Fifth Circuit Clarifies Anti-Kickback Requirements | Practical Law

Fifth Circuit Clarifies Anti-Kickback Requirements | Practical Law

In United States v. Kellogg Brown & Root, Inc., the US Court of Appeals for the Fifth Circuit clarified Anti-Kickback Act requirements, holding that corporations are liable only for the violations of employees whose authority, responsibility, or managerial role within the corporation are such that their knowledge is imputable to the corporation.

Fifth Circuit Clarifies Anti-Kickback Requirements

Practical Law Legal Update w-005-8742 (Approx. 3 pages)

Fifth Circuit Clarifies Anti-Kickback Requirements

by Practical Law Litigation
Law stated as at 03 Feb 2017 • USA (National/Federal)
In United States v. Kellogg Brown & Root, Inc., the US Court of Appeals for the Fifth Circuit clarified Anti-Kickback Act requirements, holding that corporations are liable only for the violations of employees whose authority, responsibility, or managerial role within the corporation are such that their knowledge is imputable to the corporation.
On February 3, 2017, in United States v. Kellogg Brown & Root, Inc., the US Court of Appeals for the Fifth Circuit clarified Anti-Kickback Act (AKA) requirements, holding that corporations are liable only for the violations of employees whose authority, responsibility, or managerial role within the corporation are such that their knowledge is imputable to the corporation ( (5th Cir. Feb. 3, 2017)).
The defendant, Kellogg Brown & Root, Inc. (KBR), provided logistical support to the US Army. Under the applicable contract, KBR filled task orders received by the army, either directly or through subcontractors, one of whom was EGL, Inc.
In 2004, relators filed a qui tam action against KBR and EGL, alleging False Claims Act (FCA) violations, some of which involved kickbacks. Over six years later, the government intervened and filed its own complaint, arguing that in addition to the FCA claims, KBR knowingly engaged in kickbacks in violation of the Anti-Kickback Act (41 U.S.C. §§ 8701–07). The district court dismissed the AKA claim, holding that the government failed to allege that the in-question employees were acting for KBR's benefit.
The Fifth Circuit Court of Appeals reversed and remanded. On remand, the district court found that two KBR employees knowingly accepted kickbacks. The court also held that KBR was liable under 41 U.S.C. § 8706(a)(1) for knowingly accepting kickbacks. KBR appealed.
On appeal, the Fifth Circuit affirmed KBR's liability arising from one of the employees, reversed as to the other employee, and remanded. In doing so, the Fifth Circuit held that under the AKA:
  • Corporations are liable only for the violations employees whose authority, responsibility, or managerial role within the corporation is such that their knowledge is imputable to the corporation.
  • Proof of a connection between the alleged kickback and a specific instance of favorable treatment is required, and anything of value offered to subvert the proper process for awarding contracts is a potential kickback.
The Fifth Circuit also held that although the government did not file its AKA claim within the AKA's six year statute of limitations, the claim was still timely under 31 U.S.C. § 3731(c), the subsection of the FCA providing for relation back. In this subsection, a claim is deemed to relate back if it arises "out of the conduct, transactions, or occurrences set forth, or attempted to be set forth, in the prior complaint." Because the AKA claims satisfied this provision, they were not time-barred as argued by KBR.