United States v. Science Applications International Corporation

• Court: District Court, District of Columbia
• Decided: September 15, 2009
• Docket: Civil Action No. 2004-1543
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________ ) UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) Civil Action No. 04-1543 (RWR) ) SCIENCE APPLICATIONS ) INTERNATIONAL CORPORATION, ) ) Defendant. ) ______________________________)

MEMORANDUM OPINION AND ORDER

The United States brought this action against Science

Applications International Corporation (“SAIC”) under the False

Claims Act (“FCA”), 31 U.S.C. § 3729, and the law of the District

of Columbia, alleging that SAIC failed to make required

disclosures of organizational conflicts of interest (“OCIs”) as

was required under two contracts that SAIC entered into with the

Nuclear Regulatory Commission (“NRC”) in 1992 and 1999. After a

jury found SAIC liable on FCA and breach of contract claims, SAIC

moved for judgment as a matter of law under Federal Rule of Civil

Procedure 50(b) or, in the alternative, for a new trial under

Rule 59. Because the evidence presented at trial was sufficient

for a reasonable jury to find SAIC liable, and because SAIC has

not established an error was committed at trial such that justice

requires a new trial, SAIC’s motion for judgment as a matter of

law or for a new trial will be denied. -2-

BACKGROUND

The NRC is an independent federal agency established to

regulate the civil use of nuclear materials. The NRC creates

scientific standards for allowing radioactive materials with low

levels of contamination to be released to the private sector for

recycling and reuse. In 1992 and 1999, the NRC contracted with

SAIC to provide technical assistance related to this effort.

Under the 1992 contract, SAIC was to provide the NRC with

technical assistance related to the recycling and reuse of

radioactive material and was to present an options paper

outlining the possible approaches to rulemaking for the release

of these materials. The goal of the 1999 contract was to assess

regulatory alternatives regarding the release of reusable

materials. SAIC’s neutrality was critical under both contracts.

SAIC promised in both contracts to forego entering into any

consulting or other contractual arrangements with any

organization that could create a conflict of interest. The

purpose of this clause was to avoid OCIs that were, among others,

financial, organizational, or contractual. SAIC warranted upon

entering both contracts that it had no OCIs as that term is

defined in 41 C.F.R. § 20-1.5402(a). The regulation defined an

OCI as “a relationship . . . whereby a contractor or prospective

contractor has present or planned interests related to the work

to be performed under an NRC contract which: (1) may diminish its -3-

capacity to give impartial, technically sound, objective

assistance and advice or may otherwise result in a biased work

product, or (2) may result in its being given an unfair

competitive advantage.” 41 C.F.R. § 20-1.5402(a) (1979).1 SAIC

1 Furthermore, the NRC regulations incorporated into the 1992 Contract required SAIC to disclose information concerning situations or relationships that may give rise to OCIs under the following circumstances: (I) Where the offeror or contractor provides advice and recommendations to the NRC in a technical area in which it is also providing consulting assistance in the same area to any organization regulated by the NRC. (ii) Where the offeror or contractor provides advice to the NRC on the same or similar matter in which it is also providing assistance to any organization regulated by the NRC. (iii)Where the offeror or contractor evaluates its own products or services, or the products or services of another entity where the offeror or contractor has been substantially involved in their development or marketing. (iv) Where the award of a contract would result in placing the offeror or contractor in a conflicting role in which its judgment may be biased in relation to its work for the NRC, or would result in an unfair competitive advantage for the offeror or contractor. See 41 C.F.R. 20-1.54 at p. 3. The NRC regulations incorporated into the 1999 Contract required SAIC to disclose situations or relationships that may give rise to organizational conflicts of interest under the following circumstances: (I) Where the offeror or contractor provides advice and recommendations to the NRC in the same technical area where it is also providing consulting assistance to any organization regulated by the NRC. (ii) Where the offeror or contractor provides advice to the NRC on the same or similar matter on which it is also providing assistance to any organization regulated by the NRC. (iii)Where the offeror or contractor evaluates its own products or services, or has been substantially involved in the development or marketing of the products or services of another entity. (iv) Where the award of a contract would result in placing the offeror or contractor in a conflicting role in which its judgment may be biased in relation to its work for the NRC, -4-

further promised in both contracts to disclose any OCIs it

discovered after entering the contract. SAIC repeatedly

certified throughout the periods its contracts were in force that

it had no OCIs and would notify the NRC of any changes resulting

in an OCI.

The government filed a five-count amended complaint against

SAIC contending that SAIC breached its OCI obligations under the

1992 and 1999 contracts by engaging in relationships with

organizations that created an appearance of bias in the technical

assistance and support it provided the NRC. (Am. Compl.

¶¶ 49-51.) In its amended complaint, the government alleged that

SAIC’s no-OCI certifications and subsequent requests for payment

on the 1992 and 1999 contracts violated the FCA, and brought

additional claims under quasi-contract and breach of contract

theories.

A jury trial was held on Counts I, II and V of the United

States’ amended complaint.2 Count I alleged that SAIC violated

the FCA under 31 U.S.C. § 3729(a)(1) by presenting payment

vouchers to the NRC while knowingly withholding from the NRC

or would result in an unfair competitive advantage for the offeror or contractor. See 48 C.F.R. 2009.570-3(b)(1). 2 On May 15, 2008, the defendant’s motion for summary judgment was granted in part and judgment was entered in favor of SAIC on Counts III and IV of the amended complaint. United States v. Science Applications Int’l Corp., 555 F. Supp. 2d 40, 60 (D.D.C. 2008). -5-

information about SAIC’s OCIs. Count II alleged that SAIC

violated the FCA under 31 U.S.C. 3729(a)(2)3 by knowingly making

false statements, including false certifications that SAIC had no

OCIs, for the purpose of getting the NRC to pay SAIC’s false and

fraudulent vouchers. Count V alleged that SAIC breached its 1992

contract by failing to disclose OCIs that SAIC was required to

disclose under the terms of the contract.

The jury found SAIC liable under § 3729(a)(1) and (a)(2) and

liable for breach of its 1992 contract with the NRC.

Specifically, the jury found that SAIC knowingly presented or

caused to be presented sixty false or fraudulent claims for

payment or approval by the government, causing the government to

pay to SAIC $1,973,839.61 over and above what the government

would have paid had SAIC presented truthful claims. The jury

also found that SAIC knowingly made, used, or caused to be made

or used seventeen false records or statements to get a false or

fraudulent claim paid or approved by the United States

government, causing the government to pay to SAIC $1,973,839.61

on the false or fraudulent claims over and above what the

government would have paid had SAIC made truthful statements. In

addition, the jury found that there was a contract between the

3 Under the Fraud Enforcement and Recovery Act of 2009, Pub. L. No. 111-21, this subsection was recodified as 18 U.S.C. § 3729(a)(1)(B). As is discussed in Part IV(B) below, the amended version does not apply in this action, and this memorandum opinion will continue to refer to § 3729(a)(2). -6-

United States and SAIC and that SAIC breached the contract by

failing to fully perform a duty under the contract without legal

excuse and awarded the United States monetary damages of $78 for

the breach. Judgment was entered in favor of the United States

against SAIC in the amount of $5,921,518.83 in damages for the

FCA claims, $577,500 in civil penalties for the FCA claims, and

$78 in damages for the contract claim, for a total of

$6,499,096.83.4

SAIC has moved for judgment as a matter of law under Federal

Rule of Civil Procedure 50(b),5 and, in the alternative, has

moved for a new trial under Rule 59(a), asserting that the United

4 Judgment also was entered in favor of the United States against the defendant for plaintiff’s costs incurred in this action. The United States submitted a bill of costs totaling $84,080.07. SAIC objects to the United States recovering costs for witness Dan Guttman’s return flight to China on August 23, 2008. SAIC points out that Guttman is a permanent resident of the District of Columbia and did not fly from D.C. to China until six weeks after his testimony and three weeks after trial in this case concluded. The United States’ reply to SAIC’s objections does not address Guttman’s residency status or explain the circumstances surrounding the delay between Guttman’s testimony and his departure to China. Accordingly, because the United States has not adequately rebutted the inference that the flight was optional and not necessary, or otherwise established that Guttman’s August 23, 2008 flight was a cost related to this litigation, the defendant’s objection to the United States’ request for the costs of Guttman’s return flight to China will be sustained. 5 SAIC moved for judgment as a matter of law under Rule 50(a) at the close of the United States’ case in chief, and renewed its motion at the close of all evidence. -7-

States failed to carry its burden of proof in several respects

and that numerous legal errors were committed.6

DISCUSSION

“‘Under Rule 50, a court should render judgment as a matter

of law when a party has been fully heard on an issue and there is

no legally sufficient evidentiary basis for a reasonable jury to

find for that party on that issue.’” Alkire v. Marriott Int’l,

Inc., Civil Action No. 03-1087 (CKK), 2007 WL 1041660, at *1

(D.D.C. Apr. 5, 2007) (quoting Reeves v. Sanderson Plumbing

Prods., Inc., 530 U.S. 133, 149 (2000)). The court assesses not

“the weight of the evidence [but] only its sufficiency. The

jury’s verdict will stand unless ‘the evidence and all reasonable

inferences that can be drawn therefrom are so one-sided that

reasonable men and women could not disagree on the verdict.’”

