United States Ex Rel. Vavra v. Kellogg Brown & Root, Inc.

Case: 12-40447 Document: 00512314756 Page: 1 Date Filed: 07/19/2013

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit

FILED
July 19, 2013
No. 12-40447
Lyle W. Cayce
Clerk
United States of America, ex rel., DAVID R. VAVRA, et al.,

Plaintiffs

UNITED STATES OF AMERICA,

Intervenor - Appellant

v.

KELLOGG BROWN & ROOT, INCORPORATED,

Defendant - Appellee

Appeal from the United States District Court
for the Eastern District of Texas

Before JOLLY, BENAVIDES, and HIGGINSON, Circuit Judges.
HIGGINSON, Circuit Judge:
We are asked to decide a question of first impression in interpreting the
Anti-Kickback Act (the “AKA” or the “Act”), 41 U.S.C. §§ 51-58.1 At issue is
whether, and if so under what conditions, 41 U.S.C. § 55(a)(1)’s civil suit

1
As the parties both note, after this litigation commenced, Congress re-codified the
AKA without substantive change, placing it at 41 U.S.C. §§ 8701-07. See Public
Contracts—Enact Certain Laws, Pub. L. No. 111-350, § 3, 124 Stat. 3677, 3838-41 (2011).
Because the parties and the district court all continue to cite the prior-labeled statutory
sections of the Act, we maintain that convention.
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provision extends vicarious liability to an employer for the acts of its employees.
Employees of Defendant-Appellee Kellogg Brown & Root, Inc. (“KBR”) allegedly
accepted kickbacks from two companies angling to win subcontracts on KBR’s
prime contract to service American armed forces in military theaters across the
globe. Intervenor-Appellant, the United States, wishes to hold KBR liable for
the kickbacks.
For the reasons outlined below, we conclude the district court erred in
finding that § 55(a)(1) does not allow the government to allege vicarious liability.
We REVERSE its ruling granting KBR’s motion to dismiss the government’s
AKA claim under Federal Rule of Civil Procedure 12(b)(6) and REMAND for
further proceedings.
FACTS AND PROCEEDINGS2
In 2001, KBR secured a contract to provide global logistical services to the
United States Army, an agreement known as Logistics Civil Augmentation
Program III (“LOGCAP III”). LOGCAP III was structured as an “indefinite
delivery/indefinite quantity contract,” under which the Army issues KBR
discrete task orders that KBR may fulfill on its own or by retaining
subcontractors. KBR periodically bills the Army for the costs of performing the
task orders, including costs incurred by its subcontractors, and is also permitted
to charge the Army mark ups of one percent as profit and an award fee of up to
two percent. KBR engaged two subcontractors, EGL, Inc. (“EGL”) and
Panalpina, Inc. (“Panalpina”) to assist in carrying out LOGCAP III task orders
to transport military equipment and supplies to Iraq, Afghanistan, and Kuwait
between 2002 and 2006.

2
As this case reaches the court on the district court’s grant of a motion to dismiss, we
accept the well-pleaded facts from the government’s complaint as true. See SEC v. Cuban, 620
F.3d 551, 553 (5th Cir. 2010).

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As the government alleges, employees in KBR’s transportation department
accepted kickbacks from counterparts in EGL and Panalpina calculated to
“obtain favorable treatment on . . . subcontracts with KBR, such as overlooking
service failures and continuing to award new subcontracts . . . despite such
failures.” The allegations center on KBR’s Corporate Traffic Supervisor for
LOGCAP III, Robert Bennett. Bennett was responsible for overseeing EGL’s and
Panalpina’s performances on LOGCAP III subcontracts and for reviewing the
invoices those subcontractors billed KBR for their services. From 2002 to 2006,
Bennett and four colleagues in the KBR transportation department accepted
kickbacks from Kevin Smoot, managing director of EGL’s freight forwarding
station, as well as other EGL employees acting on Smoot’s instructions, on at
least ninety-three occasions. The benefits ranged from “meals, drinks, golf
outings, tickets to rodeo events, baseball games, football games, and other gifts
and entertainment.” Between 2003 and 2006, Panalpina’s account
representative for the LOGCAP III subcontracts, Grant Wattman, and other
Panalpina employees acting at Wattman’s behest, provided Bennett and KBR
colleagues kickbacks on fifty-five occasions in the form of “meals, drinks, golf
outings, and other gifts and entertainment.”3
This civil action commenced when two private individuals brought a qui
tam suit against KBR, Bennett, and others for the kickback scheme. The
government intervened in the case against KBR and filed its own complaint.
KBR moved to dismiss the government’s complaint. As relevant to the present
appeal, KBR argued the government failed to state a claim for civil liability
under the AKA, because 41 U.S.C. § 55(a)(1) does not permit vicarious liability.
In the alternative, it contended the complaint failed to allege sufficient facts to
attribute Bennett’s and his transportation department colleagues’ conduct to

3
Bennett and Smoot subsequently pleaded guilty to federal criminal charges related
to the kickbacks that were brought under the AKA’s criminal provision, 41 U.S.C. § 54.

