United States Ex Rel. Purcell v. MWI Corp., 420 U.S. App. D.C. 176

Background

MWI sold irrigation pumps to Nigeria and obtained eight Export-Import Bank loans totaling $74.3 million; MWI certified in 58 documents that it paid only “regular commissions” to its sales agent.
Relator Purcell alleged MWI paid $28 million in commissions to a long‑term Nigerian agent (Indimi) that were not “regular,” and the United States intervened under the False Claims Act (FCA).
The district court adopted the Government’s industry‑wide meaning of “regular commissions,” submitted falsity and knowledge to a jury, which found liability and $7.5 million in actual damages (trebled to $22.5M), later offset to zero based on Nigeria’s loan repayments; civil penalties were imposed.
Government appealed the offset ruling; MWI cross‑appealed arguing as a matter of law it lacked the requisite FCA knowledge because the term “regular commissions” was ambiguous and MWI’s interpretation was reasonable.
The D.C. Circuit held the meaning of “regular commissions” was ambiguous and MWI’s individual‑agent interpretation was objectively reasonable; because the Government failed to show the Bank or an authoritative source warned MWI away from that interpretation, the Government did not prove MWI acted knowingly.
The court reversed and directed entry of judgment for MWI; it declined to address the damages offset issue due to disposition on knowledge.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether MWI knowingly presented false claims under the FCA	MWI paid excessive commissions that exceeded any industry norm, so it knew certifications were false	MWI had a reasonable, good‑faith interpretation that “regular commissions” meant commissions consistent with what it historically paid an individual agent	Reversed: Government failed to prove knowledge because there was no authoritative guidance warning MWI away from its reasonable interpretation
Whether the ambiguous term “regular commissions” precludes FCA liability as a matter of law	Term should be construed industry‑wide; ambiguity did not excuse nondisclosure of large commissions	The term is ambiguous and an objectively reasonable individual‑agent interpretation defeats knowledge	Term is ambiguous; objective reasonableness of MWI’s interpretation precludes a finding of knowledge absent authoritative warning
Whether informal or internal signals from the Bank sufficed to ‘warn away’ MWI’s interpretation	Bank officials’ informal comments (e.g., ~5%) and internal concern at MWI show notice or recklessness	Informal comments are not authoritative; subjective employee concerns are irrelevant to objective knowledge standard	Informal guidance and internal worries are insufficient to show the Bank warned MWI away from its reasonable view
Whether the size of the commissions alone proves knowledge	Large commissions so divergent from industry norms establish recklessness or deliberate ignorance	Magnitude does not negate a reasonable interpretation absent evidence commissions were inherently irregular or industry benchmarks were known	Size alone does not prove knowledge; it cannot substitute for evidence that MWI was objectively warned away from its interpretation

Key Cases Cited

United States v. Bornstein, 423 U.S. 303 (Sup. Ct.) (defendant entitled to offset against trebled FCA damages for payments compensating the government)
Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (Sup. Ct.) (objective‑reasonableness standard and that informal guidance typically does not warn a regulated party away from a reasonable interpretation)
Rockwell Int’l Corp. v. United States, 549 U.S. 457 (Sup. Ct.) (relator‑intervention and qui tam principles discussed)
Village of Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 489 (Sup. Ct.) (vagueness and notice concerns bear on enforcement of ambiguous regulatory standards)
K & R Ltd. P’ship v. Mass. Hous. Fin. Agency, 530 F.3d 980 (D.C. Cir.) (need for authoritative guidance to warn a defendant away from a reasonable interpretation)
United States ex rel. Siewick v. Jamieson Sci. & Eng’g, Inc., 214 F.3d 1372 (D.C. Cir.) (difficulty of proving recklessness when falsity depends on interpretive disputes)
United States ex rel. Purcell v. MWI Corp., 520 F. Supp. 2d 158 (D.D.C.) (district court summary judgment ruling addressing meaning of “regular commissions")
United States ex rel. Purcell v. MWI Corp., 824 F. Supp. 2d 12 (D.D.C.) (district court denying further summary judgment on falsity and knowledge)
United States ex rel. Purcell v. MWI Corp., 15 F. Supp. 3d 18 (D.D.C.) (district court on damages offset and penalties)
United States ex rel. Purcell v. MWI Corp., 50 F. Supp. 3d 33 (D.D.C.) (district court Rule 50(b) denial on judgment as a matter of law)