Smith v. Washington Sheraton Corp., 135 F.3d 779, 782 (D.C. Cir.

1998) (quoting Scott v. District of Columbia, 101 F.3d 748, 753

(D.C. Cir. 1996)). “Evidence supporting the verdict, however,

must be ‘more than merely colorable; it must be significantly

probative.’” Duncan v. Wash. Metro. Area Transit Auth., 240 F.3d

1110, 1114 (D.C. Cir. 2001) (quoting Smith, 135 F.3d at 782).

“In ruling on [a] renewed motion, the court may: (1) allow

6 Upon SAIC’s consent motion to stay execution of judgment under Rule 62(b), execution of judgment in this action was stayed pending resolution of SAIC’s motion for judgment as a matter of law, or for a new trial. -8-

judgment on the verdict, if the jury returned a verdict; (2)

order a new trial; or (3) direct the entry of judgment as a

matter of law.” Fed. R. Civ. P. 50(b).

Under Rule 59(a), a court has discretion to grant a new

trial “after a jury trial, for any reason for which a new trial

has . . . been granted in an action at law in federal court[.]”

Fed. R. Civ. P. 59(a). Reasons for granting a new trial include

errors in admitting or excluding evidence, or in giving or

refusing to give instructions. Miller v. Holzmann, 563 F. Supp.

2d 54, 75 (D.D.C. 2008). “The standard for a new trial is less

onerous than the one applicable to a Rule 50 motion[,] . . .

[b]ut just as with a motion for judgment as a matter of law, the

[c]ourt should not disturb a jury verdict unless the evidence and

all reasonable inferences that can be drawn therefrom are so one-

sided that reasonable men and women could not disagree on the

verdict.” Id. (internal quotation marks and citation omitted).

“A new trial ‘should be granted only where the court is convinced

the jury verdict was a seriously erroneous result’ and where

denial of the motion will result in a clear miscarriage of

justice.” Nyman v. FDIC, 967 F. Supp. 1562, 1569 (D.D.C. 1997)

(quoting Sedgwick v. Giant Food, Inc., 110 F.R.D. 175, 176

(D.D.C. 1986)). -9-

I. “KNOWLEDGE” UNDER THE FCA

SAIC alleges that it is entitled to judgment as a matter of

law because (1) its reasonable interpretation of its OCI

obligations precludes a jury finding that it knowingly submitted

false claims; (2) the government improperly relied on a

collective knowledge theory to prove SAIC’s scienter; and (3) the

government failed to prove that SAIC acted recklessly or with

deliberate ignorance. In the alternative, SAIC contends that it

is entitled to a new trial because the jury was not instructed

that a defendant does not act knowingly if its actions were the

result of “mere ‘differences in interpretation’ of a contract or

regulation” and was improperly instructed on a collective

knowledge theory.

A. SAIC’s interpretation of its OCI disclosure obligations

SAIC argues that it is entitled to judgment as a matter of

law because its “reasonable, good faith understanding of the

NRC’s OCI regulations preclude[s] any finding of ‘knowledge’”

under the FCA. (Def.’s Mem. in Support of Its Mot. for Judgment

as a Matter of Law or for a New Trial (“Def.’s Mem”) at 6.)

Relying on the court of appeals’ decision in United States ex

rel. K&R Limited Partnership v. Massachusetts Housing Finance

Agency, 530 F.3d 980 (D.C. Cir. 2008), SAIC contends that “as a

matter of law, a contractor’s plausible interpretation of its

contractual or regulatory obligations does not evidence the kind -10-

of ‘reckless disregard’ necessary to prove a violation of the

[FCA].” (Id. at 2.) In K&R, the relator brought a qui tam

action against the Massachusetts Housing Finance Agency (“MHFA”)

alleging that the MHFA knowingly submitted false claims for

payment to Department of Housing and Urban Development (“HUD”).

530 F.3d at 981. For each alleged false claim, MHFA’s

representative had “‘certifie[d] to the best of his knowledge and

belief’ that ‘each interest reduction payment [submitted to HUD]

. . . ha[d] been calculated in accordance with’ the applicable

agreement.” Id. The court of appeals upheld the district

court’s granting summary judgment in favor of MHFA because K&R

had failed to show that MHFA “at least recklessly disregarded the

falsity of its claims.” Id. at 983. The court found that K&R

failed to carry its burden because the MHFA’s interpretation of

its calculation obligations was “plausible” and “K&R point[ed] to

nothing else ‘that might have warned [MHFA] away from the view it

took[.]’” Id. (quoting Safeco Ins. Co. of Am. v. Burr, 551 U.S.

47, 70 (2007)).

Here, SAIC contends that it “reasonably understood that work

it performed in support of the Department of Energy (“DOE”) could

not present a conflict with the work it was doing under its

[c]ontracts with the NRC” because the DOE and its contractors are

excluded from NRC regulation. (Def.’s Mem. at 3-4.) As is

explained in Part II(A) below, although under 42 U.S.C. -11-

§ 2140(a)(1) certain work performed for the DOE is not subject to

NRC regulation, it does not follow that an entity which performs

work outside the scope of the DOE exclusion can avoid NRC

regulation for all purposes. Unlike in K&R, the government

presented evidence here that SAIC knew that it had relationships

with entities that were in fact regulated by the NRC, even if

those entities performed other work for the DOE that was excluded

from NRC regulation. That evidence could tend to discredit

SAIC’s argument that its alleged false statements were the result

of its belief that the entities with which it had relationships

were entities wholly excluded from NRC regulation because of

those entities’ work for the DOE. Thomas Rodehau, a former SAIC

employee involved with NRC and DOE contracts, testified that the

term “regulated by the NRC” found in the NRC’s OCI regulations

meant “subject to the regulations of” or “subject to the

regulatory authority of” the NRC. (Rodehau Test., 7/3 p.m. Tr.

50:2-16.) Several other SAIC employees testified that they were

aware that SAIC’s recycle project for British Nuclear Fuels, Ltd.

(“BNFL”) on which they were working contemplated the application

of NRC’s waste disposal regulations to BNFL’s proposed

activities. (See Chris Caldwell Test., 7/9 p.m. Tr. 80:17-83:1;

Jeff Slack Test., 7/9 a.m. Tr. 95:22-104:3; Jerry Truitt Test.,

7/10 p.m. Tr. 7:25-9:23; 21:10-22:1.) In addition, SAIC employee

Richard Profant testified that Manufacturing Science Corporation -12-

(“MSC”), a wholly owned subsidy of BNFL and an entity for whom

SAIC provided services during the time period of the NRC

contracts at issue, had an NRC license. (Profant Test., 7/22

p.m. Tr. 18:2-19:8 (admitting that he received an e-mail in 1999

indicating that MSC had an NRC license through the state of

Tennessee).) This testimony permitted reasonable jury inferences

that SAIC knew that it had relationships with entities, including

BNFL and MSC, that were subject to the regulations of the NRC,

regardless of whether these entities were doing other work for

the DOE excluded from the NRC’s regulatory authority, that should

have been disclosed under the NRC’s OCI regulations.7 A

defendant’s reasonable interpretation of an ambiguous regulation

may well be a successful defense to an alleged FCA violation in

appropriate cases. In this case, though, the government

presented sufficient evidence at trial upon which the jury could

conclude that SAIC’s representations to the NRC regarding its

OCIs were not the result of SAIC’s adoption of a reasonable

interpretation of ambiguous regulations.

