. § 2415(a).” Resp. 9, ECF No. 104. Because the government filed its complaint before the relevant agency action became final-and § 2415(a)'s 6-year period is triggered by final agency action-the claim's timeliness cannot be disputed, or so the United States theorizes. The United States goes on to offer a different construction of the False Claims Act than does KBR. Resp. 10-18. In particular, it meets KBR's textual and legislative-history arguments and cites cases that construe § 3731(b)(2)'s “the official . . . charged with responsibility to act” to include only the knowledge of the Attorney General or her designees, excluding knowledge held by other agencies or attorneys. Finally, the government admits that the knowledge of other agencies may be relevant to when DOJ Civil ought to have known of KBR's alleged false claims, but only to the extent that knowledge was made public (via report or otherwise), and KBR does not need discovery to search for public information. Resp. 19-21. The United States substantively concludes by addressing discovery related to any grand jury investigations; it contends that even if there was a grand jury investigation covering the underlying events, the criminal division's knowledge should not be imputed to DOJ Civil because of the rules related to grand jury secrecy. Resp. 22.[6]

         Much of the government's briefing shades into argument on the merits of the statute of limitations issue. For example, it contends that because KBR has never admitted that it knew its claims were false then there is no way DOJ Civil knew or should have known that it had a viable fraud claim. Of course, DOJ Civil could have learned facts that should have put it on notice of an FCA claim arising out of KBR's allegedly massive fraud from other sources besides KBR.

         c. Discussion

         Rule 26 states in relevant part that the scope of discovery in a civil action encompasses “any nonprivileged matter that is relevant to any party's claim or defense . . . .” Fed.R.Civ.P. 26(b).[7] KBR's statute of limitations defense squarely puts the government's knowledge of KBR's allegedly false claims at issue, and the government's invocation of the discovery rule waives the relevant privileges. The question now is which government officials' knowledge matters-the answer helps define the scope of the government's waiver of privilege.[8]

         1.“[T]he official” under 31 ...

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