United States District Court, D. Delaware
For Kellogg Brown & Root Services, Inc., Plaintiff: William J. Wade, Esq., Kelly E. Farnan, Esq., RICHARDS LAYTON & FINGER, P.A., Wilmington, DE; Herbert L. Fenster, Esq. (argued), Raymond B. Biagini, Esq., Alejandro L. Sarria, Esq., John W. Sorrenti, Esq., MCKENNA LONG & ALDRIDGE LLP, Washington, DC.
For United States of America, Defendant: Charles M. Oberly, III, Esq., United States Attorney for the District of Delaware, Jennifer Welsh, Esq., Assistant United States Attorney for the District of Delaware, Wilmington, DE; Joyce R. Branda, Esq., James G. Touhey, Jr., Esq., Rupert M. Mitsch, Esq., Conor Kells, Esq. (argued), Philip D. MacWilliams, Esq., U.S. DEPARTMENT OF JUSTICE, Washington, DC.
Richard G. Andrews, UNITED STATES DISTRICT JUDGE.
Presently before the Court is Defendant United States of America's Motion to Dismiss for Lack of Subject Matter Jurisdiction and Failure to State a Claim. (D.I. 11). The motion has been fully briefed (D.I. 13, 20 & 23), and oral argument was held on April 13, 2015. For the reasons set forth herein, the United States' motion is granted.
Plaintiff Kellogg Brown & Root Services, Inc. (KBR) filed its two-count complaint on September 17, 2014. (D.I. 1). Count I alleges a violation of the Federal Tort Claims Act (FTCA) arising from the Defense Contract Audit Agency's (DCAA) negligent audit, seeking damages for attorney's fees incurred while appealing KBR's contract disputes before the Armed Services Board of Contract Appeals (ASBCA). ( Id. at 27). Count II alleges a violation of the FTCA arising from DCAA's negligent audit, seeking damages for attorney's fees incurred while defending against the Department of Justice's (DOJ) action under the False Claims Act filed in the United States District Court for the District of Columbia. ( Id. at 31). I find that both counts of KBR's complaint are barred by the discretionary function exception, and that I therefore do not have subject matter jurisdiction over this lawsuit. Thus, this opinion does not address the United States' arguments relating to the Contract Disputes Act, the statute of limitations, the interference with contract rights exception to the FTCA, and the application of Texas tort law.
II. LEGAL STANDARD
" A Rule 12(b)(1) motion may be treated as either a facial or factual challenge to the court's subject matter jurisdiction." Gould Elecs. Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000). " In reviewing a facial attack, the court must only consider the allegations of the complaint and documents referenced therein and attached thereto, in the light most favorable to the plaintiff." Id. " In reviewing a factual attack, the court may consider evidence outside the pleadings." Id.
" Sovereign immunity not only protects the United States from liability, it deprives a court of subject matter jurisdiction over claims against the United States." Richards v. United States, 176 F.3d 652, 654, 41 V.I. 493 (3d Cir. 1999). " The FTCA waives the federal government's sovereign immunity with respect to tort claims for money damages." Baer v. United States, 722 F.3d 168, 172 (3d Cir. 2013) (citing 28 U.S.C. § 1346(b)(1)). " The discretionary function exception limits that waiver, eliminating jurisdiction for claims based upon the exercise of a discretionary function on the part of an employee of the government." Id. (citing 28 U.S.C. § 2680(a)). Under the discretionary function exception, the government retains sovereign immunity for " [a]ny claim . . . based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused." 28 U.S.C. § 2680(a). " The plaintiff. . . bears the burden of demonstrating that [its] claims fall within the scope of the FTCA's waiver of government immunity, but [t]he United States has the burden of proving the applicability of the discretionary function exception." Merando v. United States, 517 F.3d 160, 164 (3d Cir. 2008) (third alteration in original) (citations and internal quotation marks omitted). " If the discretionary function exception applies, the district court lacks subject matter jurisdiction over the case." Sloan v. U.S. Dep't of Horn. & Urban Dev., 236 F.3d 756, 759, 344 U.S.App.D.C. 389 (D.C. Cir. 2001).
The Supreme Court has established a two-part test to determine whether the discretionary function exception applies. Berkovitz v. United States, 486 U.S. 531, 536, 108 S.Ct. 1954, 100 L.Ed.2d 531 (1988). First, the court must consider whether the action " involves an element of judgment or choice." Id. Second, the court must determine whether the judgment exercised " is of the kind that the discretionary function exception was designed to shield." Id. In other words, the discretionary function exception " protects only governmental actions and decisions based on considerations of public policy." Id. at 537. " [I]f a regulation allows the employee discretion, the very existence of the regulation creates a strong presumption that a discretionary act authorized by the regulation involves consideration of the same policies which led to the promulgation of the regulations." United States v. Gaubert, 499 U.S. 315, 324, 111 S.Ct. 1267, 113 L.Ed.2d 335 (1991). " The focus of the inquiry is not on the agent's subjective intent in exercising the discretion conferred by statute or regulation, but on the nature of the actions taken and on whether they are susceptible to policy analysis." Id. at 325. The United States characterizes its motion as a facial attack on KBR's complaint, and KBR does not dispute this contention. (D.I. 13 at 10). I view the motion as a facial attack because the United States relies solely on " the allegations of the complaint and documents referenced therein and attached thereto." Gould Elecs., 220 F.3d at 176.
A. Count I: KBR's ASBCA Appeal
1. Discretionary Element
Under the first prong of the Berkovitz test, the contracting officer for the Army Sustainment Command in Rock Island, Illinois (ASC-RI) and DCAA both performed functions with significant discretionary elements. The United States argues that the ASC-RI contracting officer exercised discretion when deciding whether to recognize the costs associated with KBR's use of personal security contractors (PSCs) under the LOGCAP III contract, and that DCAA acted in an advisory role to the contracting officer. (D.I. 13 at 19). KBR appears to agree about the relationship between DCAA and the contracting officer, arguing that the contracting officer was an active participant in DCAA's professional malpractice, and that " DCAA's audit work was performed in lockstep with the [contracting officer]." (D.I. 20 at 32-33). KBR alleges in its complaint that the " ASC-RI ...