Moreover, SAIC has not shown error in the jury instructions

given regarding SAIC’s knowledge. A trial judge has “the

7 In addition, as is discussed in Part II(B) below, the government also presented sufficient evidence for the jury to conclude that SAIC had relationships with entities that placed SAIC in a conflicting role where its judgment may have been biased, and the relationships should have been disclosed under 48 C.F.R. 2009.570-3(b)(1)(iv), regardless of whether the entities were “regulated by the NRC.” -13-

inescapable duty . . . to instruct the jurors, fully and

correctly, on the law applicable to the case.” 9C C. Wright, A.

Miller, E. Cooper & R. Freer, Federal Practice and Procedure

§ 2556 (3d ed. 2008). “The district judge need not use any

particular form of words or sequence of ideas so long as the

charge as a whole conveys to the jury a clear and correct

understanding of the applicable substantive law without confusing

or misleading them.” Id. In this case, the jury was instructed

that “[f]or the United States to recover from SAIC for a

violation of” either § 3729(a)(1) or § 3729(a)(2), the United

States had to prove by a preponderance of the evidence, among

other essential elements, “that SAIC acted knowingly.” (7/28

a.m. Tr. 14:7-13; 14:25-15:6.) The jury was further instructed

that

the term “knowingly” means that a defendant, with respect to information, one, had actual knowledge of the true information, or, two, acted in deliberate ignorance of the truth or falsity of the information, or, three, acted in reckless disregard of the truth or falsity of the information. It is not necessary for the United States to prove that SAIC acted with an intent to defraud the government. Although the specific intent to defraud is not required, more than an honest mistake or mere negligence must be found. “Actual knowledge” means that the defendant affirmatively knew the truth or falsity of the information in a claim or statement. The United States can prove deliberate ignorance through proof that SAIC deliberately closed its eyes to what would otherwise have been obvious to it. A finding that SAIC purposely avoided learning all the facts or suspected a fact but refused to confirm it also constitutes deliberate ignorance. Stated another way, SAIC’s knowledge of a fact may be inferred from willful blindness to the -14-

existence of the fact. It is entirely up to you as to whether you find any deliberate closing of the eyes and the inference to be drawn from any such evidence. I also instructed you that the term “knowingly” includes acting in “reckless disregard” of an act’s truth or falsity. For purposes of the False Claims Act, reckless disregard can be equated with “an extreme version of ordinary negligence” or “gross negligence plus.”

(7/28 a.m. Tr. 15:25-16:25.) With these instructions, the jury

was informed of the law they were to apply with regard to

knowledge under the FCA and instructed that they had to find SAIC

acted based on more than “an honest mistake or mere negligence,”

but instead with actual knowledge, or at least reckless disregard

or deliberate ignorance of the truth or falsity of its claims.

See 31 U.S.C. § 3729(b) (FCA definition of “knowing” or

“knowingly”). SAIC was free to and did argue that its reasonable

efforts to fulfill its disclosure obligations, including its

interpretation of the relevant contractual provisions and NRC

regulations, negated the government’s allegation that SAIC acted

with actual knowledge, reckless disregard, or deliberate

ignorance. However, there was no error in instructing on the

government’s required quantum of proof while declining to

instruct on SAIC’s proposed argument about the proof, namely,

informing the jury that it “could consider whether SAIC’s efforts

to detect and disclose OCIs reasonably demonstrated that it did

not act recklessly or with deliberate disregard.” (Def.’s Mem.

at 39 (citing SAIC’s Proposed Jury Instruction No. D-20).) -15-

Accordingly, SAIC has not shown it is entitled to judgment as a

matter of law because of its purported interpretation of its OCI

obligations, or shown that the jury instructions regarding

knowledge under the FCA were erroneous, warranting a new trial.

B. SAIC’s collective knowledge

law because the government improperly relied on a “collective

knowledge” theory to establish SAIC’s scienter. In the

alternative, SAIC seeks a new trial on the basis that the jury

should not have been instructed on the government’s collective

knowledge theory. SAIC contends that knowledge under the FCA “is

not merely the knowledge of the facts, but the knowledge (or

reckless disregard or deliberate ignorance) of an objective

falsehood,” and “[g]eneral, factual information that is known

within a company does not establish that the company ‘knew’ of a

falsehood” under the FCA. (Def.’s Mot. at 6-7.) In addition,

SAIC challenges the jury instruction describing a corporation’s

liability for the collective knowledge of its employees.8

8 The jury was instructed that [a] corporation is liable for the collective knowledge of all employees and agents within the corporation so long as those individuals obtained their knowledge acting on behalf of the corporation. Therefore, if a corporation has many employees or agents, you must consider the knowledge possessed by those employees and agents as if it was added together and combined into one collective pool of information. If that collective pool of information here gives a reasonably complete picture of . . . false or fraudulent claims or false -16-

SAIC’s argument rests largely on a footnote in Saba v.

Compagnie Nationale Air France, 78 F.3d 664 (D.C. Cir. 1996), in

which the court observed that in United States v. Bank of New

England, 821 F.2d 844 (1st Cir. 1987), cert. denied, 484 U.S. 943

(1987), “corporate knowledge of certain facts was accumulated

from the knowledge of various individuals, but the proscribed

intent (willfulness) depended on the wrongful intent of specific

employees.” Saba, 78 F.3d at 670 n.6 (citing Bank of New

England, 821 F.2d at 855-56)). As was explained in the opinion

resolving SAIC’s pre-trial dispositive motions, SAIC “‘read[s]

into this brief footnote . . . more than is warranted.’” United

States v. Science Applications Int’l Corp., 555 F. Supp. 2d 40,

55 (D.D.C. 2008) (quoting United States v. Phillip Morris USA,

Inc., 449 F. Supp. 2d 1, 896 n.34 (D.D.C. 2006)). “[I]t is both

appropriate and equitable to conclude that a company’s fraudulent

intent may be inferred from all of the circumstantial evidence

including the company’s collective knowledge.” Id. The

government’s use of a collective knowledge theory to prove SAIC’s

fraudulent intent was permissible, and its use does not entitle

SAIC to judgment as a matter of law. In addition, because the

jury could have properly inferred SAIC’s fraudulent intent from

statements, you may find that SAIC itself possessed a reasonably complete picture of the false or fraudulent claims or false statements and acted knowingly. (7/28 a.m. Tr. 17:1-14.) -17-

its collective knowledge, the jury was properly instructed that

it could infer from the “collective pool of information” known by

SAIC’s employees and agents that “SAIC itself possessed a

reasonably complete picture of the false or fraudulent claims or

false statements and acted knowingly.” (Tr. 7/28, 17:1-14.)

Accordingly, SAIC has not established that the jury instruction

given regarding SAIC’s collective knowledge was an error

requiring a new trial.

C. Reckless disregard or deliberate ignorance

SAIC contends that “[t]he evidence at trial was legally

insufficient to support a jury finding of knowledge under [a]

reckless disregard or deliberate ignorance” theory because the

evidence shows that SAIC “made diligent inquiry to ensure

compliance with its OCI obligations.” (Def.’s Mem. at 9-10.)

SAIC points to trial testimony explaining that “for the purposes

of complying with its OCI obligations in all of its government

contracts, SAIC designed and implemented a comprehensive OCI

compliance system.” (Id. at 10.) While SAIC maintains that its

OCI compliance system was both reasonable and effective, and that

it made a diligent inquiry to ensure compliance, there was also

testimony provided by at least two witnesses, Sandra Carder and

Betty Bidwell, who testified that SAIC’s OCI compliance system

was inadequate in certain important respects, including by

failing to incorporate some of SAIC’s business relationships, by -18-

containing incomplete descriptions of SAIC’s work, and by failing

to associate relevant key words with certain descriptions.

(Carder Test., 7/22 a.m. Tr. 66:18-69:11, 78:13-21; Bidwell

Test., 7/16 a.m. Tr. 76:14-77:9.) Similarly, witness John Pierce

Martin testified that he made representations to the government

about SAIC’s OCIs without having seen documents the jury could

have deemed relevant to their assessment of SAIC’s OCIs. (See

Martin Test., 7/14 p.m. Tr. 18-40.) Accordingly, there was

sufficient evidence to support a jury’s finding that SAIC acted

with reckless disregard or deliberate ignorance.

