Court: District Court, D. Oregon; September 4, 2012; Federal District Court
Plaintiffs Rocky Bixby, Lawrence Roberta, Scott Ashby, Charles Ellis, and Matthew Hadley initiated a lawsuit against multiple defendants, collectively referred to as the "KBR defendants," on June 8, 2009, later amending their complaint multiple times to include additional plaintiffs and defendants, including the "Halliburton defendants." The plaintiffs allege negligence and fraud related to their exposure to sodium dichromate and hexavalent chromium poisoning while serving as Oregon National Guardsmen in Iraq at the Qarmat Ali water plant from May to September 2003. The court has faced and largely denied various jurisdictional challenges posed by the defendants throughout the litigation. Notably, on April 12, 2010, the court found it had specific personal jurisdiction over the KBR defendants, citing their failure to disclose information about the contamination to the plaintiffs. The court also denied motions to dismiss for lack of subject-matter jurisdiction based on the political question doctrine and other defenses. A recommendation to dismiss claims against the Halliburton defendants for lack of personal jurisdiction was later adopted by Judge Hernandez. The court denied a renewed motion to dismiss for subject-matter jurisdiction on August 29, 2012, again rejecting the defendants' arguments related to jurisdictional defenses.
On April 4, 2012, twelve plaintiffs were identified as the “Group I” plaintiffs for an upcoming trial set for October 9, 2012. Defendants filed a motion for summary judgment regarding the plaintiffs’ fraud and negligence claims, which was subsequently denied. Summary judgment is deemed appropriate when there are no genuine material factual disputes, as per Federal Rule of Civil Procedure 56(c), and is not suitable if factual issues remain for trial. Courts must draw all reasonable inferences in favor of the nonmoving party and avoid making credibility determinations or weighing evidence.
The factual background reveals that Kellogg, Brown, Root Service, Inc. (KBR) entered into a contract with the U.S. Army Corps of Engineers in March 2003 to restore Iraqi oil infrastructure. KBR began operations at Qarmat Ali in April 2003 under Task Order 3, which required the military to declare work sites as “benign” prior to KBR's operations. The contract also includes an indemnification clause for bodily injury or death claims related to KBR's services. From May 2003 onward, members of the Oregon National Guard, who were tasked with security at Qarmat Ali, were allegedly exposed to sodium dichromate, a harmful chemical. The plaintiffs, members of the Oregon National Guard, claim to have suffered harm from this exposure.
In defending against the summary judgment motion, the defendants argue that the plaintiffs lack sufficient evidence for their fraud claim, citing the absence of false representations, intent to defraud, reliance, or causation. For the negligence claim, they assert that KBR did not owe a duty to the plaintiffs.
To establish a fraud claim under Oregon law, plaintiffs must provide clear and convincing evidence supporting nine elements: 1) a representation; 2) its falsity; 3) its materiality; 4) the speaker’s knowledge of its falsity or ignorance of its truth; 5) intent for the representation to be acted upon; 6) the hearer’s ignorance of its falsity; 7) reliance on its truth; 8) the right to rely; and 9) resultant injury. The parties dispute whether defendants made false representations, intended to deceive, whether reliance occurred, and if plaintiffs' injuries were caused by these representations. Defendants argue plaintiffs have not established these elements with clear and convincing evidence and that summary judgment is warranted due to insufficient particularity in pleading fraud as required by Fed. R. Civ. P. 9(b). This rule mandates specificity in fraud allegations to inform defendants of the misconduct charged. Defendants claim the complaint lacks details on who communicated what to whom. However, upon reviewing the complaint, it is found to adequately specify particular KBR employees, relevant dates, and actions taken, fulfilling Rule 9(b)'s requirements despite not detailing specific statements made to each plaintiff. Therefore, the motion to dismiss the fraud claim is denied.
False representations can constitute actionable fraud through both concealment of material facts and affirmative misrepresentations. A plaintiff typically cannot sue for nondisclosure unless the defendant had a duty to disclose information. However, nondisclosure can be deemed misrepresentation if the defendant's statements are misleading without full disclosure. The determination of whether a misrepresentation imposes a duty to disclose is often a factual question. In cases of active concealment, the plaintiff does not need to demonstrate a duty to speak. Active concealment involves actions or statements that obscure the truth or hinder the discovery of material facts.