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KBR. The district court granted the motion to dismiss the AKA count for failure
to state a claim, finding that “the plain language of § 55(a) indicates that
corporate vicarious liability” does not extend to violations of § 55(a)(1). It further
noted that “[b]ecause the United States has not sufficiently alleged that KBR
employees were acting for the corporation’s benefit, imputation [of vicarious
liability] is not appropriate in this case.”
To obtain final judgment, the government voluntarily dismissed all of its
remaining claims and filed the present appeal. The government solely
challenges the district court’s ruling on the AKA count.
STANDARD OF REVIEW
We review the district court’s decision to grant a motion to dismiss de
novo. United States ex rel. Rafizadeh v. Cont’l Common, Inc., 553 F.3d 869, 872
(5th Cir. 2008). We “accept ‘all well pleaded facts as true, viewing them in the
light most favorable to the plaintiff.’” Cuban, 620 F.3d at 553 (quoting In re
Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007)). To avoid
dismissal, “a complaint must contain sufficient factual matter, accepted as true,
to state a claim to relief that is plausible on its face.’” Gonzalez v. Kay, 577 F.3d
600, 603 (5th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009))
(internal quotation marks omitted).
DISCUSSION
We begin with a brief description of the relevant provisions of the AKA,
before reaching the two merits issues raised on appeal: whether § 55(a)(1)
provides for vicarious liability, and, if it does, whether the government
sufficiently imputes liability to KBR in its complaint.
A. The Anti-Kickback Act’s Civil Liability Provisions
“In the idiom of economic crime, a ‘kickback’ is a kind of commercial bribe.”
United States v. Purdy, 144 F.3d 241, 242 (2d Cir. 1998). Congress enacted the
AKA in 1946, responding to reports revealing that World War II defense

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subcontractors paid fees to prime contractors to gain valuable military
subcontracts. Id. at 242-43; see S. REP. NO. 99-435, at 3 (1986). The taxpayer
typically bore the cost of the fees, as prime contractors charged the government
subcontract costs inflated by the amount of such “kickbacks.” See United States
v. Acme Process Equip. Co., 385 U.S. 138, 143 (1966); Purdy, 144 F.3d at 242-43.
The AKA presently defines a “kickback” as:
any money, fee, commission, credit, gift, gratuity, thing of value, or
compensation of any kind that is provided to a prime contractor,
prime contractor employee, subcontractor, or subcontractor
employee to improperly obtain or reward favorable treatment in
connection with a prime contract4 or a subcontract5 relating to a
prime contract.
41 U.S.C. § 52(2). It states that:
A person may not—
(1) provide, attempt to provide, or offer to provide a kickback;
(2) solicit, accept, or attempt to accept a kickback; or
(3) include the amount of a kickback prohibited by paragraph (1)
or (2) in the contract price—
(A) a subcontractor charges a prime contractor or a higher tier
subcontractor; or
(B) a prime contractor charges the Federal Government.
§ 53. The AKA defines “person” to include both an “individual” and “a
corporation, partnership, business association of any kind, trust, [or] joint-stock
company.” § 52(3). As the district court found, the parties do not dispute, at
least for purposes of the motion to dismiss, that the benefits provided to Bennett
and other KBR employees were kickbacks given to prime contractor employees
by subcontractor employees.

4
A “prime contract” is “a contract or contractual action entered into by the Federal
Government to obtain supplies, materials, equipment, or services of any kind.” 41 U.S.C. §
52(4).
5
A “subcontract” is defined as “a contract or contractual action entered into by a prime
contractor or subcontractor to obtain supplies, materials, equipment, or services of any kind
under a prime contract.” 41 U.S.C. § 52(7).

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The case turns on interpreting the civil liability provisions of the AKA,
codified at 41 U.S.C. § 55(a). Section 55(a), “Civil Actions,” provides:
(a) Amount.— The Federal Government in a civil action may recover
from a person—

(1) that knowingly engages in conduct prohibited by section [53] of
this title a civil penalty equal to—
(A) twice the amount of each kickback involved in the
violation; and
(B) not more than $[11,000]6 for each occurrence of prohibited
conduct; and

(2) whose employee, subcontractor, or subcontractor employee
violates section [53] of this title by providing, accepting, or charging
a kickback a civil penalty equal to the amount of that kickback.
41 U.S.C. § 55(a). Section 55(a)’s present civil liability provisions are the product
of the Anti-Kickback Enforcement Act of 1986, a series of amendments intended
“to strengthen the prohibition of kickbacks relating to subcontrac[ts] under
Federal Government contracts.” Pub. L. No. 99-634, 100 Stat. 3523. Previously,
the government could recover only the value of a kickback and could obtain relief
only from the kickback’s recipient or the subcontractor who provided it. See 41
U.S.C. § 51 (1982). The 1986 amendments reshaped the civil damages remedies
by permitting, in § 55(a)(1), recovery of double damages and per-occurrence
penalties from knowing violators of the Act. See Pub. L. No. 99-634, § 5, 100
Stat. 3523; H.R. REP. NO. 99-964, at 10 (1986), reprinted in 1986 U.S.C.C.A.N.
5960, 5967.7 In § 55(a)(2), the 1986 amendments added recovery of the cost of

6
Acting under the authority of the Federal Civil Monetary Penalties Inflation
Adjustment Act of 1990, 28 U.S.C. § 2461 (2006), the Department of Justice increased the
amount of the penalty in § 55(a)(1)(B) from $10,000, its original statutory amount, to $11,000.
28 C.F.R. § 85.3(a)(13).
7
For ease of reference, we label § 55(a)(1)(A) the “double damages penalty,” as it
permits recovery of twice the kickback amount. See § 55(a)(1)(A). We call § 55(a)(1)(B) the
“per-occurrence penalty,” under which the government also may secure up to $11,000 for each
violation. See § 55(a)(1)(B).

