Arbitration award to alleged payer of kickbacks enforced in Texas

by Ben Vernia | May 25th, 2011

On May 12 in Tamimi Global Co. Ltd. v. Kellogg Brown & Root LLC, Southern District of Texas Judge Nancy F. Atlas refused KBR’s motion to reconsider a March ruling enforcing a London arbitration panel’s award of nearly $35 million to a food services contractor in Iraq which the government alleges procured its subcontract by paying kickbacks to KBR managers.

Earlier in March, the government filed a counterclaim making those charges in defense of a Court of Federal Claims suit brought by KBR. The government alleged that KBR managers accepted the payments and steered the subcontract to Tamimi. KBR had not raised the allegations as a defense in the London arbitration. When the subcontractor sought enforcement of the arbitration award in KBR’s home state, the company argued that the award violated public policy.

Judge Atlas disagreed with the company’s argument that in her earlier decision she had wrongly assumed the government’s charges about KBR’s employees were true. Instead, she wrote, she had assumed that they were not true. If the government were to be unable to prove its allegations, she reasoned, then there would be no public policy argument against enforcing the award. If, on the other hand, the government succeeded, it would prove that KBR managers participated in the fraud. This, she wrote, posed one competing public policy (not to pay bribes) against another (not to accept them).

Judge Atlas likewise rejected KBR’s argument that enforcing the award would fail to comport with comity among federal courts, and she noted that the subcontractor was not a party to the other action and that her decision had no effect on that case.

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