II. EVIDENCE OF CLAIMS CONTAINING AN OBJECTIVE FALSEHOOD

SAIC contends that the government’s claims that SAIC failed

to disclose OCIs and certified to the absence of OCIs, as defined

by the NRC’s regulations, fail as a matter of law because SAIC’s

alleged OCIs involving DOE-related work did not involve

organizations regulated by the NRC and did not place SAIC in a

conflicting role where its judgment may have been biased.

A. Work for entities “regulated by the NRC”

SAIC alleges that as a matter of law, the government failed

to prove that SAIC’s alleged OCIs involved work for entities

regulated by the NRC because the NRC does not regulate the DOE,

DOE contractors, or DOE facilities. (Def.’s Mem. at 13-14.)

SAIC specifically cites 42 U.S.C. § 2140(a)(1), which excludes

from NRC regulation, -19-

(1) the processing, fabricating, or refining of special nuclear material, or the separation of special nuclear material, or the separation of special nuclear material from other substances, under contract with and for the account of the [DOE]; or (2) the construction or operation of facilities under contract with and for the account of the [DOE.]

42 U.S.C. § 2140(a)(1). Although the NRC is statutorily excluded

from regulating certain DOE activities and facilities, there was

sufficient evidence introduced at trial that entities with which

SAIC had a business relationship were in fact subject to the

regulations of the NRC for activities that fell outside the scope

of § 2140. SAIC employees testified that BNFL, with whom SAIC

entered into an agreement regarding a recycle project for the

DOE, was subject to the NRC’s regulations concerning disposal of

radioactive waste once the waste left DOE facilities and MSC, a

subsidiary of BNFL, was NRC-licensed. (Caldwell Test., 7/9 p.m.

Tr. 80:17-83:1; Slack Test., 7/9 a.m. Tr. 95:22-104:3; Profant

Test., 7/22 p.m. Tr. 18:2-19:8.) Similarly, government witness

Kevin Tempel testified that Alaron Corporation -- an entity with

which SAIC pursued potential radioactive metal recycling

opportunities -- had an NRC-regulated facility. (See Tempel

Test., 7/10 a.m. Tr. 23:8-11; 26:4-27:21.)

B. Situations involving a conflicting role and possible bias

SAIC contends that the government failed to prove that SAIC

had any situations or relationships where it was placed in a

“conflicting role in which its judgment may be biased in relation -20-

to its work for the NRC,” 48 C.F.R. § 2009.570-3(b)(1)(iv),

because “the NRC and DOE each have its own distinct area of

jurisdiction” and “[SAIC’s] DOE-related work could not have

biased its judgment with respect to its [c]ontracts with the

NRC.” (Def.’s Mem. at 16.)

At trial, the government presented testimony and exhibits

identifying several projects upon which the jury could have

concluded that SAIC was placed in a conflicting role in which its

judgment may have been biased. The government’s evidence showed

that under SAIC’s contract with the NRC, SAIC was charged with

the responsibility to “assess[] the health and safety impacts of

the potential large scale reuse and recycle of contaminated

nuclear material.” (Frank Cardile Test., 7/2 a.m. Tr. 28:3-5.)

Meanwhile, the government’s evidence showed, the “Work Smart

Standards” that SAIC created for the BNFL project assured BNFL

how the proposed project “would be safe for public health and

safety.” (Pl.’s Opp’n at 18 (citing Slack Test., 7/9 a.m. Tr.

93, 101-03).) In addition, the government presented evidence

that SAIC sought to continue and expand its business relationship

with BNFL into the future. (Turner Test., 7/8 a.m. Tr. 94:5-8.)

Given that SAIC assessed the safety of the BNFL recycle project

in light of existing NRC regulations and saw the BNFL recycle

project as a potential business opportunity going forward, it is

a reasonable conclusion that SAIC’s judgment regarding whether -21-

and how recycle projects with components similar to the BNFL

project could affect public health and safety may have been

biased by its BNFL work. Moreover, the government introduced

evidence that in assessing the BNFL project, SAIC considered the

NRC’s existing regulations governing waste disposal, including

Nuclear Regulatory Commission Guide 1.86. (See Slack Test., 7/9

a.m. Tr. 103:10-19.) SAIC scientist Michael McKenzie-Carter

testified that the advice SAIC provided to the NRC included

advice regarding new guidance that could replace the NRC’s Guide

1.86. (McKenzie-Carter Test., 7/17 p.m. Tr. 41:14-42:7.)

Because the SAIC’s work for BNFL and for the NRC both involved

consideration of the NRC’s regulatory guidance on waste disposal,

the jury could have reasonably concluded that SAIC had an

obligation to disclose its work with BNFL under 48 C.F.R.

§ 2009.570-3(b)(1)(iv).

Similarly, the government presented evidence that SAIC’s

work for the Bechtel Jacobs Company (“BJC”) also placed SAIC in a

conflicting role where its judgment may have been biased. SAIC

radiochemist Thomas Rucker testified that for the BJC Dose

Assessment project, SAIC conducted an “As Low As Reasonably

Achievable” (“ALARA”) assessment for the recycle of contaminated

scrap metal from three DOE facilities. (Rucker Test., 7/10 a.m.

Tr. 88:17-90:6.) He also said that SAIC analyzed the costs and

benefits of recycling such materials for BJC. (Id.) The -22-

government introduced testimony and other evidence from several

witnesses suggesting that SAIC’s work for the NRC included

similar dose assessment and cost/benefit analysis of proposed

recycle options. (See Gerald Motl Test., 7/23 a.m. Tr. 23:5-22

(testifying that SAIC’s proposed work for the NRC included a

cost/benefit analysis of recycling alternatives); Clyde Jupiter

Test., 7/22 p.m. Tr. 29:16-34:10 (explaining that he provided

cost/benefit analysis as a subcontractor for SAIC on its NRC

contract); Slack Test., 7/9 p.m. Tr. 5:2-9:21 (discussing the BJC

Dose Assessment project); McKenzie-Carter Test., 7/17 p.m. Tr.

38:10-20 (testifying that SAIC’s work for the NRC included

figuring out the level of activity that could occur at certain

dose levels); Robert Meck Test., 7/3 a.m. Tr. 94:22-97:7

(discussing SAIC’s regulatory options task for the NRC).) On the

evidence presented at trial regarding the similarities between

the work performed for the NRC and for the BJC Dose Assessment

project, the jury could have reasonably concluded that the BJC

project may have created an actual or potential OCI.

Moreover, the government presented sufficient evidence upon

which the jury could have concluded that SAIC vice president

Motl’s involvement with the Association of Radioactive Metal

Recyclers (“ARMR”) placed SAIC in a conflicting role where it may

have been biased. Motl and ARMR founder and former chairman

Valmore Loiselle testified that ARMR was created to promote the -23-

recycle and reuse of radioactive scrap metal and to advocate for

a national standard governing the release and recycle of such

material. (Loiselle Test., 7/10 a.m. Tr. 72:24-77:3; Motl.

Test., 7/23 a.m. Tr. 11:20-25.) Motl testified that “ARMR was a

very small operation,” and that it took steps to advocate for a

“standard to allow for the recycle or release of radioactive

materials.” (Motl Test., 7/23 a.m. Tr. 18:1.) Motl also

testified that he was tasked on SAIC’s 1999 NRC contract bid to

provide “key management and technical support to the cost/benefit

task” assessing recycle options. (Motl Test., 7/23 a.m. Tr.

23:5-9.) The government’s evidence at trial showing that Motl

played an active part in ARMR’s advocating for a standard

governing release or recycle of radioactive material was

sufficient for the jury to conclude that Motl’s ARMR

participation may have placed him in a conflicting role that

could have biased his judgment with regard to his work under

SAIC’s 1999 NRC contract. In light of this collection of

evidence, SAIC has not established that the government failed to

prove an objective falsehood and that SAIC is entitled to

judgment as a matter of law.