To succeed in a fraud claim, the plaintiff must prove that the representations were false, although representations that are literally true can still be actionable if they create a false impression in context. Fraud can also arise from misleading or evasive responses that convey false impressions, even if technically true. Defendants argue that plaintiffs cannot establish false representations for two reasons: first, the plaintiffs cannot demonstrate that statements made directly to them were false since the statements indicated warnings to soldiers about contamination; second, allegations regarding statements made to the Army cannot support the plaintiffs' claims, as they cannot rely on those statements to establish their fraud claim.
Defendants allegedly made misleading statements regarding the hazards of sodium dichromate to individual guardsmen, including MSgt. Stanger and Capt. Chatterji, during their visit to Qarmat Ali in late April or early May 2003. A KBR representative told them that the substance was a “mild irritant” and advised them to avoid it, mentioning potential irritation to noses and throats. Following this, yellow tape was placed around a large pile of discolored soil, and warnings to avoid the area were communicated through the Chain of Command to Oregon National Guard leaders and soldiers. Other plaintiffs, including Jason Arnold, Aaron St. Clair, and Dennis Rosgen, received similar reassurances about the substance being a mere irritant. Arnold was informed by KBR employees that only “mild irritants” were present, while St. Clair was cautioned against touching some orange dust, labeled as a skin irritant. Rosgen noted blown-open bags outside a building and, despite his concerns, was told by KBR staff that the situation was “fine” and he should not worry.
Defendants assert that KBR did not make false statements regarding sodium dichromate to the plaintiffs, as the majority (30 out of 34) could not recall any mention of it by KBR. Evidence includes testimony from plaintiff Charles Ellis, who indicated he received no reports about chemical hazards during his deployment at Qarmat Ali. Additional depositions reveal plaintiffs denied communication with KBR about chemical hazards and did not learn about sodium dichromate from KBR employees. For the four plaintiffs alleging misrepresentation, defendants argue their testimony suggests the Army provided accurate warnings about contaminated soil. For instance, St. Clair avoided a yellowish-orange powder after being informed it was a skin irritant, and Rosgen, despite KBR's reassurances regarding "crud," also avoided it. Furthermore, even when KBR commented on discolored soil, plaintiffs did not recall specific chemical identification. Notably, Stanger, who initially claimed sodium dichromate was a "mild irritant," later acknowledged receiving a CHPPM Risk Factor Fact Sheet in April 2004 that confirmed KBR's assertion that sodium dichromate was not hazardous. The defendants argue that the limited recollection of misrepresentations does not negate the plaintiffs' fraud claim, nor does their choice to avoid the soil diminish the misleading nature of KBR's statements.
Regarding statements made to the Army, defendants cite Bootay v. KBR, where a fraud claim was dismissed because the plaintiff could not demonstrate direct misrepresentations from KBR. They also reference Vasquez-Lopez v. Beneficial Oregon, Inc., where a directed verdict favored the plaintiffs as the defendants could not prove alleged misrepresentations by the plaintiffs. Thus, defendants maintain that the plaintiffs cannot support their fraud claims based on third-party communications.
Plaintiffs argue that under Oregon law, they do not need to demonstrate that defendants directly communicated misrepresentations to them to support their fraud claim. They reference the Handy v. Beck case, where the court allowed a third party to pursue a fraud action if they are part of a protected class and suffer injury from a misrepresentation made to another party. In Handy, the defendant falsely represented a well's construction status to a previous landowner while filing a misleading drilling log with the state. When the plaintiffs later purchased the property and found the well non-compliant with state standards, the court ruled that the misrepresentations did not need to be directed at the plaintiffs for a fraud claim to be valid. The court emphasized that any lawful party could rely on public records, even if the filing was for administrative purposes rather than public disclosure. It noted that evidence showed the defendant actively concealed the well's improper construction, leaving the plaintiffs without means to discover the truth. Thus, the court rejected a narrow interpretation requiring direct communication of misrepresentation to the plaintiff, asserting that if a party has concealed illegal conditions leading to injury of a protected class member, recovery is permissible without direct misrepresentation. Defendants contend that Handy is not applicable as there was no governing statute and no pecuniary loss. They highlight that Handy's ruling was based on the Restatement (Second) of Torts, § 536, which pertains to the protection of a specific class and pecuniary loss, while acknowledging that § 531 provides a broader rule regarding liability for fraudulent representations made to those who are expected to rely on them.