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the kickback from prime contractors and higher tier subcontractors for kickback
activity on the part of their employees or subcontractors. See Pub. L. No. 99-634,
§ 5, 100 Stat. 3523; H.R. REP. NO. 99-964, at 10 (1986), reprinted in 1986
U.S.C.C.A.N. 5960, 5967. The government, in this case, only alleges a violation
of § 55(a)(1).
B. Whether § 55(a)(1) Permits Holding Employers Vicariously Liable
We turn to whether the government may ever bring a suit under § 55(a)(1)
alleging an employer is vicariously liable for the kickback-related conduct of its
employees.8 When interpreting a statute, our analysis begins with its text. See
In re Amy Unknown, 701 F.3d 749, 759-60 (5th Cir. 2012) (en banc). The district
court reasoned primarily from the text and structure of § 55(a), arguing that to
provide for vicarious liability under § 55(a)(1) “would render Congress’s reference
to fraud committed by an ‘employee, subcontractor, or subcontractor employee,’
which appears only in § 55(a)(2), superfluous.” It stated that if the government
could pursue employers under § 55(a)(1), with its double damages and per-
occurrence penalty provisions, § 55(a)(2) would lose its relevance because it
provides for recovery of the value of the kickback only. Under the district court’s
approach, Congress contemplated that persons would be held liable for their
employees and subcontractors under subsection (a)(2) but not under (a)(1).
The district court’s reading gives individual expression to both subsections
(a)(1) and (a)(2), but it insufficiently accounts for the fact that both of § 55(a)’s
subsections allow the government to “recover from a person.” See § 55(a)
(emphasis added). Congress defined “person” broadly in the AKA, to include

8
On appeal, KBR does not dispute that § 55(a)(1) allows vicarious liability under some
circumstances. It has waived, therefore, any argument that the provision does not permit
imputing vicarious liability. See Audler v. CBC Innovis Inc., 519 F.3d 239, 255 (5th Cir. 2008).
Nonetheless, we address the issue out of an abundance of caution and to give attention to the
district court’s holding, as well as because it is a prerequisite to reaching the terrain the
parties do contest, the circumstances under which § 55(a)(1) vicarious liability may arise.

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corporations and other business entities. 41 U.S.C. § 52(3); see also Vt. Agency
of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 782 (2000) (“the
presumption with regard to corporations is . . . they are presumptively covered
by the term ‘person’”) (citing the Dictionary Act, 1 U.S.C. § 1). By § 55(a)’s plain
terms, a corporate person, and not solely its individual employees, can be held
liable under both subsections (a)(1) and (a)(2). See Kellogg Brown & Root Servs.,
Inc. v. United States (KBR I), 99 Fed. Cl. 488, 504 (2011). Furthermore, when
Congress creates causes of action in tort, we must assume “it legislates against
a legal background of ordinary tort-related vicarious liability rules and
consequently intends its legislation to incorporate those rules.” Meyer v. Holley,
537 U.S. 280, 285 (2003). It is well-established that “[a] corporation is only a
legal entity and strictly speaking it cannot act or have a mental state by itself.
Nevertheless, the acts and mental states of its agents and employees will be
imputed to the corporation where such natural persons acted on behalf of the
corporation.” 10 WILLIAM MEADE FLETCHER ET AL., FLETCHER CYCLOPEDIA OF
THE LAW OF CORPORATIONS § 4877 (2012 ed.) (internal citations omitted). Since
Section 55(a)(1) makes corporations liable for kickback activity, it requires
attributing liability to corporate entities for that activity under a rule of
vicarious liability.
Congress’s decision to provide for vicarious liability under both subsections
does not render § 55(a)(2) superfluous. Under § 55(a)(1), the government must
prove a “knowing[]” violation before it may obtain double damages and per-
occurrence recoveries. See § 55(a)(1). Section 55(a)(2) requires no proof of
“knowing” misconduct before allowing recovery of “a civil penalty equal to the
amount of th[e] kickback.” See § 55(a)(2). Like the Court of Federal Claims, we
find “[i]t is entirely consistent for the statute to punish knowing violations more
severely than those of which the corporation was unaware.” See Kellogg Brown
& Root Servs., Inc. v. United States (KBR II), 103 Fed. Cl. 714, 773 (2012). We

