SARA DARROW, District Judge.
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,
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.
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.
The False Claims Act's statute of limitations states:
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 . . . ."
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.
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.
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.
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).
The text and structure of the False Claims Act, as well as the overwhelming weight of the case law that construes it, require a narrower reading of § 3731(b)(2) than KBR proposes. "The official of the United States," as the statute uses the term, means the Attorney General or her designees.
The False Claims Act's 3-year statute of limitations triggers on the date that "the official of the United States" knew or reasonably should have known "facts material to the right of action." 31 U.S.C. § 3731(b)(2). What is or is not material to the right of action is defined by the False Claims Act's substantive elements. Among the elements in the FCA claims at issue here are (1) that the claims were false and (2) that KBR knew the claims were false. See 31 U.S.C. § 3729(a)(1).
KBR relies heavily on the statute's legislative history in support of its contention that "the official of the United States" should be construed broadly. The thrust of KBR's legislative history argument is that Congress intended § 3731(b)(2) to track § 2416(c). Therefore, KBR contends, the former statute should be construed as broadly as the latter.
In addition to the vagueness or ambiguity in the legislative history of the statute, the Court simply disagrees with KBR's argument. It is true that some of the language of the two statutes of limitations is identical when viewed at the most granular level. But KBR's briefing elides the relevant distinction between them.
The distinction flows from Congress's deletion of "an" and insertion of "the" to modify "official of the United States." As a definite article, the word "the" operates to "particularize[ ] the subject spoken of." The, Black's Law Dictionary (10th ed. 2014). That textual difference alone suggests Congress did not, in fact, intend to copy the general government-as-plaintiff statute of limitations. Though the difference may appear insignificant at first reading, when the two statutes are compared in any detail it comes into stark relief.
The False Claims Act is located in Title 31, in particular at §§ 3729-32.
Section 2416 is a different animal. First, the statute is located in a chapter titled "United States as Party Generally." 28 U.S.C. § 2415(a) states that "every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract. . . shall be barred unless the complaint is filed within six years after the right of action accrues or within one year after [a] final [agency] decision[ ]. . . ." Section 2416(c) is an exception; it tolls the statute if "facts material to the right of action . . . reasonably could not be known by an official of the United States charged with the responsibility to act in the circumstances." Section 2415 applies to all kinds of lawsuits filed by or on behalf of all kinds of government agencies. See United States v. Bollinger Shipyards, Inc., No. 12-920, 2013 WL 393037, at *13 (E.D. La. Jan. 30, 2013) ("For purposes of § 2416(c) tolling, different officials within the government are responsible for bringing different types of claims."). The statute of limitations necessarily must be broadly applied or else it would have no effect.
Additionally, courts that have construed § 3731(b)(2) have, with near uniformity, done so narrowly and limited "the official" to the Attorney General and her designees.
The only case that holds otherwise, United States ex rel. Kreindler & Kreindler v. United Techs. Corp., analogized to § 2416(c) and found that knowledge of facts held by "senior [Army] officials in charge of the Black Hawk project" was sufficient to start the limitations period under § 3731(b)(2). 777 F.Supp. 195, 204-05 (N.D.N.Y. 1991).
That the FCA's statute of limitations tolling provision refers to DOJ Civil, however, does not mean that discovery related to other agencies or government attorneys outside DOJ Civil is not available to KBR. The United States' contention that only publicly available government reports or memoranda are relevant to its knowledge is unduly narrow. That argument follows from the general tone of the government's briefing, and suggests that the only source of DOJ Civil's knowledge of factual matter that could have put it on notice of an FCA claim in this case was KBR itself. In support, the government has attached a declaration from one of its lawyers that describes a November 2010 presentation by KBR to DOJ Civil in which KBR tried to dissuade the government from filing an FCA claim (necessarily implying that KBR represented at that time that there was no evidence to show KBR's knowledge of the falsity of any of its claims). See Kolar Decl. ¶¶ 4-5.
Accordingly, KBR is entitled to discovery related to government communications to DOJ Civil that could tend to show DOJ Civil's knowledge of facts that should have put it on notice of any FCA claims arising out of KBR's alleged false claims. With the preceding analysis in mind, KBR may wish to retool its discovery requests.
KBR is not entitled to blanket discovery of grand jury materials from any related criminal investigation. Grand jury proceedings are secret. See Fed. R. Crim. Proc. 6(e)(2)(B) (listing "persons [who] must not disclose a matter occurring before the grand jury"); United States v. Procter & Gamble Co. 356 U.S. 677, 681 (1958); Lucas v. Turner, 725 F.2d 1095, 1099-1101 (7th Cir. 1984). Normally, the only people allowed into the grand jury room, and the only people aware of the proceedings, are the prosecutors, witnesses, grand jurors, and court reporter. Fed. R. Crim. Proc. 6(d). Some exceptions apply; as relevant to this case, "[d]isclosure of a grand-jury matter . . . may be made to . . . an attorney for the government for use in performing that attorney's duty . . . ." Fed. R. Crim. Proc. 6(e)(3). Additionally, the relevant statute permits any Department of Justice attorney to conduct grand jury proceedings, notwithstanding their assignment to a particular division, see United States v. Sells Eng'g, Inc., 463 U.S. 418, 428 (1983) (citing 28 U.S.C. § 515(a)), meaning a government lawyer normally assigned to the civil division could, in theory, take part in grand jury proceedings.
It is certainly conceivable (without speculating on the likelihood) that DOJ Civil attorneys either participated in grand jury proceedings, or else requested those materials at a later date pursuant to Rule 6(e)(3).
As a final point, this issue is particularly well-suited to staged or managed discovery. That is, a threshold inquiry of whether any DOJ Civil attorneys participated in any grand jury proceedings related to the alleged FCA claims or subsequently received any material arising out of such a grand jury must precede any discovery as to what actually transpired in front of the grand jury.
For the reasons stated above, KBR's motion for leave to file a reply, ECF No. 105, is GRANTED. The United States' motion for leave to file a sur-reply, ECF No. 109, is GRANTED. KBR's motion to compel discovery, ECF No. 100, is DENIED insofar as it seeks a legal determination that 31 U.S.C. § 3731(b)(2) should be construed to include federal government officials beyond the Attorney General or her designees. KBR may be entitled to discovery as to DOJ Civil's knowledge of any grand jury proceedings related to the contracts at issue in this case, as explained above.
The parties are directed to meet and confer in good faith to minimize the burden stemming from discovery on the statute of limitations defense. They should first focus their efforts on the government agencies or attorneys involved in any investigations of KBR's claims that have a policy or custom of reporting relevant information to DOJ Civil.
31 U.S.C. § 3729(b)(1).