Lcm Energy Solutions v. United States
128 Fed. Cl. 728
| Fed. Cl. | 2016Background
- ARRA §1603 provided cash grants equal to 30% of the cost basis for qualifying renewable energy property placed in service in 2009–2011; Treasury administered the program with NREL assistance.
- RCIAC (installer) performed a pilot solar installation (Brandon Oaks) using a $10.50/ watt retail price; Treasury approved the full §1603 grant for that transaction.
- After Treasury and IRS told RCIAC that the installer and lessor could not be the same entity to qualify for §1603, RCIAC’s principals formed LCM to hold title and lease 18 systems that RCIAC had installed.
- LCM’s leases charged nominal payments ($25/month or equivalent in kind) and included purchase options; RCIAC’s actual installation cost per ~10.08 kW system was ~$47,880 while retail prices claimed were about $106,000 (≈$10.50/watt).
- Treasury awarded LCM $482,504 (reduced from LCM’s claimed $889,638) after concluding LCM’s claimed bases overstated costs; LCM sued for the $407,134 difference and the Government counterclaimed for forfeiture and False Claims Act liability alleging fraud.
- After trial, the Court found (1) the systems qualified and LCM owned them, (2) the proper §1603 basis is installation cost plus 20% profit (not the inflated retail price), (3) Treasury paid the correct amounts, and (4) Government failed to prove fraud or false-claims liability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper §1603 cost basis for LCM’s 18 systems | LCM sought 30% of the retail price (~$10.27–$10.53/watt) used in leases (difference ≈ $407,134) | Treasury argued retail prices were not meaningful because LCM waived customer payments; award should be based on lower installation costs | Held: Use actual installation cost plus 20% profit as reasonable basis; Treasury awards were correct and LCM keeps $482,504 |
| Ownership and lease validity | LCM contended RCIAC transferred title to LCM and leases were enforceable, qualifying property for §1603 | Gov. suggested transfers and leases were sham devices to obtain grants | Held: Transfers and leases were valid under Texas law; LCM owned the property and executed true leases |
| Forfeiture under Forfeiture of Fraudulent Claims Act (28 U.S.C. §2514) | LCM: no intent to defraud; acted on Treasury/IRS guidance in forming LCM | Gov.: LCM knowingly submitted false claims and thus forfeited recovery | Held: Gov. failed to prove knowledge and intent by clear and convincing evidence; forfeiture denied |
| False Claims Act liability (31 U.S.C. §3729) | LCM: did not knowingly submit false claims; relied on Treasury approvals and guidance | Gov.: LCM knowingly presented false records/statements material to claims and must repay treble damages plus penalties | Held: Gov. failed to prove knowing presentation or reckless disregard by preponderance; FCA claims denied |
Key Cases Cited
- Daewoo Eng’g & Constr. Co. v. United States, 557 F.3d 1332 (Fed. Cir. 2009) (standards for Forfeiture of Fraudulent Claims Act and scienter)
- Commercial Contractors v. United States, 154 F.3d 1357 (Fed. Cir. 1998) (knowledge and intent elements for forfeiture and False Claims Act)
- Glendale Fed. Bank, FSB v. United States, 239 F.3d 1374 (Fed. Cir. 2001) (requiring proof of fraud-based forfeiture)
- Therasense v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (clear-and-convincing standard for intent and inference rules)
- ARRA Energy Co. I v. United States, 97 Fed. Cl. 12 (Fed. Cl. 2011) (treating §1603 as money-mandating and reviewing basis issues)
- Kellogg Brown & Root Servs., Inc. v. United States, 99 Fed. Cl. 488 (Fed. Cl. 2011) (discussing burden and proof for fraud-related counterclaims)
- D’Avanzo v. United States, 54 Fed. Cl. 183 (Fed. Cl. 2002) (de novo review and plaintiff’s burden in tax-refund-type suits)