Kellogg Brown & Root Services, Inc. ( 2016 )

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeals of -- )
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Kellogg Brown & Root Services, Inc. ) ASBCA Nos. 57530, 58161
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Under Contract No. DAAA09-02-D-0007 )
APPEARANCES FOR THE APPELLANT: Craig D. Margolis, Esq.
Amy L. Riella, Esq.
Christian D. Sheehan, Esq.
Vinson & Elkins LLP
Washington, DC
APPEARANCES FOR THE GOVERNMENT: E. Michael Chiaparas, Esq.
DCMA Chief Trial Attorney
Carol L. Matsunaga, Esq.
Senior Trial Attorney
Defense Contract Management Agency
Carson, CA
John A. Kolar, Esq.
Russell B. Kinner, Esq.
Senior Trial Counsel
Department of Justice
Washington, DC
OPINION BY ADMINISTRATIVE JUDGE MELNICK
ON THE GOVERNMENT'S REQUEST TO RECONSIDER THE DENIAL
OF ITS MOTION TO SUSPEND OR DISMISS THE APPEALS
The government requests the Board reconsider its 25 July 2016 denial of the
government's second motion to suspend or dismiss these appeals under Board Rule 20.
See Kellogg Brown & Root Services, Inc., ASBCA Nos. 57530, 58161, 16-1 BCA
if 36,449. The government reiterates that it is pursuing claims against Kellogg Brown
& Root Services, Inc. (KBR) in a United States District Court under the False Claims Act
(FCA) and the Contract Disputes Act regarding the costs KBR seeks here. See 31 U.S.C.
§ 3729; 41 U.S.C. § 7103(c)(2); United States v. Kellogg Brown & Root Services, Inc.,
No. 4:12-cv-04110 (C.D. Ill. filed Nov. 20, 2012). It argues the recent court of appeals
decision in Laguna Construction Co. v. Carter, 828 F.3d 1364 (Fed. Cir. 2016), compels
the Board to suspend the appeals pending resolution of its district court claims.
In evaluating a motion to reconsider, the Board examines whether the movant has
provided newly discovered evidence, shown mistakes in the findings of fact, or errors of
law. Robinson Quality Constructors, ASBCA No. 55784, 09-2 BCA ~ 34,171at168,911.
The Board denied the government's motion to dismiss or to stay the appeals for a second
time after considering four factors: (1) the similarity of the facts, issues, and witnesses;
(2) whether proceeding here would compromise the fraud case; (3) whether KBR would
be harmed by more delay; and (4) whether the duration of the suspension sought was
reasonable. Additionally, the Board stressed its inherent authority to manage its docket
and to suspend or dismiss appeals without prejudice after weighing the parties' interests
and assessing any prejudice. The Board found that the indefinite suspension sought by the
government was unreasonable, KBR would be prejudiced by more delay, the government
conceded that continuing here with a full record would not be prejudicial to it, and any
similarity in facts and issues had already been accounted for by a previous three-year
dismissal of the appeals. KBR, 16-1 BCA ~ 36,449 at 177,637-38.
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The government maintains that Laguna establishes a new legal principle that
did not exist when it conceded that proceeding with the appeals here upon a complete
record would not prejudice it. According to the government, Laguna now dictates as a
matter of law that contractor cost appeals such as these must be suspended when they
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are also the subject of a pending government fraud claim in district court.
In Laguna, the contractor's vice president pleaded guilty in district court to
conspiracy to defraud the government by participating in a kickback scheme, prompting the
government to assert fraud as an affirmative defense before the Board. Laguna, 828 F .3d
at 1367. The court affirmed the Board's ruling that the fraud constituted a prior material
breach of contract. The court acknowledged that established precedent permitted the
government to pursue the affirmative defense of fraud here as long as the Board did not
have to determine the underlying facts of the fraud, which it did not because fraud was
established in the district court. Id, at 1368-73. Here, the government's fraud claim
remains pending in district court and has not been presented as an affirmative defense.
Nothing in Laguna mandates that the Board suspend appeals indefinitely
whenever the government has merely filed a fraud case elsewhere that might establish
an affirmative defense of prior material breach if and whenever proven. Laguna does
not bar the Board from determining the reasonableness of costs that are sought in an
appeal subject to its jurisdiction simply because those costs have been challenged in a
fraud claim pending elsewhere. Although the Board may not make findings about the
government's fraud complaint, it may make those findings necessary to decide appeals
properly before it. Even if a ruling upon those facts might overlap with ones in dispute
in the fraud case, the Board is not required to suspend its own proceedings for that
reason. See BAE Sys. Tactical Vehicle Sys. LP, ASBCA Nos. 59491, 60433, 16-1 BCA
~ 36,450 at 177,643 (denying government request to suspend Board appeal involving a
defective pricing claim because a parallel FCA action in district court presented the
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same issue, noting the matter was within the Board's ..statutory mandate''); TRW, Inc.,
ASBCA Nos. 51172, 51530, 99-2 BCA ~ 30,407 at 150,331-32 (denying motion to stay
appeals addressing contractor's treatment of indirect costs though that matter was
arguably "intricately intertwined and/or identical" to matter before the district court).
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Nothing else that the government presents is newly discovered evidence, nor
does it present error in the Board's factual or legal determinations justifying disturbing
its ruling that dismissal without prejudice is inappropriate and a stay is not necessary at
this time. Accordingly, the government's motion for reconsideration is denied.
Dated: 8 November 2016
MARK A. MELNICK
Administrative Judge
Armed Services Board
of Contract Appeals
I concur I concur
MARK N. STEMPLER
Administrative Judge
Acting Chairman
Armed Services Board
SHACKLEFORD
Administrative Judge
Vice Chairman
Armed Services Board
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of Contract Appeals of Contract Appeals
I certify that the foregoing is a true copy of the Opinion and Decision of the Armed
Services Board of Contract Appeals in ASBCA Nos. 57530, 58161, Appeals of Kellogg
Brown & Root Services, Inc., rendered in conformance with the Board's Charter.
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Dated:
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JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
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