The United States Fifth Circuit Court of Appeals has dismissed KBR’s interlocutory appeal in McManaway, et al, v KBR, Inc.,et al as premature until a determination of controlling law has been made. In the appeal, KBR contended the case should be dismissed as barred under the political question doctrine and preempted by the combatant-activities exception to the Federal Tort Claims Act (FTCA). The appeal was dismissed without prejudice. Click here to read the decision.
McManaway, et al, v KBR, Inc.,et al involves dozens of Indiana, West Virginia, South Carolina, and British veterans. The plaintiffs have sued the Houston-based military contractor over health problems they blame on exposure to hexavalent chromium dust, a carcinogenic orange-yellow powder used to fight corrosion in water pipes. The troops were guarding KBR workers as they tried to restore water treatment facilities at the Qarmat Ali water treatment site.
United States District Judge Vanessa Gilmore is presiding over the case in the Southern District of Texas. Judge Gilmore denied the immunity defense last year. After denying KBR’s immunity motions, the court permitted the immunity defense decision to go on interlocutory appeal to the Fifth Circuit in September 2012. In November 2012, a decision was made by a jury in Oregon in Bixby, et al, v KBR, Inc., et al, a case involving the same circumstances as McManaway, et al, v KBR, Inc.,et al, determining KBR was negligent and awarded the veterans $85 million. The court later affirmed the jury decision in the amount of $81 million.
At this time, Judge Gilmore will decide on when and how to proceed to trial for the Texas cases. It is anticipated that KBR will ask for reconsideration by the Court of Appeals.
Oral argument is underway in Sergeant Mark McManaway et al. v. KBR Inc., et al before the United States Fifth Circuit Court of Appeals. The court will consider KBR’s bid for blanket immunity for acts of misconduct committed during their work in Iraq and that resulted in a toxic contamination to hundreds of United States and British soldiers. Just two weeks before trial was set to begin in federal court in Houston, U.S. District Judge Vanessa Gilmore denied KBR’s immunity motions and the issue was appealed. Since then, a bellwether group of twelve soldier’s claims went to trial in federal court in Oregon, and resulted in a judgment of $81 million against KBR. Bloomberg News profiled the case in an article this morning, and identified the issues to be addressed by the Fifth Circuit panel. A recording of the oral argument is expected to be available later today or tomorrow [http://www.ca5.uscourts.gov/OralArgumentRecordings.aspx].
Federal Times has reported on the mounting tensions between contractor KBR Inc. and the US Army over an ultimatum to provide a firm, fixed price on remaining work to close out the $38 billion Logistics Civil Augmentation Program (LOGCAP) III.
LOGCAP III is the 12-year-old logistics contract that has supported US military logistics operations in Iraq. The Army awarded the contract in 2001 and issued 160 tasks for everything from dining services to delivery of housing for civilian and military personnel. The original contract was considered a “cost plus” contract, which means KBR was paid its costs plus a guaranteed profit; the Army seeks to revise the pricing terms on the final work to be done on the contract to be firm, fixed pricing. KBR filed a lawsuit in response seeking to keep the “cost plus” nature of the contract.
The dispute started in July 2012, at that time the Army decided contract closeout activities must be performed on a fixed-price basis meaning KBR would need to provide a fixed dollar figure for the remaining work and absorb any excess costs. KBR responded they were unwilling to accept that due to the lack of scope or duration of work that needs to be completed.
KBR filed a case with the Government Accountability Office that was thrown out on jurisdictional grounds. The case was refiled in the US Court of Federal Claims and accused the Army of using the wrong type of contract, acting in bad faith and violating procurement regulations.
In emails submitted as part of the lawsuit, Army contracting officer Robert Egan told KBR he would not “enter further communication exchanges with” KBR’s contract team until he saw the FFP deliverable. KBR responded they were unwilling to accept such a proposal. KBR responded to Federal Times with a statement noting the company enjoys “frank, open and continuous communications with the Army.”
KBR has been paid enormous amounts for well
One of several motions heard by Judge Papak last month in Oregon Federal Court involved yet another attempt to lash out at the attorneys who proudly represent the veterans of Qarmat Ali. A jury awarded a bellwether group of twelve of the 162 veterans a total $85.2 million in November for KBR’s misconduct in exposing the veterans to sodium dichromate. With an award of nearly $7.1 million for each veteran, KBR’s own potential financial exposure to the remaining Veterans exceeds $1 billion if the remaining verdicts remain consistent with the bellwether trial verdict. Click here to read a synopsis of that trial and verdict.
Having lost the trial in front of an Oregon jury, KBR and its counsel have continued to try and shift blame for misconduct everywhere but towards their own actions. The topic at the center of the latest legal wrangling brought on by KBR’s attorneys concerns the limited ‘gag order’, generally restricting the parties’ rights to comment to the verdict. The order was effective throughout the trial, partially lifted after the verdict, and then fully lifted on December 19, 2012.