The Oregon Supreme Court in Handy emphasized the specific circumstances of the case rather than focusing solely on the statutory requirement for defendants to file a drilling log. Key factors included the defendant’s misrepresentations to the plaintiffs' predecessor, the submission of a false log as a public record, efforts to conceal improper drilling, and the plaintiffs' lack of means to ascertain the truth. The court's rationale was mirrored in a district case allowing fraud-on-the-FDA claims without requiring proof of reliance on defendants' misrepresentations, as plaintiffs were deemed part of the protected class under the violated statute. The Handy exception centers on whether defendants' misrepresentations to third parties were reasonably relied upon by plaintiffs, rather than on any underlying statutory obligation. Additionally, the Oregon Court of Appeals established that to prove a fraud claim, a plaintiff must demonstrate that the defendant made representations directly to the plaintiff, to an agent, or to a third party intending for the information to reach the plaintiff. This principle was applied in cases where misrepresentations made by employers were found to influence not only employees but also their spouses, recognizing that relocation decisions often involve family considerations. Thus, courts have allowed family members to bring fraud claims based on misleading information provided to their spouses during employment negotiations.
Oregon law allows a fraud claim to proceed even if alleged misrepresentations were not made directly to the plaintiffs, provided the plaintiffs belong to a class that the defendants should have expected to rely on those misrepresentations or intended for them to rely on them. Previous cases cited by defendants, such as Bootay and Vasquez-Lopez, are deemed unpersuasive. Bootay is based on Pennsylvania law, which requires direct misrepresentation to the plaintiff, differing significantly from Oregon's standards. Vasquez-Lopez is factually distinct and does not address the necessity of direct communication for fraud claims. The plaintiffs assert they were harmed due to misrepresentations made to the Army, and as National Guard soldiers under the Army's control, they qualify as individuals whom the defendants should have anticipated would rely on these misrepresentations. Consequently, the plaintiffs' fraud claim is valid under Oregon law. The next issue is whether sufficient evidence exists to prove that the defendants made false representations to the Army. Defendants argue there is no clear evidence that they informed the Army about sodium dichromate's presence or its potential hazards. In contrast, plaintiffs claim substantial evidence of fraudulent statements made to military personnel and intentional omissions about sodium dichromate contamination at Qarmat Ali. The court will assess both the evidence of affirmative misrepresentations and the evidence of concealment or nondisclosure, acknowledging that fraud can arise from either.
Plaintiffs allege that KBR misrepresented its knowledge of sodium dichromate contamination to the U.S. Army's CHPPM, claiming KBR falsely stated it became aware of the contamination in late July 2003. Defendants counter that KBR did not recognize sodium dichromate as a hazard until July 25, 2003, asserting no falsehood was communicated. Evidence presented by plaintiffs indicates KBR employees were aware of contamination risks much earlier. Specifically, Rod Kimbro documented on June 21, 2003, concerns about potential contamination from sodium dichromate at Qarmat Ali, recommending that contaminated areas be cordoned off and tested. Additionally, KBR’s Mark Daniels discussed contamination hazards with an Army safety officer on June 25, 2003. The Department of Defense's Inspector General determined that KBR recognized potential contamination by June 8, 2003, suggesting KBR's representations to the Army were misleading.
Further, on August 15, 2003, KBR manager Young Lee allegedly misrepresented the seriousness of contamination in response to Army Staff Sgt. Hamilton’s inquiries about safety measures and test results. Lee informed Hamilton that KBR's test results were “preliminary,” despite being aware since August 8, 2003, of a “serious health problem” linked to sodium dichromate, with nearly 60% of personnel showing symptoms. Lee's email implies he had shared soil test results with an Army environmental officer, indicating that the results were not truly preliminary.
