A federal trial judge has declined to shut down a whistleblower's suit that alleges defense contractor Kellogg Brown & Root and its parent company, Halliburton Co., passed along to the U.S. government the inflated cost of laundry services provided to American bases in Iraq.
KBR and Halliburton, represented by a team from Vinson & Elkins, disputed whistleblower Harry Barko's allegations that the companies bilked the U.S. government through subcontracts that didn't reflect the appropriate cost of the construction of laundry facilities and provision of laundry services.
"FCA lawsuits cannot be based on opinion, however--matters which, like Barko’s subjective assessments of KBR’s contract performance, cannot be judged true or false on the basis of objective facts," the companies' lawyers said in their effort to dismiss the suit.
U.S. District Judge James Gwin, sitting by designation in Washington federal district court, today ruled for Barko. The whistleblower, Gwin concluded, "provides a great deal of factual allegations to support his fraud claims." Barko also sued the subcontractors, Jordan-based Daoud & Partners, Inc. and EAMAR Co. Gwin's opinion is here.
"Although KBR attempts to put a more positive spin on the allegations, Barko gives sufficient facts to survive a motion to dismiss," Gwin wrote. "While the Court need not accept Barko’s legal conclusions, his factual allegations, if believed, support plausible fraud claims."
Gwin also rejected the subcontractors' argument that the companies cannot be liable under the False Claims Act based on alleged insufficient contact with the U.S. government. The judge noted that Daoud, represented by Quinn Emanuel Urquhart & Sullivan, has been a registered subcontractor with the United States since 1999. (Daoud's motion to dismiss is here.)
"Considering all of its contact with the United States Government and citizens, Daoud could reasonably anticipate being hauled into federal court," Gwin wrote. "Daoud has directly targeted American companies and purposefully availed itself of government subcontracting opportunities."
Gwin also made the rare move of vacating a protective order he had previously allowed in the litigation. The lawyers in the case earlier agreed to the order, to allow certain documents to flow freely between the parties without scrutiny from the public.
As an alternative, the judge said today, the lawyers in the case can move to seal individual documents. Gwin, however, cautioned the attorneys that he will not be a rubber stamp when it comes to shielding information from the public.
"[T]he showing required to seal documents is great and approval for sealing documents will seldom be given," Gwin wrote today. "The Court will not simply grant the parties blanket authorization to cloak the entire case under a veil."