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conclude that § 55(a)(1) permits the government to attribute liability to
corporate defendants vicariously.9
We add that we appreciate Judge Jolly’s separate effort, in concurrence,
to explore the distinction between the “knowing[]” violations contemplated in §
55(a)(1) and those acts encompassed by § 55(a)(2). We are mindful, however,
that this issue of statutory interpretation was neither squarely presented to us
by the parties on appeal, nor relied upon by the district court. We respectfully
decline to reach the question, unnecessary as it is to our holding, on our own
initiative. Even consistent with Judge Jolly’s approach to the text, as he admits,
defining what “knowingly” entails in the context of the AKA is a nuanced, fact-
reliant question unsuited for resolution at the motion to dismiss stage. See In
re Hellenic Inc., 252 F.3d 391, 395 & n.20 (5th Cir. 2001); see also United States
v. Hangar One, Inc., 563 F.2d 1155, 1158 (5th Cir. 1977) (holding, in the False
Claims Act context, that “liability of a corporation . . . may arise from the
conduct of employees other than those with ‘substantial authority and broad
responsibility.’”). Lacking development of the record, we emphasize that we
make no determination as to the knowledge requirement of this statute, pleaded
by the government in its complaint.
C. Whether the Complaint Sufficiently Alleges Vicarious Liability
We next reach KBR’s challenge to whether the government pleaded facts
sufficient to hold KBR liable for the conduct of its employees. When grappling
with the standard for imposing vicarious liability in civil liability provisions, we
look to the common law principles distilled in the Restatement (Second) of
Agency for guidance. See Kolstad v. Am. Dental Ass’n, 527 U.S. 526, 542 (1999);
Am. Soc’y of Mech. Eng’rs, Inc. v. Hydrolevel Corp. (ASME), 456 U.S. 556, 565-66
& n.5 (1982); United States v. Ridglea State Bank, 357 F.2d 495, 498-500 (5th

9
The statutory text yields a clear result, so we need not examine the legislative history
on which the government also relies. See In re Amy Unknown, 701 F.3d at 760.

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Cir. 1966). Under the default, common law rule of vicarious liability, “[a] master
is subject to liability for the torts of his servants committed while acting in the
scope of their employment,”10 or, if the act is committed outside the scope of
employment, if “the servant purported to act or to speak on behalf of the
principal and there was reliance upon apparent authority, or he was aided in
accomplishing the tort by the existence of the agency relation.” RESTATEMENT
(SECOND) OF AGENCY § 219 (1958) (emphasis added); accord ASME, 456 U.S. at
565-67; see also In re Hellenic Inc., 252 F.3d at 395. The government, for its
part, neither avers in its complaint nor advances on appeal that the KBR
officials accepting bribes did so within the scope of their employment. The
government instead argues the KBR officials acted within their apparent
authority. “‘Apparent authority is the power to affect the legal relations of
another person by transactions with third persons, professedly as agent for the
other, arising from and in accordance with the other’s manifestations to such
third persons.’” ASME, 456 U.S. at 566 n.5 (quoting RESTATEMENT (SECOND) OF
AGENCY § 8 (1958)). As the Supreme Court has further explained, “one who
appears to have authority to make statements for the [principal] gives to his
statements the weight of the [principal’s] reputation.” Id. at 567 (internal
quotation marks omitted).

10
The Restatement further defines the term “scope of employment,” providing that:
(1) Conduct of a servant is within the scope of employment if, but only if:
(a) it is of the kind he is employed to perform;
(b) it occurs substantially within the authorized time and space limits;
(c) it is actuated, at least in part, by a purpose to serve the master, and
(d) if force is intentionally used by the servant against another, the use
of force is not unexpectable by the master.
(2) Conduct of a servant is not within the scope of employment if it is different
in kind from that authorized, far beyond the authorized time or space limits, or
too little actuated by a purpose to serve the master.
RESTATEMENT (SECOND) OF AGENCY § 228 (1958).

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KBR’s challenge is that the AKA’s language and structure indicate
congressional intent to deviate from the default rule and require the government
to plead, and later to prove, a narrower theory of vicarious liability than
apparent authority. KBR urges principally that the government must allege
KBR employees acted with an intent to benefit KBR and were of managerial
level acting within the scope of their employment, before the government may
state a claim imputing liability to KBR. We disagree, not being persuaded
judicially to interpret this statute to apply restrictive notions of vicarious
liability.
Specifically, and starting with the intent-to-benefit requirement, the
district court buttressed its decision to grant the motion to dismiss by noting
that the government could not, in any event, impute vicarious liability to KBR
for “knowingly” violating § 55(a)(1) because it had “not sufficiently alleged that
KBR employees were acting for the corporation’s benefit.” The district court
relied on our decision in Ridglea, 357 F.2d 495, for the act-to-benefit standard,
and KBR does the same on appeal.
In Ridglea, the government sought to hold two banks liable under the
False Claims Act (“FCA”) for the conduct of a former employee who knowingly
approved false and fraudulent Federal Housing Authority loan applications
while working at the banks. 357 F.2d at 496. The version of the FCA in effect
at the time gave the government the right to recover, for knowing violations of
the law, double damages and a forfeiture of $2000 for each false claim. See id.
at 499. In deciding whether the banks could be held liable, we noted the
government’s reliance on case law establishing “that in most civil cases the
employer is held liable for the fraudulent misrepresentations of his agent, even
though the agent acted without any intent to benefit his employer, so long as the
third person reasonably believed that the agent was acting within the scope of
his employment.” Id. at 499. We distinguished the case before us, however,