Plaintiffs allege that Lee misrepresented the status of medical tests for workers exposed to contamination, as discussed during the August 8, 2003 "Team RIO" meeting with KBR officials. While the meeting minutes suggested that medical tests were recommended, they had not been ordered, indicating that they may have been in a preliminary stage when Lee responded to Hamilton's inquiry. Significant discussions on protective measures were held, including establishing decontamination stations and conducting medical testing; however, Lee failed to disclose additional relevant information about contamination despite Hamilton's specific requests, which included inquiries about personal protective equipment and safety monitoring programs. Legal precedent establishes that once a party makes representations, there is a duty to be truthful, and providing misleading information can be considered fraudulent. Lee's statements allegedly created a false impression about KBR's knowledge of contamination and safety measures, particularly regarding his communication with Hamilton, despite having shared soil and air test results with an Army officer. Furthermore, plaintiffs claim that defendants misled the British Royal Air Force by providing biological monitoring test results that suggested KBR employees were within normal limits, influencing the RAF's decision against monitoring its own soldiers. Plaintiffs argue that KBR was aware of elevated chromium levels as early as September 9, 2003, and received a report on September 16, 2003, indicating high chromium levels in KBR employees.
Fourteen out of fifteen individuals tested exhibited elevated blood chromium levels, indicating long-term exposure, while only one showed high urinary chromium levels, suggesting a lack of recent exposure. The exposure was classified as "less than moderate," with a duration of a few weeks deemed acceptable. Defendants argue that KBR did not misrepresent test results to the Royal Air Force (RAF), citing an expert's email affirming that KBR’s results were lower than the accepted clinical range for chromium and selenium. However, it remains unclear if the RAF's expert evaluated the same results referenced by the plaintiffs, as the document's dates suggest possible discrepancies. The RAF decided against further biological monitoring due to the elapsed time since exposure and because available test results were reported as normal. The ambiguity surrounding the specific test results complicates the determination of whether KBR made false representations. Additionally, plaintiffs assert that KBR failed to disclose the presence and hazards of sodium dichromate in daily safety meetings with the Army, which they argue misrepresented the safety risks associated with the chemical. General Crear’s testimony supports the expectation that KBR would share information about chemical hazards at these meetings.
Plaintiffs argue that a jury might infer that defendants misled the Army by failing to mention sodium dichromate in daily safety meetings, suggesting that this omission implied the substance was not dangerous. This claim of misrepresentation hinges on silence or nondisclosure, which can constitute fraud if there is a duty to disclose and a deliberate silence regarding a material fact. Evidence cited by plaintiffs includes a KBR Project Rio Site Report from June 13, 2003, which notes a safety meeting but lacks details about its content. Although this document does not definitively prove that KBR consistently omitted information about sodium dichromate, there is evidence suggesting KBR was aware of its dangers and had a duty to disclose such information during these meetings. Additionally, plaintiffs assert that delays in soil testing after remediation efforts began indicate active concealment, suggesting defendants attempted to evade responsibility. Defendants, however, argue that plaintiffs have not substantiated these claims with adequate evidence of intent to deceive, as required to support a fraud claim. While intent to defraud can be inferred from circumstantial evidence, it must be compelling enough to constitute clear proof of fraudulent intent.
Plaintiffs failed to provide evidence supporting their claims of defendants' intentional concealment regarding delays in soil testing, relying solely on unsubstantiated accusations. Consequently, these allegations do not amount to a false representation. However, when considering the facts favorably for the plaintiffs, there is sufficient evidence that defendants made affirmative misrepresentations or inadequately disclosed material facts about the sodium dichromate hazard at Qarmat Ali. Plaintiffs indicated that KBR employees communicated inconsistent information about sodium dichromate's presence and dangers to military personnel. Although plaintiffs did not prove KBR explicitly stated there was no sodium dichromate or that it was safe, Oregon law allows for implied misrepresentations that create false impressions, satisfying the fraud claim's requirements.
Regarding intent, plaintiffs must demonstrate that defendants knowingly misrepresented facts or acted with reckless disregard for the truth. They can establish intent by showing that the misrepresentations were made to mislead or with awareness that they would mislead the plaintiffs. Defendants argue that KBR was transparent about the sodium dichromate risks and could not have intended to deceive, asserting that they only learned of the chemical's prior use at Qarmat Ali on June 1, 2003, and its hazard on July 25, 2003. Following this awareness, KBR is claimed to have promptly disclosed the issue to military officials, initiated testing, restricted access to the area, and commenced remediation efforts. Defendants contend that the Army was already aware of potential contamination, implying that any statements made could not have been intended to mislead.
