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IN RE: KBR, INC., NO. 13-1430

Decided: March 6, 2014

The Fourth Circuit, finding that the district court lacked the information necessary to dismiss Appellants’ claims, vacated the district court’s decision granting summary judgment in favor of Appellee and remanded for further proceedings.

Fifty-eight individuals, the majority of whom are United States military personnel (Servicemembers), brought various state tort and contract claims against KBR, Inc.; Kellog Brown & Root LLC; Kellog Brown & Root Services, Inc.; and Halliburton (collectively, KBR). The Army contracted with KBR to provide waste disposal and water treatment services on military bases in Iraq and Afghanistan. Unfortunately, according to the Servicemembers, they suffered injuries as a result of KBR’s waste disposal and water treatment practices, which allegedly breached the contract.

The Servicemembers contended that KBR violated the waste management and water disposal components of the contract by failing to properly handle and incinerate waste and by providing contaminated water to military forces. The Judicial Panel on Multidistrict Litigation transferred all of the cases to the District of Maryland for consolidated pretrial proceedings. KBR then filed a motion to dismiss for lack of subject matter jurisdiction, arguing that (1) the Servicemembers’ claims are nonjusticiable under the political question doctrine; (2) KBR is entitled to derivative sovereign immunity based on the discretionary function exception to the federal government’s waiver of immunity in the Federal Tort Claims Act (FTCA); and (3) the FTCA’s combatant activities exception preempts the state tort laws underlying the Servicemembers’ claims. The district court denied the motion to dismiss without prejudice, concluding that it did not have enough information to decided the issue. And, due to its concern about unleashing “the full fury of unlimited discovery” on government contractors operating in war zones, the court asked the parties to submit a joint discovery plan for limited jurisdictional discovery.

The district court, subsequently, stayed the proceedings in light of the Fourth Circuit’s pending decision in Al-Quraishi v. L-3 Services, Inc. Following the resolution of those appeals, the district court granted KBR’s renewed motion to dismiss, holding that the political question doctrine, derivative sovereign immunity, and the combatant activities exception each provided a basis on which to dismiss the Servicemembers’ claims. This appeal followed.

On appeal, the Fourth Circuit first addressed whether the district court erred in dismissing Appellants’ complaint on the basis of the political question doctrine. In addressing this issue, the court performed its analysis using only the Taylor test, which is made up of two factors— (1) the “Military Control” factor; and (2) the “National Defense Interests” factor—either one of which, if satisfied, would render the Servicemembers’ claims nonjusticiable. For purposes of the “Military Control” factor the court observed it must consider the extent to which KBR was under the military’s control. With respect to this factor, although it noted that evidence showed that the military exercised some level of oversight over KBR’s burn pit and water treatment activities, the court held more evidence was needed to determine whether KBR or the military ultimately chose how to carry out the relevant operations. With respect to the “National Defense Interests” factor, the court found that KBR’s causation defense does not require evaluation of the military’s decision making unless (1) the military caused the Servicemembers’ injuries, at least in part, and (2) the Servicemembers invoke a proportional-liability system that allocates liability based on fault. Thus, this factor did not necessarily counsel in favor of nonjusticiability.  The court, therefore, concluded that the political question doctrine did not render the Servicemembers’ claims nonjusticiable at this time.

Next, the Fourth Circuit addressed whether the district court erred in finding KBR was entitled to derivative sovereign immunity under the FTCA’s discretionary function exception. At issue was whether the government authorized KBR’s actions. As the court observed, that inquiry required the court to determine whether KBR exceeded its authority under the contract. However, at this point in the litigation, the court determined the record lacked sufficient evidence to make that determination and, therefore, held that the district court erred in granting KBR’s summary judgment motion on the basis of derivative sovereign immunity.

Lastly, the Fourth Circuit reversed the district court’s ruling that the Servicemembers’ state tort law claims were preempted under the FTCA’s combatant activities exception. The court acknowledged, however, that KBR did engage in combatant activities under the court’s analysis. With respect to the remaining inquiry, though, while it was evident that the military controlled KBR to some degree, the extent to which KBR was integrated into the military chain of command could not be determined without further discovery. Accordingly, the court vacated the district court’s decision to dismiss the Servicemembers’ claims and remanded for further proceedings.

Full Opinion

– W. Ryan Nichols