SCUTELLARO v. CAPITOL SUPPLY, INC., 1:10-cv-01094

Background

Capitol Supply, a GSA schedule contractor, sold office products (including Fellowes shredders) to federal agencies and was contractually/ regulatory‑ly required to retain country‑of‑origin (COO) records.
Capitol admitted it did not preserve COO data for sales before July 2009 and retained only incomplete COO history through late 2010; suppliers provided COO data feeds with varying frequency.
The relator sued under the False Claims Act (FCA), alleging Capitol sold non‑TAA/BAA (non‑designated‑country) products while certifying TAA compliance; the United States intervened on Fellowes shredders.
GSA regional evaluators gave Capitol favorable Contractor Assistance Visit report cards, while GSA New York repeatedly notified Capitol (2005–2012) of alleged TAA noncompliant listings and issued a Cure Notice in 2011.
Government and relator issued subpoenas to suppliers and Capitol; Capitol’s poor recordkeeping led to a court‑ordered subpoena enforcement and a conditional contempt order.
After extended discovery, the court granted plaintiffs’ motions for an adverse inference for missing COO records and denied all summary judgment motions.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether adverse inference for missing COO data is warranted	Relator & U.S.: Capitol violated regulatory/contract record‑ retention obligations; adverse inference that missing COO would show non‑designated origin	Capitol: spoliation governed only by Rule 37(e); plaintiffs did not meet its standards; no intent to deprive	Court: Rule 37(e) inapplicable because independent regulatory retention duties existed; under inherent authority and Talavera, adverse inference permitted that missing COO would show non‑designated origin; scope to be resolved at trial
Whether FCA public‑disclosure bar bars pre‑2010 claims	Relator: allegations not based on public disclosures; relator not barred	Capitol: COO data and prior filings/public sources publicly disclosed transactions/ allegations	Court: Pre‑Mar‑23‑2010 conduct uses pre‑amendment bar; but defendant failed to show transaction (X) was publicly disclosed (no public source connected COO to Capitol), so public‑disclosure bar does not apply to pre‑amendment claims
Whether post‑2010 public‑disclosure bar applies	U.S. opposed dismissal; government objects to dismissal on public‑disclosure grounds	Capitol sought dismissal for post‑2010 sales too	Court: 2010 amendment applies to post‑March‑23‑2010 sales and government’s objection blocks dismissal; defendant’s MSJ denied as to post‑amendment claims
FCA merits: falsity, materiality, scienter, and damages on summary judgment	Plaintiffs: implied‑certification theory; COO noncompliance material because TAA/FAR conditions and GSA warnings; enough evidence for summary judgment	Capitol: mixed signals from GSA, supplier reliance, and disputed expert methodologies create factual disputes; materiality and scienter not established as a matter of law	Court: genuine disputes exist on falsity (materiality), scienter, and damages; summary judgment denied to all parties; adverse inference noted but number/scope of noncompliant sales for damages remain for jury

Key Cases Cited

Talavera v. Shah, 638 F.3d 303 (D.C. Cir. 2011) (violation of record‑retention regulations can justify adverse inference)
United States ex rel. Oliver v. Philip Morris USA Inc., 763 F.3d 36 (D.C. Cir. 2014) (public‑disclosure bar principles)
United States ex rel. Oliver v. Philip Morris USA Inc., 826 F.3d 466 (D.C. Cir. 2016) (clarifies transaction/public‑disclosure analysis)
Springfield Terminal v. Quinn, 14 F.3d 645 (D.C. Cir. 1994) (X + Y = Z framework for public‑disclosure bar)
Universal Health Servs. v. Escobar, 136 S. Ct. 1989 (2016) (materiality standard for implied‑certification FCA claims)
Science Applications Int’l Corp. v. [United States], 626 F.3d 1257 (D.C. Cir. 2010) (implied certification and materiality considerations)
United States ex rel. McBride v. Halliburton Co., 848 F.3d 1027 (D.C. Cir. 2017) (post‑Escobar FCA guidance)
United States ex rel. Folliard v. Gov’t Acquisitions, Inc., 764 F.3d 19 (D.C. Cir. 2014) (third‑party COO certifications and reasonableness of reliance)