Defendants argue that KBR employee Rod Kimbro's memo from June 21, 2003, documented potential sodium dichromate soil contamination, but U.S. Army Corps of Engineers specialist Christopher Kennedy had already noted this contamination weeks earlier. On June 25, 2003, KBR's Mark Daniels and safety officer Mike Remington discussed sodium dichromate's carcinogenic potential during a site visit, leading Remington to issue a memo highlighting safety precautions regarding the substance. Defendants claim this indicates KBR's communication with the military was transparent, as the Army was aware of the contamination beforehand. Testimonies from various Army Corps members support this view, affirming they felt KBR addressed the sodium dichromate hazard adequately.
Conversely, plaintiffs contest the timeline, asserting KBR was aware of sodium dichromate's prior use by the Southern Oil Company at Qarmat Ali as early as January 31, 2003, and certainly by May 2003. They cite KBR's first site visit in April 2003 and claim that KBR knew of sodium dichromate's use before entering the site. Kennedy testified he notified KBR of the hazard in May 2003, expecting safety procedures to be implemented, although evidence suggests KBR did not know the specifics of chemical usage by May 19, 2003. Information regarding sodium dichromate's use appeared in KBR's project report only on June 1, 2003, although preliminary notes included it on May 31, 2003. An Inspector General report from September 2011 concluded KBR was aware of sodium dichromate's use by May 31, 2003, and identified potential contamination by June 8, 2003. Thus, the evidence allows for a jury to find that KBR was aware of sodium dichromate's previous use by May 31, 2003.
Plaintiffs contest defendants' claim that KBR promptly notified the military about the contamination hazards, arguing that KBR was aware of the dangers associated with sodium dichromate well before July 25, 2003. Evidence indicates that KBR employee Rod Kimbro raised concerns about potential contamination as early as June 21, 2003, when he observed discolored soil and recommended testing for sodium dichromate. Additionally, on June 25, 2003, KBR’s Mark Daniels discussed the chemical's hazards with a U.S. Army Corps of Engineers safety officer, further demonstrating KBR's prior knowledge.
Plaintiffs assert that KBR misrepresented sodium dichromate as a “mild irritant,” a misleading statement that intended to downplay the chemical's dangers, contradicting internal communications that labeled it as “very dangerous.” KBR’s area safety supervisor, Ed Blacke, testified he felt pressured to resign due to his warnings about the chemical's risks to soldiers.
The evidence presented, when viewed favorably for the plaintiffs, suggests a jury could find that KBR intentionally misrepresented its knowledge of sodium dichromate's presence and the seriousness of the contamination. KBR's claims of ignorance regarding the contamination prior to July 25, 2003, are undermined by earlier internal communications, indicating awareness by at least late June 2003. Despite conflicting testimonies regarding Blacke's resignation and KBR's collaboration with the Army, the overall evidence supports the inference that KBR was not fully transparent with the Army about the contamination risks, potentially indicating intent to mislead. This evidence is sufficient to allow a jury to determine the defendants' intent.
A party claiming fraud must demonstrate clear and convincing evidence of reliance on the other party's misrepresentations and that such reliance was reasonable. Defendants argue that neither the Army nor the plaintiffs reasonably relied on any misrepresentations. They assert that the Army was aware of contamination at Qarmat Ali before KBR's involvement, having noted sodium dichromate as early as April 2003. Despite initial recommendations against restoration, the Army directed KBR to proceed with work. Later, safety personnel advised against continuing operations due to the known contamination, yet the Army continued to authorize work at the site.
Defendants highlight that by mid-June 2003, Army personnel identified sodium dichromate and communicated potential health hazards, indicating that the Army could not reasonably rely on any further information from KBR. A safety memo from June 25, 2003, warned about sodium dichromate as a Class I carcinogen and directed warning signs to be posted, which KBR complied with by July 2, 2003. Additionally, inspections by both the U.S. Army and British military concluded that exposure at Qarmat Ali was unlikely to result in adverse health effects, further supporting the claim that the Army did not rely on KBR's representations.