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reasoning: “All of these authorities concern civil actions to recover actual loss
caused by the misrepresentations of an employee; not, as here, actions to recover
forfeitures and double damages far in excess of actual loss.” Id.
We focused particularly on the FCA’s $2000 forfeiture provision, which
“ha[d] been held to be mandatory and beyond the power of the courts to modify
no matter how disproportionate the forfeiture may seem in relation to the actual
damage suffered by the Government.” Id. at 499. Consequently, the
government would have received “a recovery wholly out of proportion to actual
loss” and we observed further that the bank employee was additionally liable for
criminal penalties. Id. at 500. In light of the disproportionate civil sanctions at
issue, we sought guidance in the vicarious liability principles that govern
criminal law. See id. at 498-500 (citing RESTATEMENT (SECOND) OF AGENCY §§
217D cmt. d, 235 (1958)). We incorporated the criminal standard into the civil
FCA in part, holding “that the knowledge or guilty intent of an agent not acting
with a purpose to benefit his employer, will not be imputed to the employer,
when the latter is sought to be held liable under a statute requiring knowledge
or guilty intent.” Id. at 499-500.
We have elaborated little on the holding in Ridglea nor have we applied
it to any other civil statute.11 In Ridglea itself, we acknowledged the outcome
was in tension with precedent generally construing FCA double damages and
forfeiture provisions. Id. at 500 (citing United States ex rel. Marcus v. Hess, 317
U.S. 537, 549 (1943) (upholding the FCA against Double Jeopardy Clause
challenge as a penal sanction, concluding that “[w]e cannot say that the remedy

11
We applied Ridglea to civil FCA suits in United States ex rel. Taylor-Vick v. Smith,
513 F.3d 228, 231 (5th Cir. 2008), Hangar One, 563 F.2d at 1158, Peterson v. Weinberger, 508
F.2d 45, 53 (5th Cir. 1975), United States v. Aerodex, Inc., 469 F.2d 1003, 1007 (5th Cir. 1972),
and Henry v. United States, 424 F.2d 677, 679 (5th Cir. 1970). We applied it in a criminal case
in United States v. Tupelo Flight Ctr., Inc., 12 F.3d 1099 (5th Cir. 1993) (unpublished) and
discussed it in a diversity suit for conversion under Texas law in Bankers Life Ins. Co. of Neb.
v. Scurlock Oil Co., 447 F.2d 997, 1004 n.12 (5th Cir. 1971).

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now before us requiring payment of a lump sum and double damages will do
more than afford the government complete indemnity for the injuries done it”));
see also United States v. Bornstein, 423 U.S. 303, 315 n.11 (1976); United States
v. Halper, 490 U.S. 435, 446 (1989) (assessing the Double Jeopardy Clause
implications of FCA civil awards, describing “that the Government is entitled to
rough remedial justice, that is, it may demand compensation according to
somewhat imprecise formulas, such as reasonable liquidated damages or a fixed
sum plus double damages.”), abrogated by Hudson v. United States, 522 U.S. 93
(1997).
Moreover, since Ridglea, the Supreme Court has provided additional
guidance in evaluating the elements required to assert vicarious liability under
federal civil suit provisions. In ASME, 456 U.S. at 558-59, the Court addressed
whether ASME, a non-profit engineering standard-setting body, could be held
liable under the Sherman Antitrust Act for the fraudulent activity of members
of one of its subcommittees, “performed with apparent authority.” The Court
reiterated “that under general rules of agency law, principals are liable when
their agents act with apparent authority and commit torts analogous to the
antitrust violation presented by this case,” including when “the agent acts solely
to benefit himself.” Id. at 565-66; see also id. at 567 (“The apparent authority
theory has long been the settled rule in the federal system.”). Turning to the
antitrust law’s statutory purpose, the Court found that “the apparent authority
theory is consistent with the congressional intent to encourage competition.” Id.
at 570. It also noted that requiring an employee act to benefit the employer
before imputing liability would stymie the law’s purpose. Id. at 573-74. The
Court further rejected the petitioner’s reliance on Ridglea to argue the antitrust
statute’s treble damages remedy was punitive such that it triggered more
restrictive vicarious liability rules. Id. at 574-76 & n.14. The Court
acknowledged that the treble damages provision was “designed in part to punish