III. IMPLIED FALSE CERTIFICATION

The government relied on an implied certification theory to

establish that SAIC made false claims for payment. “The theory

of implied certification . . . is that where the government pays -24-

funds to a party, and would not have paid those funds had it

known of a violation of a law or regulation, the claim submitted

for those funds contained an implied certification of compliance

with the law or regulation and was fraudulent.” United States ex

rel. Barrett v. Columbia/HCA Healthcare Corp., 251 F. Supp. 2d

28, 33 (D.D.C. 2003) (citing Ab-Tech Construction, Inc. v. United

States, 31 Fed. Cl. 429, 434 (Fed. Cl. 1994)). SAIC alleges that

it is entitled to judgment as a matter of law because the

government failed to prove that SAIC submitted any false claims

under an implied certification theory because the government did

not prove that payment was expressly conditioned on SAIC’s OCI

representations. In the alternative, SAIC alleges that it is

entitled to a new trial because the jury instructions did not

inform the jury that “the theory of implied false certification

applies only when the underlying regulatory or contractual

violation is an explicit pre-condition to payment.” (Def.’s Mem.

at 41.)

SAIC cites United States ex rel. Hockett v. District of

Columbia/HCA Healthcare Corp., 498 F. Supp. 2d 25 (D.D.C. 2007),

for the proposition that a defendant can be liable for impliedly

certifying compliance with a condition set forth in a “background

regulation, law, or other requirement” only if the regulation or

law at issue “expressly condition[s] payment on compliance.” Id.

at 68 (citing United States ex rel. Pogue v. Diabetes Treatment -25-

Centers of Am., Inc., 238 F. Supp. 2d 258, 263-66 (D.D.C. 2002)).

Hockett recognizes that implied false certification “typically

applies where: (1) the defendant submits a claim, thus impliedly

certifying compliance with a condition; (2) that condition, by

virtue of some background regulation, law, or other requirement

is an explicit condition precedent to payment; and (3) compliance

with that condition is essential to the government’s decision to

pay.” Id. SAIC alleges that “[t]he government ‘has not

identified a regulation or law in this case that specifically

conditions payment on compliance with a law, regulation, or other

requirement’ that SAIC allegedly violated.’” (Def.’s Mem. at 19-

20 (quoting Hockett, 498 F. Supp. 2d at 68 (emphasis added)).)

As was discussed in the opinion denying SAIC’s motion for

summary judgment on this issue, although Hockett places a

significant emphasis on the requirement that a regulation

expressly condition payment on compliance, “[t]he D.C. Circuit

. . . has never announced such a requirement.” SAIC, 550 F.

Supp. 2d at 50. Instead, the court of appeals has recognized

that “the essence of a false claim” is “[t]he withholding of

. . . information critical to the [government’s] decision to

pay.” United States v. TDC Mgmt. Corp., 288 F.3d 421, 426 (D.C.

Cir. 2002) (internal quotation marks omitted) (quoting Ab-Tech

Constr., 31 Fed. Cl. at 434); see also United States ex rel.

Siewick v. Jamieson Sci. & Eng’g, 214 F.3d 1372, 1376 (D.C. Cir. -26-

2000) (“Courts have been ready to infer certification from

silence, but only where certification was a prerequisite to the

government action sought.”). Thus, as Barrett explains, “[t]he

implied certification theory essentially requires a materiality

analysis. Certification of compliance with the statute or

regulation alleged to be violated must be so important to the

contract that the government would not have honored the claim

presented to it if it were aware of the violation.” 251 F. Supp.

2d at 33 (citing TDC, 288 F.3d at 426 and Harrison v.

Westinghouse Savannah River Co., 176 F.3d 776, 785 (4th Cir.

1999)); see United States ex. rel. Ortega v. Columbia Healthcare,

Inc., 240 F. Supp. 2d 8, 19 (D.D.C. 2003) (finding that “recovery

may be had under the FCA for an implied certification where if

the government had known of the violation when presented with the

claim for payment, it would not have paid the claim”).

At trial, the government presented sufficient evidence to

support the jury’s finding that SAIC’s OCI representations were

critical to the government’s decision to pay. Numerous witness

from both the NRC and SAIC testified that the OCI obligations in

SAIC’s contracts with the NRC were important to the overall

purpose of the contract. (See, e.g., Rodehau Test., 7/3 p.m. Tr.

43:24-44:10; Mary Lynn Scott Test., 7/3 a.m. Tr. 32:2-8 (NRC

Director of the Division of Contracts); Mark Otis Test. 7/17 a.m.

Tr. 21:16-22:1, Ashok Tahdani, 7/21 a.m. Tr. 53:15-56:6, 64:19- -27-

67:2; see also McKenzie-Carter Test., 7/17 p.m. Tr. 45:8-46:21

(explaining that SAIC avoids OCIs to ensure its work product is

trustworthy).) In addition, NRC contracting officer Mary Mace

testified that had she known of SAIC’s relationships with BNFL

and BJC, she would not have awarded either the 1992 or 1999

contract or would not have approved payments under the contracts.

(Mace Test., 7/15 p.m. Tr. 114:20-118:4.) NRC contract

specialists Stephen Pool and Sharlene McCubbin also testified

that they considered OCI representations before approving payment

and that they would not have approved payment if SAIC had

apparent or actual OCIs. (Pool Test., 7/15 a.m. Tr. 32:15-33:5;

McCubbin Test., 7/15 p.m. Tr. 67:5-68:11.) Similarly, SAIC’s

Rodehau, who had been responsible for some of SAIC’s contracts

with the NRC and DOE between 1991 and 1996, also testified that

SAIC was required to certify that it had no apparent or actual

OCIs for proposed work under its NRC contracts and that such

certification was required for SAIC to get the contract and

receive payments under the contract. (Rodehau Test., 7/3 p.m.

Tr. 62:7-22; see also 68:17-69:7 (testifying that if SAIC failed

to make its OCI certifications, it would not get paid under its

contracts with the NRC).) Thus, the government carried its

burden to provide sufficient evidence showing that SAIC’s

withholding of information that should have been disclosed under -28-

its OCI disclosure obligations constituted the submission of

false claims for payment to the NRC.

Moreover, the jury was properly informed on the law

regarding the government’s use of the implied false certification

theory to establish that SAIC made false or fraudulent “claims”

to the NRC. With respect to what constitutes a false or

fraudulent claim, the jury was instructed that

[a] claim includes any request or demand for payment from government funds. A claim may include a voucher, invoice, or any other demand for payment of government money. A claim or statement is false if it is an assertion that is untrue when made or when used. A claim is fraudulent if it is an assertion that is known to be untrue. A claim for payment or a statement made in order to get payment is false if there is a withholding of information that is critical to the government’s decision to pay. In other words, a claim or statement is considered to be false or fraudulent where, if the government had known of the information when presented with a claim or payment, it would not have paid the claim.

(7/28 Tr. 15:13-24.) In light of the holding in TDC, this

correctly explained what constitutes a false or fraudulent claim

under an implied false certification theory. Thus, SAIC is not

entitled to a new trial because the jury was properly instructed

on this element of the government’s case.

IV. FALSE STATEMENTS TO GET FALSE CLAIMS PAID

A. Application of the Supreme Court’s decision in Allison Engine

Regarding the government’s § 3729(a)(2) claim, SAIC alleges

that the government failed to prove that SAIC submitted false -29-

statements to get its false claims paid. In addition, SAIC

alleges that the jury instruction regarding the government’s

burden of proof under § 3729(a)(2) erroneously eliminated the

requirement that the government prove “SAIC made false statements

with the intent and for the purpose of getting its false claims

paid.” (Def.’s Mem. at 42.) It argues that under the Supreme

Court’s decision in Allison Engine Co., Inc. v. United States ex

rel. Sanders, 128 S. Ct. 2123 (2008), “[i]t is not enough for the

[g]overnment to claim that a defendant’s statements affected its

decision to pay.” (Def.’s Mem. at 22.) Instead, SAIC contends,

the government was “‘obligated to prove that the defendant made a

false record or statement for the purpose of getting a false or

fraudulent claim paid or approved by the Government[,]’” and in

this case, “[t]he evidence presented at trial was legally

insufficient to meet this burden [because] it showed that SAIC’s

alleged ‘false statements’ were entirely separate from the issue

of payment on SAIC’s vouchers.” (Id. at 21 (quoting Allison

Engine, 128 S. Ct. at 2130).)