Regarding individual plaintiffs, defendants contend that reliance was unreasonable since the guardsmen acted under orders from their superiors; even after KBR officially informed the Army about contamination, the military continued to send guardsmen to the site.
Defendants reference testimony from plaintiff Randy Keiper, who questioned the absence of protective equipment for guardsmen exposed to orange dust and was instructed to remain silent and follow orders. Plaintiffs counter that the Army would have acted differently had it been aware of the dangers of sodium dichromate. MSgt. Stanger and Capt. Chaterji, relying on defendant guidance that the substance was a "mild irritant," only took minimal precautions. Stanger indicated that had he known of the chemical's hazards, he would have mandated chemical protection suits for his soldiers. General Crear emphasized the necessity for defendants to disclose hazard information during safety meetings, while Lt. Col. Gentry expressed disappointment over the lack of communication regarding contamination, which prevented him from ordering protective gear. Environmental specialist Kennedy noted that the Army did not fully assess the hazards once sodium dichromate was identified, relying instead on contractors for technical guidance. Safety officer Remington pointed out the Army's limited oversight in safety matters, suggesting that had he been informed earlier, he would have enacted immediate safety measures, including the use of protective masks and initiated medical monitoring. Viewing the evidence favorably for plaintiffs, there is sufficient basis for a jury to conclude the Army relied on KBR’s misleading information regarding sodium dichromate hazards, impacting the orders given to the guardsmen, thus establishing reasonable reliance for the fraud claim. Plaintiffs must demonstrate that their injuries were proximately caused by reliance on defendants’ misrepresentations, as established by Oregon law, which recognizes a broad range of legal causation in fraud cases. Defendants contend that since the Army was aware of the potential contamination and hazards yet still ordered personnel to Qarmat Ali, their statements or omissions could not have caused any injuries from exposure.
Plaintiffs argue that a jury could reasonably find that defendants intentionally endangered them to expedite project completion for financial gain from government contracts. The key issue of causation revolves around whether the plaintiffs' injuries were foreseeable as a result of defendants' misrepresentations. Evidence suggests that plaintiffs' exposure to sodium dichromate was a likely consequence of the Army's reliance on the defendants' information about the chemical's presence and hazards. Given KBR's expertise in infrastructure repair and the known use of sodium dichromate at Qarmat Ali, along with the site's susceptibility to looting and sabotage, it was foreseeable that individuals could be harmed without accurate information and adequate protection.
In terms of fraud, plaintiffs have provided sufficient evidence suggesting defendants made false representations with intent to deceive, that the Army relied on these representations, and that plaintiffs’ injuries were directly caused by them. As a result, defendants' motion for summary judgment on the fraud claim is denied.
Regarding negligence, defendants claim they owed no duty to the plaintiffs because they did not create the hazards at Qarmat Ali and acted according to the terms of the RIO contract. However, plaintiffs contend that Task Order 3 imposed a duty on KBR to clean up and assess the site, which included warning of hazards. They argue that KBR's control of the premises made it liable as an occupier, triggering a duty to warn under Oregon law. Even if no specific duty existed under Task Order 3, plaintiffs assert that liability could arise from the general foreseeability standard in Oregon law. The analysis of negligence liability in Oregon involves assessing whether a special relationship exists that defines or limits the defendant's duty, as established in relevant case law.
A special relationship or status can create a duty of care, which may define the scope of that duty in terms of specific harms or classes of individuals. In the absence of such a defined scope, common law principles of reasonable care and foreseeability apply. When determining a defendant's duty without a special relationship, courts assess whether the defendant unreasonably created a foreseeable risk of harm to a protected interest. Oregon courts have shifted their analysis from traditional duty of care concepts to focusing on reasonable foreseeability in assessing liability for harm caused by a defendant’s conduct.
In this case, plaintiffs argue that a special relationship existed due to Task Order 3 or KBR's status as an occupier of Qarmat Ali, which created a duty, particularly regarding environmental assessments and warnings about sodium dichromate hazards. If no special duty is found, plaintiffs assert that KBR’s actions posed a foreseeable risk of harm under general foreseeability principles.