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past violations,” but stated that it functioned “primarily as a remedy for the
victims” and also as a deterrent. Id. at 575. It concluded: “Since treble damages
serve as a means of deterring antitrust violations and of compensating victims,
it is in accord with both the purposes of the antitrust laws and principles of
agency law to hold ASME liable for the acts of agents committed with apparent
authority.” Id. at 575-76. Under ASME, we must construe federal civil remedies
statutes in harmony with the common law apparent authority rule for
attributing vicarious liability, unless Congress signals its intent to adopt a
different approach. See id. at 568-70 & n.6.
Applying those principles, we first find § 55(a)(1) is meaningfully distinct
from the provisions we analyzed in Ridglea. The per-occurrence penalty in the
AKA, unlike the mandatory $2000 forfeiture at issue in Ridglea, is not obligatory
upon finding the defendant liable. The Act provides that the government “may
recover . . . not more than $[11,000] for each occurrence of prohibited conduct.”
§ 55(a)(1) (emphasis added). Courts retain the discretion to tailor the size of the
per-occurrence penalty they award under § 55(a)(1) to fit the facts of the case.
See United States v. Lippert, 148 F.3d 974, 978 (8th Cir. 1998) (observing, in
conducting an Excessive Fines Clause analysis of an award under § 55(a)(1), that
the district court declined to permit recovery beyond double damages); Morse
Diesel Int’l, Inc. v. United States, 79 Fed. Cl. 116, 122-23 (2007) (finding that
imposing the per-occurrence penalty “is warranted in this case”). It is true, as
KBR emphasizes, that the double damages and per-occurrence penalties may
result in recoveries in excess of the proven value of the kickback exchanged.
Nonetheless, in construing a prior version of the AKA, the Supreme Court
emphasized the insufficiency of recovering the simple, estimated dollar value of
a kickback to fully compensate the government for its kickback-related losses:
The second false assumption underlying Acme’s argument is that
the increased cost of the Government is necessarily equal to the

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No. 12-40447

amount of the kickback which is recoverable. Of course, a
subcontractor who must pay a kickback is likely to include the
amount of the kickback in his contract price. But this is not all. A
subcontractor who anticipates obtaining a subcontract by virtue of
a kickback has little incentive to stint on his cost estimates. Since
he plans to obtain the subcontract without regard to the economic
merits of his proposal, he will be tempted to inflate that proposal by
more than the amount of the kickback. And even if the Government
could isolate and recover the inflation attributable to the kickback,
it would still be saddled with a subcontractor who, having obtained
the job other than on merit, is perhaps entirely unreliable in other
ways. This unreliability in turn undermines the security of the
prime contractor’s performance—a result which the public cannot
tolerate, especially where, as here, important defense contracts are
involved.
Acme Process Equip. Co., 385 U.S. at 144-45; see also ASME, 456 U.S. at 475
(noting the treble damages provision at issue helped compensate for the costs in
bringing a private suit). We discern no persuasive evidence of congressional
intent in § 55(a) to vary from the common law norm of permitting vicarious
liability for employee actions taken under apparent authority.12
KBR also argues we should apply “heightened proof” requirements hewn
by the law of vicarious liability applicable to punitive damages statutes,
including that offending employees must have acted within their scope of
employment and have been of managerial rank. In Kolstad, the Supreme Court
made clear that “[t]he common law has long recognized that agency principles
limit vicarious liability for punitive awards,” a rule “this Court historically has

12
As the government references, other courts have read ASME and subsequent
amendments to the FCA to cast doubt on the act-to-benefit requirement even in the FCA
context in which we distilled it. See United States v. O’Connell, 890 F.2d 563, 568 (1st Cir.
1989); United States ex rel. Shackelford v. Am. Mgmt., Inc., 484 F. Supp. 2d 669, 675 (E.D.
Mich. 2007); United States ex rel. McCready v. Columbia/HCA Healthcare Corp., 251 F. Supp.
2d 114, 118 n.2 (D.D.C. 2003); cf. CLAIRE M. SYLVIA, THE FALSE CLAIMS ACT: FRAUD AGAINST
THE GOVERNMENT § 4:63 (2012 ed.) (noting pre-1986 decisions imposing an intent-to-benefit
requirement are “contrary” to ASME’s holding). Ridglea is our court’s precedent in FCA cases.
But for the reasons outlined above, Ridglea does not control in the AKA’s distinctive statutory
context.

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No. 12-40447

endorsed.” 527 U.S. at 541; see also id. at 542-43 (quoting and applying
RESTATEMENT (SECOND) OF AGENCY § 217C (1958), which separately enumerates
rules for vicarious liability for punitive damages). KBR reasons that § 55(a)(1)
is a statute with a punitive purpose. Nonetheless, KBR cites no case in which
a court has applied punitive damages vicarious liability principles to a statute
that, by its terms, does not expressly provide for punitive damages.13 Rather, the
Supreme Court rejected that reasoning in ASME, finding the deterrence and
compensatory rationales of the antitrust laws required applying an apparent
authority rule, in spite of those laws also bearing punitive characteristics. 456
U.S. at 575-76. We see no cause in the AKA to stretch Kolstad’s holding
expansively, as KBR’s position requires. See United States ex rel. Bryant v.
Williams Bldg. Corp., 158 F. Supp. 2d 1001, 1006, 1008 (D.S.D. 2001) (rejecting
the argument that Kolstad should apply to the FCA because of the FCA’s
punitive purposes).
Nor does § 55(a)(1), with its caps on the damages the government may
recover, bear the hallmarks of a punitive damages provision. See RESTATEMENT
(FIRST) OF TORTS § 908 (1939) (providing that punitive damages are “awarded
against a person to punish him for his outrageous conduct,” and “their allowance
and amount are within the discretion of the trier of fact”). That dissimilarity is
significant because the Restatement (Second) of Agency cautions that the
punitive damages rule “stated in this Section does not apply to the interpretation
of special statutes such as those giving triple damages, as to which no statement
is made.” RESTATEMENT (SECOND) OF AGENCY § 217C cmt. c (1958). Likewise,
the Supreme Court has observed that while the treble damages and civil

13
Nor has a case been offered for the proposition that designating the recovery in §
55(a)(1) a “penalty” renders the double damages and per-occurrence penalties punitive in
purpose for determining vicarious liability. To the contrary, § 55(a)(2) calls its recovery of
value “equal to the amount of the kickback,” a “civil penalty” as well. See § 55(a)(2).