KBR complained about a post-trial email communication featuring plaintiffs’ attorney Mike Doyle. The email contained an embedded video narrated by Doyle and referenced the jury verdict. KBR argued the video violated the limited ‘gag order’. The email was distributed by Trial Guides, a commercial publisher of various legal guides and commentaries, and a link to the video can be found here.
Judge Papak rejected KBR’s latest attacks, confirming that the “statements were clearly not in violation of the previously imposed restrictive order”, and the communication “disclosed no information material to the parties’ dispute not already in the public record.”
The presiding judge in the Oregon litigation pitting veterans of the Oregon National Guard against military contractor, KBR, heard motions this week concerning the company’s attempts to overturn the jury verdict and obtain a new trial.
KBR’s request for the verdict to be overturned is another disregard of this country’s legal system. The jury pool became the voice of the community when they issued their verdict. A group comprised of responsible citizens of Oregon decided that KBR’s behavior was reprehensible and that there was evidence of wanton misconduct, establishing the veterans right to recover punitive damages. KBR’s wanton misconduct included falsely telling a commander that his soldiers had no reason to be concerned about the presence of sodium dichromate and referred to it as a mild irritant.
KBR also requested that the jury verdict amount be decreased claiming insufficient evidence of damages. The tone of the argument was aimed at labeling the veterans as a complainers who should be able to withstand the fear of their current and future illness by virtue of being soldiers who had signed up to protect and serve their country in Iraq… Sodium dichromate causes a variety of skin, digestive, and respiratory illnesses, among others, and genetic transformation from which the body may or may not heal itself once exposed. Essentially the soldiers are left not knowing whether they may develop serious illness in the future, including cancer.
The company also brought up the issue of personal jurisdiction, arguing that Oregon is not the appropriate venue for the case. All plaintiffs were members of the Oregon National Guard and were residents of Oregon at all relevant times. The record is replete with evidence that KBR directed intentional acts on Oregon residents, including intentional misstatements about sodium dichromate that were given to a commanding officer who then passed that information on to soldiers serving under him. Once the intentional act has been proven, all the Oregon
KBR reported a net income of $30 million for the fourth-quarter of 2012. Chief Executive Officer Bill Utt called it “a disappointing year” but later stated 2013 would bring “a robust series of new opportunities across each of our business units.”
For the same period a year earlier, KBR reported profits of $90 million. Utt accredited the sharp decline in profits to difficulties in the company’s minerals and US construction businesses. The sector of the company that did perform well was the hydrocarbons arm. Its profits increased 76 percent from the same period a year earlier resulting in a $174 million net income.
Interestingly, the released statement made no mention of the current litigation against KBR. In November, a jury awarded $85 million to twelve Oregon Army National Guard soldiers for negligence due to the contamination of a water treatment plant in Iraq. KBR, in turn, sued the US government to honor a secret indemnity agreement signed by the secretary of the Army in 2001. The agreement purports to shield KBR from financial costs associated with unusually hazardous risks including “sudden or non-sudden release of hydrocarbons or other toxic or hazardous substances or contaminants into the environment.”
They also did not mention the lawsuit filed by the United States in November. In that civil complaint, the government accuses KBR of inflating claims for the delivery and installation of trailers to house troops in Iraq.
The jury verdict for the twelve plaintiffs in Oregon is significant for the role it will play in the future trials for the more than 150 soldiers awaiting their day in court. The financial impact for KBR potentially could be more than $1.1 billion if the current individual case value trend of $7 million continues. The case is currently being reviewed by the Department of Justice and the Department of Defense. We will continue to blog updates as they develop.
Through the Freedom of Information Act, The Huffington Post reported today that it has acquired the signed indemnity agreement between the United States Army and KBR (at the time known as Kellogg, Brown, and Root).
The Army official that signed the agreement at the insistence of the Houston-based private contractor was a former Enron executive. Thomas E. White was named secretary of the Army in 2001. He signed the agreement on March 19, 2003 after considering “the availability, costs and terms of private insurance to cover these risks, as well as the viability of self-insurance, and have concluded that adequate insurance to cover the unusually hazardous risks is not reasonably available.” His memo concluded that the use of the “indemnification clause in this contract will facilitate the national defense.” There is no indication that KBR disclosed at the time of the contract-add any information or knowledge KBR had about the longstanding, widespread use of hexavalent chromium at Qarmat Ali, or any other specific hazard to the troops and other men on the ground at KBR’s work sites.
White resigned his position as secretary on April 23, 2003 amid questions about his ties to Enron Corp. He sold millions of dollars in stock in 2001 and claimed it was a requirement under government ethics rules. White and his wife were also investigated by the Pentagon’s inspector general for using a military jet for personal travel.
