WASHINGTON - In a victory for Minnesota Democrat Al Franken, military contractor KBR has decided to drop a Supreme Court appeal in the case of a former company clerk who alleges she was raped by co-workers in Iraq.

KBR's decision represents the first significant legal fallout from the "Franken amendment," which protects defense workers from being forced to accept arbitration after suffering sexual assault, battery or discrimination. (REUTERS/Tim Johnson)REUTERS KBR's decision represents the first significant legal fallout from the "Franken amendment," which protects defense workers from being forced to accept arbitration after suffering sexual assault, battery or discrimination. The measure became the subject of a testy Senate battle that reverberated in legal circles and in popular culture as the subject of a Jon Stewart rant on cable TV's "The Daily Show."

KBR, which has sought to handle Jamie Leigh Jones' claim out of court, acknowledged Tuesday that its appeal might violate the amendment.

With Jones looking on from the public gallery, the Senate passed Franken's measure last October by a vote of 68 to 30. Even though 10 Republicans sided with Franken, the debate proved to be his first big partisan fight. It left lasting feelings among Republicans who believed that in standing for the merits of arbitration they ended up being vilified as apologists for rape, something Franken said he did not intend.

KBR's decision sends Jones' case to a trial in Houston.

"I'm thankful that Jamie Leigh will finally have her long-overdue day in court," Franken said. "She's one of the most courageous women I have ever met and any role I played in helping her seek justice was my honor."

Jones alleges that she was drugged, beaten and gang-raped by several co-workers at company housing in Baghdad's Green Zone in 2005, when KBR was operating as a subsidiary of Halliburton.

Although the incident happened five years ago, when Jones was 20, the company could still be covered by the Franken amendment, which was intended to bar defense contracts to companies that enforce new or existing arbitration agreements in cases such as Jones'.

Dismissal follows big contract

In its Supreme Court petition, filed in January, KBR argued that the legislation did not affect the Jones case. But lawyers for the company, which recently received a multi-billion-dollar defense contract, apparently decided not to take a chance.

"It is our belief that the language of the amendment is very broad and vague," KBR said in a statement released by spokeswoman Heather Browne. "As a result, KBR did not want to risk being in violation of the amendment."

Washington attorney Stephen Kinnaird, representing KBR, declined to comment.

While announced this week, court records indicate the petition was dismissed March 11, weeks after the Army's Feb. 26 announcement of a $2.3 billion logistics contract to KBR that includes vehicle maintenance, heavy-equipment transport and postal services.

With or without the Franken amendment, the Supreme Court petition was expected to be a test case of the legal rights of private defense workers operating in war zones. KBR has questioned Jones' story and argued that, in any event, she had agreed as an employee to arbitrate workplace disputes.

The company's court filings also accuse Jones of going to "great lengths to sensationalize her allegations against [KBR] in the media, before the courts, and before Congress."

Jones' attorney, John Vail of the Center for Constitutional Litigation in Washington, said he agreed to the dismissal, even as it could leave open the question of the reach of the Franken amendment.

"Regardless of why, we're just happy to be in court," Vail said. "That's where we've wanted to be all along."

Polaris among rule's critics

Other defense contractors, including Minnesota's Polaris Industries Inc., which builds all-terrain vehicles for the military, have raised objections about the rule, saying arbitration is an increasingly common alternative to litigation.

"Especially in today's day and age ... using arbitration to settle disputes is kind of the common way of doing it," said Polaris' Marlys Knutson. "It just seems very strange that this would be in there."

Franken said the rule protects other women like Jones.

"I'm glad, and I know she's glad, that the law we passed will stop other women from going through what she went through," he said.

Staff writer Eric Roper contributed to this report.