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No. 12-40447
forfeitures provisions in the FCA may be punitive in some respects, “[t]reble
damages certainly do not equate with classic punitive damages, which leave the
jury with open-ended discretion over the amount.” Cook Cnty. v. United States
ex rel. Chandler, 538 U.S. 119, 131-32 (2003). We decline to apply law crafted
in the context of punitive damages provisions to alter the generally applicable
common law rules for a non-punitive-damages law like the AKA. We conclude
that neither the act-to-benefit pleading standard we adopted in Ridglea, nor
standards fitted to punitive damages statutes, govern when alleging a violation
of § 55(a)(1). We find the government at this threshold point has adequately
stated an AKA claim.14
CONCLUSION
Accordingly, we REVERSE the district court’s ruling granting KBR’s
motion to dismiss for failure to state an AKA claim under § 55(a)(1), and we
REMAND for further proceedings in accordance with this opinion.

14
We emphasize that, as this case progresses on remand, the government must of
course provide evidence that KBR officials acted under apparent authority in accepting
kickbacks before the government may prove a knowing violation of § 55(a)(1) by KBR. Under
that standard, it is clear that KBR cannot be exposed to an unexpected flood of liability for
nefarious acts of any and every member of its worldwide workforce. See KBR II, 103 Fed. Cl.
at 773-74. Resolving whether the kickback-accepting employees in this case possessed the
apparent authority to implicate their employer will be of necessity, like proof of knowledge,
a fact-intensive inquiry, capable of resolution only after opportunity for discovery. See In re
Hellenic, 252 F.3d at 395.

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No. 12-40447
E. GRADY JOLLY, Circuit Judge, concurring in the judgment:
The majority in this case purports to engage in statutory interpretation
while failing to address critical words of the statute. Thus, while I concur in the
outcome the majority reaches, I do not join in their analysis.
The question presented in this appeal is whether § 55(a)(1) allows for
vicarious liability. Upon finding § 55(a)(1) imposes liability on a “person,” the
majority quickly concludes the answer is yes. Though this conclusion may be
correct, the majority reaches this holding without adequately considering the
remainder of provisions § 55(a)(1) and (2). This analytical step is in error, as the
type of “person” from which the government may recover differs under § 55(a)(1)
and (2)—and in neither provision is a “person” unencumbered. Namely, §
55(a)(1) allows recovery “from a person that knowingly engages in conduct
prohibited by section [53] of this title,” while § 55(a)(2) provides for recovery from
a person “whose employee, subcontractor, or subcontractor employee violates
section [53] of this title[.]” § 55(a)(1) & (2).
To engage in proper statutory interpretation, we must address the phrases
describing “person” before discerning whether vicarious liability is available
under § 55(a)(1). The majority correctly notes that corporations are generally
considered persons for statutory purposes. Accordingly, if we stop reading after
“person,” § 55(a)(1) does, by its plain terms, encompass the acts of employees.
But if we read the entire provision, the question becomes: which employees?
Section 55(a)(1) tells us that only “person[s] that knowingly” take kickbacks are
covered. § 55(a)(1) (emphasis added). Here, “knowingly” modifies
“person”—making it a qualifier essential to determining whether vicarious
liability may arise. The government may not, under this provision, recover from
any persons (or corporations), but only those who act with the requisite
knowledge. Under the facts of this case, the knowledge requirement means that,

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No. 12-40447
when a corporation is being sued, the corporation (i.e., person) itself must have
knowledge of the kickback before liability may arise.1
This requirement, in turn, compels us to ask when we may say that a
corporation has “knowingly” become part of kickback activity. Due to the nature
of corporations, any knowledge attributed to a corporation must necessarily be
imputed to that corporation from some individual person. See F.D.I.C. v. Ernst
& Young, 967 F.2d 166, 171 (5th Cir. 1992); FLETCHER § 787. “[A] court may
deem only the knowledge of officers and employees at a certain level of
responsibility imputable to the corporation.” FLETCHER § 790. And “[w]hether
an individual’s knowledge will be imputed to the corporation depends on a
factual determination, according to the particular circumstances, of the
individual’s position in the corporate hierarchy; the person need not necessarily
be either a shareholder or an officer.” FLETCHER § 807; F.D.I.C., 967 F.2d at 171
(“Where the level of responsibility begins must be discerned from the
circumstances of each case.” (quoting Continental Oil Co. v. Bonanza Corp., 706
F.2d 1365, 1376 (5th Cir. 1983))). But “knowledge of a mere employee of the
corporation ordinarily is not imputed to the company.” FLETCHER § 807;
F.D.I.C., 967 F.2d at 171 (noting the “knowledge of individuals at a certain
level of responsibility must be deemed . . . knowledge of the organization”
(quoting Continental Oil, 706 F.2d at 1376) (emphasis added)); In re Hellenic
Inc., 252 F.3d 391, 395 (5th Cir. 2001) (“While courts generally agree that the
knowledge of directors or key officers, such as the president and vice president,
is imputed to the corporation, they differ as to the effect of knowledge acquired

1
This corporate knowledge requirement is a factor distinguishing § 55(a)(1) and §
55(a)(2)—because we can assume a person who is being bribed always knows he is being
bribed, the knowledge requirement would not add to this provision if it applied to employees
rather than to the corporation itself. Moreover, that § 55(a)(1) applies to a “person” while §
55(a)(2) applies to a person’s “employee, subcontractor, or subcontractor employee” further
supports this plain reading of the text, which requires knowledge of the person (i.e.,
corporation) itself.