Task Order 3 outlines KBR's duties at Qarmat Ali, but there is a dispute over whether it establishes a negligence claim. Oregon law stipulates that a negligence claim can arise from a contractual relationship only if the defendant's standard of care is independent of the contract terms. A tort claim may exist based on obligations assumed in a contract if those obligations would exist regardless of the contract. The focus must be on the nature of the parties' relationship rather than the contract terms, with a heightened duty arising when one party acts to further the economic interests of the other.
Oregon courts recognize specific relationships that create tort obligations beyond contractual duties, including those between professionals and clients, principals and agents, trustees and beneficiaries, and sometimes insurers and insureds. These relationships impose a duty to act beyond merely exercising reasonable care to prevent foreseeable harm. A special relationship exists when one party delegates authority to another for significant decisions, expecting that authority will be exercised for the benefit of the delegator. In this context, the party owed the duty relies on the other party's independent judgment.
In the case at hand, plaintiffs aim to impose tort liability based on responsibilities outlined in Task Order 3. The inquiry focuses on whether the Army and KBR held a special relationship that created a heightened duty. The analysis concludes that such a relationship existed, as the Army entrusted KBR with the restoration of the Qarmat Ali water treatment plant to support oil production. By clearing the site and allowing KBR to manage the restoration, the Army placed itself in a reliant position regarding KBR's expertise.
This special relationship establishes a duty of care independent of the contract terms. However, it remains uncertain whether Oregon courts would permit plaintiffs, who are not parties to the contract, to pursue a negligence claim against KBR for its performance under the contract.
An injured contracting party's ability to sue another party in tort, based on contract duties, is examined, with focus on whether third parties can also sue. Plaintiffs claim KBR owed them a duty under Section 324A of the Restatement (Second) of Torts, arguing that KBR's negligence in performing services under Task Order 3 harmed them. Section 324A establishes liability for harm to third parties if a service provider fails to exercise reasonable care, increasing risk, assuming a duty owed to the third party, or if harm arises from reliance on the service. However, a Pennsylvania district court, in Bootay, rejected a similar claim on grounds that the plaintiff could not prove KBR had a duty to protect him from hazardous exposure, despite foreseeability of injury from sodium dichromate. The plaintiffs argue that Pennsylvania law, which uses a five-part test involving public policy considerations, differs from Oregon law, which focuses on foreseeability. The Bootay court found that imposing a duty could lead to impractical consequences and noted the plaintiff did not demonstrate reliance on KBR’s actions nor that KBR increased his risk of exposure. Additionally, there was no evidence of KBR's awareness of the plaintiff's presence or any interaction with him.
Plaintiffs accuse KBR of failing to conduct site assessments and monitor air quality and soil contamination, which allegedly led to their exposure to sodium dichromate. Evidence indicates that KBR interacted with some plaintiffs regarding the dangers of sodium dichromate. The court notes that, unlike the Pennsylvania case, Oregon law emphasizes foreseeability, and the factors influencing the Pennsylvania decision are not applicable here. The Pennsylvania court ruled that KBR did not owe a duty to the plaintiffs because it did not create the hazard, was unaware of their presence, and had not undertaken a duty to protect them from chemical exposure. The Third Circuit upheld this reasoning, stating the plaintiffs' reliance on the Restatement of Torts was misplaced.
However, in this case, KBR was aware of the plaintiffs at Qarmat Ali and had communicated about the contamination. Plaintiffs argue that under Task Order 3, KBR had responsibilities to inform the Army about hazards, suggesting a duty to protect third parties like the plaintiffs. They claim the contract mandated KBR conduct environmental assessments and adhere to safety regulations for all government employees at Qarmat Ali. In contrast, defendants assert that Task Order 3 placed the responsibility for assessing environmental hazards solely on the Army, citing a provision that required military verification of safety before personnel deployment. The importance of interpreting this provision in context is emphasized.
An Iraqi Oil Infrastructure facility is deemed benign and ready for contractor engagement only if certain conditions are met: it must be free from enemy direct fire weapon systems, cleared of enemy forces and environmental hazards (including NBC, industrial mines, unexploded ordnance, booby-traps, and sabotage systems), and the contractor cannot enter until the day after the facility is secured and declared benign. The military is responsible for declaring the facility "benign" before KBR can commence work. The term "benign" primarily indicates the absence of combatant activity and weapons but does not eliminate the potential for additional environmental hazards. Further environmental assessment is required as part of KBR’s restoration efforts, despite initial declarations.