Under 31 U.S.C. § 3729(a)(2), a defendant who “knowingly

makes, uses, or causes to be made or used, a false record or

statement to get a false or fraudulent claim paid or approved by

the Government” is civilly liable to the United States. In

Allison Engine, the relator produced fraudulent invoices

submitted by subcontractors to a Navy contractor as evidence of -30-

false statements to get false claims paid under § 3729(a)(2).

128 S. Ct. at 2127. The Supreme Court held that the term in

§ 3729(a)(2) “‘[t]o get’ denotes purpose, and thus a person must

have the purpose of getting a false or fraudulent claim ‘paid or

approved by the government’ in order to be liable under [that

section].” 128 S. Ct. at 2128 (emphasis added). Thus, Allison

Engine concluded that

a subcontractor violates § 3729(a)(2) if the subcontractor submits a false statement to the prime contractor intending for the statement to be used by the prime contractor to get the Government to pay its claim. If, [on the other hand,] a subcontractor or another defendant makes a false statement to a private entity and does not intend the Government to rely on that false statement as a condition of payment, the statement is not made with the purpose of inducing payment of a false claim “by the Government.” In such a situation, the direct link between the false statement and the Government’s decision to pay or approve a false claim is too attenuated to establish liability.

Id. at 2130 (emphasis added).

Unlike the attenuated statements at issue in Allison Engine,

the statements at issue here were made directly to the NRC,

rather than to a private entity. In addition, there was

significant evidence upon which the jury could conclude that

SAIC’s statements about their OCIs were made for the purpose of

having their claims paid. For example, SAIC’s Rodehau testified

that SAIC had to agree to the provisions regarding OCIs in its

NRC contract to be eligible for an award of the contract and to

receive payment under the contract, and that a violation of the -31-

OCI provisions could result in termination of the contract. (See

Rodehau Test., 7/3 p.m. Tr. 43:24-47:7; 62:7-22, 67:19-69:7; see

also Thadani Test. 7/21 a.m. Tr. 53:15-20 (testifying that SAIC

was obligated to provide advice to the NRC that was free from

potential bias).) SAIC’s Martin also testified that in response

to the NRC’s cure notice seeking additional information regarding

SAIC’s OCIs, SAIC submitted a response to the NRC that SAIC

intended the NRC to rely on when deciding whether to terminate

its contract with SAIC. (Martin Test., 7/14 p.m. Tr. 14:12;

22:16-23:3; 29:25-30:3.) Moreover, several NRC employees

testified that SAIC’s compliance with its OCI obligations was

important to the NRC’s decision to pay SAIC under its NRC

contract and failure to comply with the OCI obligations would

result in nonpayment. (Mace Test., 7/15 p.m. Tr. 114:20-118:4

(stating that she would not have awarded the 1992 or 1999

contracts or approved payment under them if she had known about

SAIC’s relationships with BNFL or BJC); Scott Test., Tr. 7/3 a.m.

32:4-8 (stating that the NRC was very concerned that work done by

the agency or in support of its regulations “be free of any kind

of doubt or conflict, and that the public can trust in the work

that the agency does”); Pool Test., 7/15 a.m. Tr. 32:19-33:5

(testifying that whether SAIC complied with the OCI provisions in

its contract would affect whether he would approve payment and

that he would not have approved payment if SAIC had an actual or -32-

potential OCI); McCubbin Test., 7/15 p.m. Tr. 67:5-68:11 (stating

that the NRC relied on certifications from contractors).) With

this evidence, a reasonable jury could have concluded that SAIC’s

representations regarding actual and potential OCIs were made for

the purpose of getting its claims paid.

In addition, the jury instructions on the required elements

of a § 3729(a)(2) claim were not erroneous. The jury was

instructed that

[f]or the United States to recover from SAIC for a violation of Section 3729(a)(2), it must prove each of the following essential elements by a preponderance of the evidence: First, that SAIC made or caused another to make a statement for the purpose of getting the United States government to pay a false or fraudulent claim; second, that the statement was false; and third, that SAIC acted knowingly.

(7/28 Tr. 14:25-15:6.) Immediately after this instruction, the

jury also was told that

[t]o find a violation of the False Claims Act, you must find that the false or fraudulent claim or false statement would have been material. A claim or statement is material if it has a natural tendency to influence, is capable of influencing, or is essential, important, or pertinent to, the government’s decision to pay.

(Id. at 15:7-12.) SAIC contends that the reading of the

materiality instruction immediately after the elements of

§ 3729(a)(2) “effectively eliminated the Allison Engine

requirement that the [g]overnment show” that SAIC made a

statement for the purpose of getting the government to pay its

claim. (Def.’s Mem. at 42.) The instructions given to the jury -33-

clearly distinguished between the essential elements specifically

pertaining to a § 3729(a)(2) claim -- which were presented to the

jury in a numbered list -- and the additional requirement for any

FCA violation that a false claim or false statement be material.

Separate from the enumerated list of essential elements of a

§ 3729(a)(2) violation, the materiality instruction that followed

began with “[t]o find a violation of the False Claims Act,”

informing the jury that the instruction pertained to all alleged

FCA violations. Contrary to SAIC’s allegation, there was nothing

in the materiality instruction suggesting that the materiality

requirement replaced any of the essential elements under

§ 3729(a)(2). Thus, SAIC has not shown the jury instructions

regarding the elements of § 3729(a)(2) and materiality to be

erroneous.

B. Fraud Enforcement and Recovery Act

Post-trial, on May 20, 2009, the Fraud Enforcement and

Recovery Act (“FERA”) of 2009, Pub. L. No. 111-21, 123 Stat.

1617, was enacted, which amends certain provisions of the FCA to

reflect the original intent of the law. FERA “legislatively

overrules” the holding of Allison Engine by amending the language

of § 3729(a)(2), replacing the words “to get” with the word

“material.” See S. Rep. No. 111-10 (2009). Thus, under the new

version, recodified as 31 U.S.C. § 3729(a)(1)(B), a person is

liable under the FCA if he “knowingly makes, uses or causes to be -34-

made or used, a false record or statement material to a false or

fraudulent claim.” 123 Stat. at 1621. Section 4(f) of FERA also

provides that

[T]he amendments made by this section shall take effect on the date of enactment of this Act and shall apply to conduct on or after the date of enactment, except that -- (1) subparagraph (B) of section 3729(a)(1) of title 31, United States Code, as added by subsection (a)(1), shall take effect as if enacted on June 7, 2008, and apply to all claims under the False Claims Act (31 U.S.C. 3729 et seq.) that are pending on or after that date; and (2) section 3731(b) of title 31, as amended by subsection (b); section 3733, of title 31, as amended by subsection (c); and section 3732 of title 31, as amended by subsection (e); shall apply to cases pending on the date of enactment.

123 Stat. at 1625 (codified as a note following 31 U.S.C.

§ 3729).

The United States filed a notice of supplemental authority

contending that section 4(f)(1) retroactively applies the new

§ 3729(a)(1)(B) to all cases pending on or before June 7, 2008.

Thus, it contends, FERA eliminates the United States’ burden of

proving that SAIC made false statements for the purpose of

getting claims paid and moots SAIC’s argument that the government

failed to do so at trial. In response, SAIC contends that

section 4(f)(1)’s retroactivity does not apply to the present

case because the provision’s use of the phrase “claims under the -35-

[FCA]” implicates the FCA’s definition of “claim” in § 3729(c)9

and none of SAIC’s claims at issue in this action were pending on

or after June 7, 2008.10 SAIC alleges in the alternative that to

the extent that FERA does apply § 3729(a)(1)(B) to this case,

“constitutional notions of fundamental fairness” require that

SAIC be “entitled to a new trial in which the evidence and

instructions would properly reflect the applicable law.” (Def.’s

Response to United States’ Notice of Supp. Auth. at 8.)