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No. 12-40447
by other employees.”); Kellogg Brown & Root Servs., Inc. v. United States (KBR
II), 103 Fed. Cl. 714, 773-74 (2012) (finding two mid-level managers had
insufficient authority to impute their knowledge to KBR for purposes of §
55(a)(1)). Thus, properly construed, § 55(a)(1) holds corporations liable only for
the knowing violations of those employees whose authority, responsibility, or
managerial role within the corporation is such that their knowledge is imputable
to the corporation.
At this point, it is important to recognize that, in corporate law, “The acts
of a corporation’s vice-principals are considered to be the acts of the corporation
itself and are imputed to the corporation. Thus, the liability of a corporation for
the acts of its vice-principals is direct rather than vicarious.” FLETCHER § 4877.
In certain situations, then, § 55(a)(1) may not be punishing vicarious, but rather
direct, liability. Because corporate law further tells us that knowledge of
employees other than vice-principals may be imputable to a corporation,
however, § 55(a)(1) may also impose vicarious liability—but it does so only when
the knowledge of the employee is imputable to the corporation, not in all
circumstances. See FLETCHER, § 807 (noting individuals whose knowledge has
been found imputable to the corporation include, among several others, vice-
principals, managers, treasurers, attorneys, stockbrokers, and company
physicians). This distinction between “direct” and vicarious liability is another
reason it is error to assume § 55(a)(1) allows for vicarious liability without
determining what it means for a corporation to “knowingly” engage in kickback
activity.
This conclusion as to the meaning of § 55(a)(1) leads us to the next step in
the statutory analysis: asking whether a corporation’s liability differs under §
55(a)(1) and § 55(a)(2). In other words, we ask whether this plain reading of the
text affords individual expression to both subsections. A careful analysis of the
liability available under each subsection illustrates that the answer to this

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No. 12-40447
question is yes. Under § 55(a)(1), the government must prove a “knowing[]”
violation before it may obtain double damages and per-occurrence recoveries.
See § 55(a)(1). Section 55(a)(2), to the contrary, requires no proof of “knowing”
misconduct before allowing recovery of “a civil penalty equal to the amount of
th[e] kickback.” See § 55(a)(2). Instead, it imposes traditional strict liability
upon corporations for the acts of their employees. Traditionally, corporations are
held liable for the torts of employees acting within the scope of their employment
or with apparent authority. RESTATEMENT (SECOND) OF AGENCY § 219. I note
that, if this rule were the entirety of the test under § 55(a)(1), that provision
would impose liability identical to § 55(a)(2): an employee who is bribed will
always have apparent authority—it would be nonsensical to give a kickback to
an employee who lacked the apparent authority to accomplish its object. The
requirement that an employee not only have apparent authority, but also have
sufficient responsibility or authority within the company to attribute his
knowledge to the corporation itself is therefore the distinguishing aspect of §
55(a)(1).
Furthermore, as the majority notes, “[i]t is entirely consistent for the
statute to punish knowing violations more severely than those of which the
corporation was unaware.” See KBR II, 103 Fed. Cl. at 773. And because
knowing violations of § 55(a)(1) only arise when employees whose knowledge is
imputable to the corporation knowingly engage in kickback activity, corporations
are liable for fewer of their employees’ violations under § 55(a)(1) than under §
55(a)(2).
Accordingly, a thoroughly-conducted statutory analysis demonstrates that
§ 55(a)(1) permits the government to attribute liability to corporate defendants
vicariously in cases where the knowledge of the employees is imputable to the
corporation. Before concluding, I would observe that whether an employee has
sufficient responsibility or authority to impute his knowledge to the corporation

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No. 12-40447
is a highly fact-intensive analysis. See FLETCHER, § 807; F.D.I.C., 967 F.2d at
171 (quoting Continental Oil, 706 F.2d at 1376); In re Hellenic Inc., 252 F.3d at
394-96 (“The decision on whether to impute knowledge acquired by such
employees tends to be fact-intensive and contingent on the specific legal regime
involved.”); KBR II, 103 Fed. Cl. at 773-74 (analyzing the titles, the
responsibilities, and the factors surrounding the hiring of two mid-level
managers). Because this issue has not yet been examined, the district court will
need to conduct such an analysis on remand. This analysis will likely involve
developing the evidence, both factual and expert, regarding the employees’ job
titles, their actual responsibilities, and their overall place within the company,
among other things.
In conclusion, I agree with the majority’s ultimate decision to remand this
case for further factual development, but disagree with its analysis, as it does
not comport with basic tenets of statutory interpretation.

22