Section 1.13 emphasizes the need for documenting and assessing site-specific liabilities, stating that environmental protection matters must be coordinated with the Procuring Contracting Officer or their representative. Section 1.14 obligates KBR to implement a safety and health program based on OSHA and Army standards, including training for employees on existing and new hazards. Various sections outline KBR’s health and safety compliance requirements under Task Order 3, including adherence to the Overseas Environmental Baseline Guidance Document and other safety standards.
Under Task Order 3, KBR must execute five specific missions related to restoration: establishing management infrastructure, initial facility operational control, fire suppression for oil wells and facilities, responding to oil spills, and emergency restoration of oil systems. KBR is required to provide technical and operational support to limit safety and environmental damage immediately after hostilities and coordinate with government representatives. Additionally, KBR must complete site assessment reports for oil spills that document existing conditions and recommend remedial actions.
Applicable standards for soil remediation are outlined, specifying that the contract does not intend to address environmental contamination from prehostilities unless necessary for the health and safety of contractor and Army personnel during restoration. Although focused on oil spill cleanup, the text emphasizes KBR's obligation to notify the Army of any hazardous contamination threatening personnel safety at Qarmat Ali. Task Order 3 designates the Army as responsible for initially declaring a site as “benign,” which only pertains to visible wartime hazards like enemy forces and explosives. KBR assumes primary responsibility for environmental inspections and safety assessments and must communicate discovered hazards to the Army, recognizing that this communication is vital for the protection of soldiers.
KBR may be liable for failing to exercise reasonable care in fulfilling its responsibilities under Task Order 3. Additionally, the plaintiffs assert that KBR's alleged non-compliance with OSHA and safety regulations incorporated into the task order establishes a duty of care. Citing precedents, including Boyer v. Salomon Smith Barney and Shahtout v. Emco Garbage Co., the text indicates that while external regulations can inform the standard of care, they do not constitute negligence per se if they do not establish liability standards for non-employees. In Oregon, statutes can define the appropriate standard of care, and plaintiffs argue that KBR did not meet the required safety regulations.
Plaintiffs reference a September 2011 Inspector General report investigating KBR's actions regarding sodium dichromate contamination at Qarmat Ali, concluding that KBR's recognition and response to the health hazard were delayed due to noncompliance with occupational safety standards and lack of enforcement by TF RIO. The report highlights specific sections of Task Order 3 outlining KBR's responsibilities, including establishing a health and safety program and adhering to various safety regulations. Testimony from a plaintiffs' expert indicates KBR's failure to comply with OSHA’s HazCom regulations, which mandated protective measures for all employees, including soldiers. While defendants acknowledge some OSHA compliance requirements, they argue plaintiffs have not demonstrated KBR's failure to establish a proper health and safety program or that the Army viewed KBR as having breached this obligation. However, the court finds that plaintiffs have established a genuine issue of material fact regarding KBR's alleged failure to meet the contractual standard of care, which may have caused their damages. Therefore, the safety regulations in Task Order 3 are relevant to determining KBR's duty of care to the plaintiffs. The court concludes that a duty exists based on the terms of Task Order 3 and denies the defendants' motion for summary judgment. The evidentiary record is construed under the standard for summary judgment as per Federal Civil Procedure Rule 56, with citations primarily to depositions.
Stanger cites a KBR representative describing a chemical as "mildly caustic." Additionally, a KBR employee informed an Indiana National Guardsman that the orange substance was "nothing" and "a mild irritant." This situation is part of three similar legal cases addressing the same issues, including Dachenhausen v. Danek Medical, Inc. and Price v. Danek Medical, Inc., both decided on July 23, 1999. In the legal arguments, both parties reference the RIO contract but fail to provide specific provisions from it, relying instead on Task Order 3, which governs KBR's services at Qarmat Ali. The court interprets all contract-related arguments as pertaining to Task Order 3, available as Exhibit 53 in the Carter Affidavit. Oregon courts have acknowledged section 324A concerning a defendant's duty to prevent harm to third persons, though its applicability has been limited in specific cases. However, Oregon law does not prohibit plaintiffs from using section 324A to argue for a duty owed to them as third parties.
