Case of the Day: Tamimi Global Co. v. Kellogg Brown & Root

Today we revisit the case of the day from April 5, 2011, Tamimi Global Co. v. Kellogg Brown & Root. KBR had a US government contract in Iraq. The case arose when a subcontractor, Tamimi, sought to confirm an arbitral award against KBR for non-payment; KBR’s defense was that the government had not paid what it owed, and that KBR wasn’t obligated to pay Tamimi until it was paid by the government. Meanwhile, the government and KBR were litigating in the Court of Federal Claims—KBR seeking payment, and the government asserting that the KBR had violated the False Claims Act and the Anti-Kickback Act in connection with procurement of the subcontract. KBR argued that the award was contrary to public policy, but the court rejected that argument on the grounds that even if the government ultimately proved that the subcontract was procured by fraud, KBR, through its employees, was a party to the fraud. The court therefore confirmed the award.

In today’s case of the day, KBR moved to alter the or amend the findings and judgment, in effect asking the court to reconsider its decision. It argued that the court had “improperly assumed tht the United States could prove the allegations made in the Court of Claims proceeding, stressing its position that the allegations in the Court of Claims are not true.” This is puzzling. If the allegations of fraud are not true, then the contract was not procured by fraud and KBR does not have a public policy defense to confirmation of the award. But in any event, the court rejected KBR’s argument on the grounds that in its decision, it had made no findings one way or the other about the truth of the government’s allegations. Instead, the court had simply held that even if the allegations of fraud were true, public policy would not bar confirmation.

KBR also asserted that the court had imporperly assumed that KBR was vicariously liable for the supposed fraud of its employees, that KBR had unclean hands, and that KBR knew of the fraud allegations prior to the arbitration. The court’s response was more or less the same. It had made no such findings, and in any event these questions weren’t material to the issue before it, which was whether KBR had satisfied its burden to prove that the award was contrary to public policy.

Last, KBR argued that the court’s decision was inconsistent with comity, because it interfered with the Court of Claims proceeding. The court reiterated the same point: it had not made any factual findings on any questions before the Court of Claims.

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