Under 31 U.S.C. § 3729, a “claim” is a “request or demand

. . . for money or property.” 31 U.S.C. § 3729(c). “Statutory

definitions control the meaning of statutory words . . . in the

usual case.” Lawson v. Suwannee Fruit & S.S. Co., 336 U.S. 198,

201 (1949). Under § 3729’s definition of “claim,”

§ 3729(a)(1)(B) does not apply in this case because none of

9 Before FERA, under § 3729(c), a claim included: any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded. 31 U.S.C. § 3729(c) (emphasis added). FERA amends the definition of claim in ways not relevant to issues in this case and codifies the new definition as 31 U.S.C. § 3729(b)(2). 10 SAIC also argues that application of § 3729(a)(1)(B) to its conduct would violate its rights under the Ex Post Facto Clause, U.S. Const. art. I, § 10, and its Fifth Amendment due process rights. -36-

SAIC’s claims at issue here were pending on or before June 7,

2008.

The government contends the legislative history of FERA

compels the conclusion that Congress did not intend “claim” in

FERA section 4(f)(1) to apply this statutory definition, citing

Senate Report 111-10. The Senate Report’s explanation of FERA’s

amendments to the FCA similarly utilizes “claims” to refer to a

defendant’s request for payment and “cases” when discussing civil

actions for FCA violations. See S. Rep. No. 110-10 (2009)

(discussing Allison Engine’s expansion of the scope and

applicability of the FCA to certain false claims and defendants’

use of Allison Engine as a defense in “FCA cases”). Thus,

contrary to the government’s contention, FERA’s legislative

history supports applying the statutory definition of “claim”

when interpreting the reach of FERA section 4(f)(1).

Further, the full text of section 4(f) supports the

conclusion that Congress did not intend “claims” in subsection

4(f)(1) to mean “cases.” Subsection 4(f)(2), immediately after

the provision at issue reads “section 3731(b) of title 31, as

amended . . . shall apply to cases pending on the date of

enactment.” 123 Stat. at 1625. Surely, had Congress intended

the retroactivity of subsection 4(f)(1) to be measured by

“cases,” it would have said so as it did in subsection 4(f)(2).

There is no reason to depart from the usual rule and section -37-

4(f)(1) will be interpreted to apply to “claims” as defined in

§ 3729, that is, requests or demands for money or property.

Thus, FERA has no impact on the present action.

V. DAMAGES

SAIC contends that the judgment should be amended because

the government failed to prove that it suffered any damages

actually or proximately caused by the alleged false claims

submitted to SAIC. In the alternative, it seeks a new trial

because the damages instructions given to the jury were

erroneous. SAIC contends that the government’s theory for

assessing damages, as explained to the jury, “ignor[ed] the value

of the services and work product SAIC provided” to the NRC.

(Def.’s Mem. at 22.) The jury was instructed that if it found

that SAIC violated the FCA, “[t]he damages that the United States

[was] entitled to recover under the [FCA were] the amount of

money that the government paid out by reason of the false claims

over and above what it would have paid out had SAIC not made the

false claims.” (7/28 Tr. 21:15-21.) The jury was further

instructed that its

calculations of damages should be limited to determining what the [NRC] paid to SAIC over and above what the NRC would have paid had it known of SAIC’s organizational conflicts of interest [and its] calculation of damages should not attempt to account for the value of services, if any, that SAIC conferred upon the [NRC].

(7/28 Tr. 21:22-22:3.) -38-

A defendant is liable under the FCA “for damages actually

caused the Government because of the submission of [a] false

claim.” United States ex rel. Fago v. M&T Mortgage Corp., 518 F.

Supp. 2d 108, 120 (D.D.C. 2007). To recover actual damages, a

plaintiff “must prove causation -- specifically that the

Defendant caused the Government to pay claims because of the

alleged false statements.” Id. (internal quotations and

citations omitted). Applying this proximate cause standard, a

defendant is liable for “for those damages that arise because of

the falsity of the claim, i.e., . . . those damages that would

not have come about if the defendant’s misrepresentations had

been true.” United States ex rel. Schwedt v. Planning Research

Corp., 59 F.3d 196, 200 (D.C. Cir. 1995).

For example, in TDC, TDC entered into a contract with the

Urban Mass Transit Authority of the Department of Transportation

to assist with a program “designed to assist minority enterprises

in securing bonding from sureties when bidding on large

transportation construction projects.” TDC, 288 F.3d at 422-23.

TDC’s role was to use its “best efforts” to locate investors

willing to provide collateral and other assistance to minority

enterprises and sureties to participate in the program, and to

act as ombudsman between the parties, “with no financial interest

in [p]rogram operations.” Id. at 423. After it was discovered

that TDC had fraudulently failed to disclose in its monthly -39-

progress reports that it had a financial stake in the program’s

operations, the government sought damages under the FCA using a

“‘but for’ measure of damages, based on what the government would

have paid out had it known of the information that TDC omitted

from its monthly progress reports.” Id. at 428. Relying on its

previous position in Schwedt “that if the government can show it

relied on representations in a contractor’s progress reports in

deciding to make payments, ‘those payments may constitute

damages,’” the court of appeals found no error in the district

court’s use of the “but for” theory. Id. (quoting Schwedt, 59

F.3d at 200).

Under the government’s theory of proximate causation

-- that “had SAIC made truthful statements regarding its [OCIs],

the NRC would not have awarded either contract in the first

instance [and] would not have paid SAIC” (Pl.’s Opp’n at 30) --

the value of work done by SAIC is irrelevant because absent

SAIC’s false claims, no money would have been paid to SAIC under

its contracts. Under TDC, where, as here, the government alleges

that it would not have accepted or paid for such advice from the

defendant if it had known of the defendant’s false or fraudulent

claims, the government can properly contend and prove that its

damages are all amounts paid because of the false claims that

would not have been paid out if the defendant had not made the

false claims. See 288 F.3d at 428; see also United States v. -40-

Rogan, 517 F.3d 449, 453 (7th Cir. 2008) (finding that the

government’s FCA damages for Medicare reimbursement claims

omitting material information that, if disclosed, would have

resulted in nonpayment were the entire amount paid on the claims

regardless of whether medical services were actually provided).

Thus, the jury was properly instructed that its calculation

should not attempt to account for the value of SAIC’s work

because, under the government’s theory, but for SAIC’s false or

fraudulent claims, it would not have paid anything for SAIC’s

work.

In addition, there was significant testimony at trial by the

NRC’s contracting officers stating that the NRC would not have

awarded the contracts at issue to SAIC or approved SAIC’s claims

for payment if they had known about SAIC’s OCIs. (Mace Test.,

7/15 p.m. Tr. 114:20-118:4; Pool Test., 7/15 a.m. Tr. 32:15-33:5;

McCubbin Test., 7/15 p.m. Tr. 67:5-68:11.) Accordingly, the

defendant’s motion for judgment as a matter of law on the issue

of damages or for a new trial on the basis that the jury

instructions regarding damages were erroneous will be denied.

VI. “APPEARANCE” OF AN OCI

SAIC contends that it is entitled to a new trial because the

government was erroneously permitted to argue “that SAIC had an

obligation to disclosure the ‘appearance’ of a conflict of

interest to the NRC.” (Def.’s Mem. At 35.) SAIC contends that -41-

its disclosure obligation was “limited to avoiding ‘actual’ or

‘potential’ OCIs,” as defined by the NRC’s OCI regulations, and

the government’s references to “apparent” OCIs likely led the

jury “to believe that the mere appearance of an OCI,” without

proof an actual or potential OCI could be a violation of the FCA.

(Id. at 36.)

SAIC’s argument rests on the unsupported premise that there

is a difference between an “apparent” OCI and a “potential” OCI.

However, in direct contrast to SAIC’s argument, the D.C. Circuit

has previously referred to “apparent” conflicts of interest

interchangeably with “potential” or “possible” conflicts of

interests when the relevant regulatory language referred to

“potential” and “actual” conflicts of interest. See LeBoeuf,

Lamb, Greene & MacRae, L.L.P. v. Abraham, 347 F.3d 315, 322-24

(D.C. Cir. 2003) (analyzing whether the Department of Energy

correctly analyzed a planned procurement under applicable federal

regulations).