The language of the no-bid, cost-plus with award fee contract relates to the bellwether trial against KBR in Oregon where 12 veterans were awarded more than $85 million in damages stemming from KBR’s knowing exposure of the men to hexavalent chromium at Qarmat Ali. The additional “bailout” agreement, which was demanded by KBR after initially grabbing the multi-billion dollar no-bid, cost-plus award fee contract for Iraqi oilfield reconstruction, purports to shield the company from various liabilities, including financial costs associated with unusually hazardous risks including
The Huffington Post published an article concerning the indemnity agreement between KBR and the government. KBR has sued the government for indemnity arising out of the $85 million verdict in favor of 12 soldiers exposed to sodium dichromate in Iraq while protecting KBR engineers repairing a water treatment facility.
The Huffington Post’s front page headline of “We Poison, You Pay” is a concise summary of KBR’s apparent legal position. And while KBR presses the government for indemnity, they seem to be unwilling to disclose the full terms of their indemnity sweetheart deal to the public. Beyond seeking indemnification for their liability to our soldiers, KBR is also demanding that the government pay their legal fees,which so far total more than $15 million.
The verdict involved a bellwether group of the first 12 of 162 soldiers we are proud to represent. With an average case award of over $7 million, KBR faces an exposure of over $1 billion for their misconduct in Iraq. Unfortunately, despite the verdict, and the public outcry as evidenced by the thousands of comments made in response to the Huffington Post article, KBR’s behavior seems to continue to worsen.
Click here to read the article in its entirety.
After several weeks of an informal, partial gag order entered at the request of KBR shortly before the verdict was delivered, we are now able to comment more fully on the verdict, the full facts of the case, and other developments in the fight for the Qarmat Ali veterans. As was widely reported, on November 2, 2012, an Oregon jury unanimously returned an $85 million verdict in favor of the plaintiffs in the first lawsuit for KBR’s misconduct at Qarmat Ali. This first trial pitted 12 US National Guard veterans against defense contractor KBR, and the twelve jurors not only found KBR liable for negligence in causing harm to these men, but also confirmed by “clear and convincing evidence” that KBR was guilty of “reckless and outrageous indifference to a highly unreasonable risk of harm and conscious indifference to the health, safety, and welfare” of our troops.
The facts of the trial were simple: KBR promised the Army’s Corp of Engineers it would repair a the Qarmat Ali water injection treatment plant in southern Iraq and that KBR’s “subject-matter expertise” would allow it to fully evaluate and safely repair the facility. Unfortunately, instead KBR knowingly exposed the military personnel providing security and the other personnel working at Qarmat Ali to massive levels of sodium dichromate present at the site after decades of use by the Iraqis as an anti-corrosive. The soldiers returned home to face medical issues ranging from respiratory dysfunction, persistent skin rashes, and even cancer. The commander of one of the National Guard units, Lt. Col. James Gentry of the Indiana National Guard, died of cancer attributed to the exposure in Iraq, and one of his men also died from lung disease attributed in part to his exposure at KBR’s Qarmat Ali project.
The damages received by the each of the 12 plaintiffs included actual damages of $850,000 and $6.25 million in punitive damages, totalling $85 million for
On August 31, 2012, the United States District Court for the District of Oregon, Judge Papak presiding, issued its most recent ruling denying KBR’s efforts to avoid trial of the claims of Oregon Guard Veterans poisoned by sodium dichromate as a result of the misconduct of KBR at the Qarmat Ali Water Treatment Plant, near Basra, Iraq.
In its discussion of KBR’s conduct, the Court concluded that KBR failed to inform the Oregon Veterans of the sodium dichromate contamination at all and delayed informing the United States Army Corps of Engineers of the contamination until August 12, 2003, even though KBR knew of the contamination months before. The Court continued its decision by rejecting KBR’s argument that there was insufficient medical evidence to support the Oregon Veterans’ claims that they inhaled, ingested, and came into contact with sodium dichromate due to KBR’s wrongdoing. Among the evidence cited by the Court in refusing KBR’s request for summary judgment was the opinion of Dr. Arch Carson, M.D., of the University of Texas School of Public Health, the medical records of the Oregon Veterans, and the opinions of Dr. Herman Gibb, a world-renowned expert in the study of sodium dichromate. The Court held, “[Dr.] Carson, a qualified expert, has offered his opinion, based on reliable application of reliable principles and methods to sufficient data, that these damages were caused to a reasonable degree of medical probability by such exposure. This opinion is sufficient as a matter of Oregon law to permit the prayer for medical personal injury damages…”
The ruling brings the Veterans claims closer to trial, which is set to begin in Portland, Oregon on October 9, 2012.Rich Text Area