In any event, the jury was properly instructed on the law

they were to apply with respect to SAIC’s OCI disclosure

obligations utilizing the language of its contracts with the NRC

and the NRC’s OCI regulations. (See 7/28 Tr. 19:1-19

(instructing the jury that “[w]hether SAIC’s judgment may have

been biased includes whether SAIC’s relationships with third

parties had the potential of causing SAIC to be biased or -42-

impairing SAIC’s objectivity in the work it was performing for

the NRC” (emphasis added)).) The jury was also instructed that

if “any difference appear[ed] to [them] between the law as stated

by counsel and that stated by [the court] in [its] instructions,

[they were] to be governed by [the court’s] instructions.” (7/28

Tr. 5:2-5.) Thus, regardless of any references made by counsel

or witnesses to an “apparent” OCI, the jury was properly

instructed that SAIC was required to disclose relationships that

had the potential of causing SAIC to be biased or impairing its

objectivity. Having shown neither that an apparent OCI differs

from a potential OCI or that the jury was improperly instructed

with respect to SAIC’s OCI disclosure obligations, SAIC has not

demonstrated that it is entitled to a new trial on the grounds

that the government improperly argued that SAIC had to disclose

the appearance of an OCI.

VII. INSTRUCTIONS REGARDING SAIC’S OCI DISCLOSURE OBLIGATIONS

SAIC contends that it is entitled to a new trial because of

erroneous instructions provided to the jury regarding its OCI

disclosure obligations. It alleges that the jury instructions

did not adequately define “ambiguous terminology” in the NRC’s

OCI regulations and improperly “omitted any reference to the

applicable contract language that governed SAIC’s post-award OCI

disclosure obligations.” (Def.’s Mem. at 38, 40.) -43-

A district court has discretion to craft jury instructions

and “jury instructions are not considered erroneous if, when

viewed as a whole, ‘they fairly present the applicable legal

principles and standards[.]” Joy v. Bell Helicopter Textron,

Inc., 999 F.2d 549, 556 (D.C. Cir. 1993) (quoting EEOC v.

Atlantic Community Sch. Dist., 879 F.2d 434, 436 (8th Cir.

1989)). Thus, “[i]t is well established that challenges to jury

instructions are subject to the harmless error rule. . . .

Accordingly, reversal is appropriate only if ‘the trial court’s

error could have affected the substantial rights of the

parties.’” Id. at 559 (internal citations omitted) (quoting

Williams v. U.S. Elevator Corp., 920 F.2d 1019, 1023 (D.C. Cir.

1990)).

A. Explanation of key terms in the NRC’s OCI regulations

SAIC alleges that the jury should have been instructed

differently on the meaning of the terms “regulated by the NRC,”

“relationship,” “bias,” “may diminish capacity,” “potential OCI,”

“present or planned interest,” and “appearance,” as they are used

in or in relation to the NRC’s OCI regulations. (Id.) For the

reasons articulated at the July 25, 2008 jury charge conference

and explained below, SAIC has not shown the jury instructions on

the NRC’s OCI regulations to be erroneous with respect to these

terms. -44-

To the extent SAIC contends the jury instructions lacked

sufficient explanation of the term “regulated by the NRC” within

the explanation of what constitutes an OCI under the NRC’s

regulations, SAIC has not shown the instructions on this issue to

be erroneous. SAIC argued at the jury charge conference and

argues now that “regulated by the NRC” means “licensed by the

NRC.” (7/24 Tr. 57:2-5.) Contrary to SAIC’s argument, neither

the unobjected to evidence at trial nor the NRC’s regulations

support SAIC’s limited definition of “regulated by.” Trial

testimony applied a common sense, ordinary usage of “regulated by

the NRC” -- that is, an organization is regulated by the NRC if

it is subject to the regulations of the NRC. (See, e.g., Rodehau

Test., 7/3 p.m. Tr. 50:2-16.) The term “regulated by the NRC”

does not carry a specialized definition under the NRC

regulations, and the jury was adequately informed of the ordinary

definition of “regulated by the NRC” throughout trial. Further

definition in the jury instruction was unnecessary and omitting

SAIC’s proposed language was not grounds for a new trial.

The terms “relationship,” “present or planned interest,” and

“bias” were defined for the jury utilizing the adequate language

of the NRC regulations regarding OCIs. The jury was instructed

[a]n organizational conflict of interest is a relationship whereby a contractor has present or planned interests related to the work to be performed under an NRC contract which may diminish its capacity -45-

to give impartial, technically sound, objective assistance and advice, or may otherwise result in a biased work product. Present or planned interest may not be contractual but instead may be financial, contractual, organizational, or other interests which relate to a contractor’s work for the NRC.

(7/28 Tr. 18:9-16 (emphasis added).) The jury was further

[w]hether SAIC’s judgment may have been biased includes whether SAIC’s relationships with third parties had the potential of causing SAIC to be biased or impairing SAIC’s objectivity in the work it was performing for the NRC. It does not require a showing that SAIC was, in fact, biased or lacked objectivity or that any such bias or lack of objectivity actually had an affect on SAIC’s work for the NRC.

(7/28 Tr. 19:13-19 (emphasis added).) These instructions, which

closely mirror the language of the NRC’s regulations, informed

the jury what constitutes an OCI, including what type of present

or planned interest with another entity creates an actual or

potential conflicting relationship, and what it means to have the

potential for bias.

Regarding the terms “potential” OCI and “may diminish

capacity,” SAIC has not established that these words carry

anything other than their common sense meanings in ordinary

usages. Failing to include additional definitions of these terms

posed no error. Similarly, to the extent that SAIC contends the

jury instructions should have defined “appearance,” the court’s

instructions did not use the word “appearance.” SAIC has not

shown that “appearance,” which is not used in the NRC’s OCI -46-

regulations, is a term on which it was necessary to instruct the

jury regarding SAIC’s OCI disclosure obligations. Accordingly,

SAIC has not shown that the jury instructions failed to define

key terms in a way that could have substantially affected its

rights, and has not shown it is entitled to a new trial on such a

ground.

B. Omission of contract language regarding post-award disclosure obligations

SAIC alleges that the instructions given to the jury

regarding its OCI obligations were erroneous because they omitted

“any reference to the applicable contract language that governed

SAIC’s post-award OCI disclosure obligations.” (Def.’s Mem. at

40.) SAIC contends that the instructions should have used such

language and informed the jury that post-award, SAIC was

obligated to disclose only “actual conflicts when (and if) [it]

discovers them during performance and to disclose proposed work

for others that SAIC had reason to believe created a potential

conflict of interest[.]” (Id. (internal quotation marks

omitted).)

This contractual language was presented to the jury in the

evidence admitted at trial, including the relevant contracts, and

explained through witness testimony. Both parties were free, and

encouraged, to utilize the language from the contracts in their

closing arguments. It was unnecessary for the jury instructions

to re-read all of the language from the contracts with which they -47-

had already been presented. As is discussed above, the jury was

properly instructed regarding what constituted an actual or

potential OCI. The jury also was properly instructed as to the

state of mind required for SAIC to be liable under the FCA --

i.e., that SAIC had to have acted “knowingly.” There was

significant evidence supporting the jury’s finding that SAIC

either discovered actual conflicts during its performance or had

reason to believe its work for others created a potential

conflict, and by failing to disclose the actual or potential

conflicts, SAIC knowingly submitted false claims with respect to

its OCI obligations. Accordingly, SAIC has not shown either that

the jury instruction’s omission of this contract language was in

error, or that if the additional instruction should have been

included, the omission was anything but harmless.

CONCLUSION

Given all of the evidence presented at trial and the

reasonable inferences that could be drawn from it, there was

sufficient evidence upon which a reasonable jury could find for

the United States on its FCA and breach of contract claims. SAIC

is not entitled to judgment as a matter of law on any count. In

addition, SAIC has not shown that the instructions given to the

jury were erroneous or that any other error was committed at

trial such that it would be a clear miscarriage of justice not to

grant SAIC a new trial. SAIC’s motion for judgment as a matter -48-

of law or, in the alternative, for a new trial, will be denied.

Thus, it is hereby

ORDERED that SAIC’s motion [152] for judgment as a matter of

law or for a new trial be, and hereby is, DENIED. It is further

ORDERED that SAIC’s objection [156] to the United States’

bill of costs be, and hereby is, SUSTAINED. Travel costs for

witness Dan Guttman’s flight to China are EXCLUDED from the

United States’ bill of costs. It is further

ORDERED that the stay of execution of judgment issued on

November 7, 2008 be, and hereby is, LIFTED.

SIGNED this 14th day of September, 2009.

/s/ RICHARD W. ROBERTS United States District Judge