UNITED STATES of America, Plaintiff, v. DRC, INC., Defendant.
Civil Action No. 04-1608 (RWR)
United States District Court, District of Columbia.
April 21, 2012.
856 F. Supp. 2d 159
RICHARD W. ROBERTS, District Judge.
IV. CONCLUSION
For the foregoing reasons, the Plaintiffs’ Joint Motion to Complete and Supplement the Record will be granted in part and denied in part, and the federal defendants’ Motion to Strike will be granted in part and denied in part.7 Specifically, the Court will not supplement the administrative record, but will consider the four documents offered by the plaintiffs that postdate the issuance of the Final Guidance as extra-record evidence.
The Court will contemporaneously issue an Order consistent with this Memorandum Opinion.8
Laurie J. Weinstein, Mitchell P. Zeff, United States Attorney‘s Office, Washington, DC, for Plaintiff.
Barbara Ann Van Gelder, Dickstein Shapiro LLP, Adele Lack, Dickstein Shapiro Morin & Oshinsky LLP, Washington, DC, Jose Antonio Canales, Canales & Simonson, PC, Corpus Christi, TX, for Defendant.
RICHARD W. ROBERTS, District Judge.
The government brings suit against defendant DRC, Inc. (also known as Disaster Relief Construction, Inc.) under the False Claims Act (“FCA“),
BACKGROUND
The contract at the heart of this dispute was financed by USAID in order to help Honduras and other countries rebuild after Hurricane Mitch struck in 1998. USAID collaborated with the Honduran Social Investment Fund (“FHIS“), an agency of the government of Honduras, on a project to construct and reconstruct water, sewer, and sanitation infrastructure in the wake of the hurricane. (Am. Compl. ¶ 10.) DRC participated in a competitive bidding process for a contract to perform the construction work and in connection with its bid submitted numerous pre-qualification documents representing its equipment, inventory, personnel, and financial obligations. (Id. ¶¶ 11-12.) The pre-qualification documents also requested information about the contractor‘s plans to subcontract. (Pl.‘s Opp‘n to Def.‘s First Mot. Partial Summ. J. (“Pl.‘s Opp‘n“), Exs. 4 and 5.) DRC did not identify any subcontractors with which it planned to work and represented that the company had no intention of subcontracting. (Id.)
On the basis of its pre-qualification score and low bid, DRC obtained a contract for construction projects in Honduras. (Am. Compl. ¶ 13.) The contract took the form of a “host country contract,” an agreement between a foreign country and a third-party contractor, where USAID provides funding but is not itself a party. (Def.‘s Reply in Support of Def.‘s First Mot. Summ. J. (“Def.‘s Reply“), Def.‘s Stmt. of Undisputed Facts for Def.‘s First Mot. Summ. J. (“Def.‘s Stmt. Undisputed Facts“) ¶¶ 10-11.) DRC ultimately submitted twenty eight vouchers for payment under the contract (Compl., Ex. C), each of
I. SUBCONTRACTING OBLIGATIONS IN THE CONTRACT
The construction contract between DRC and FHIS was executed on June 21, 2000. (Def.‘s Stmt. Undisputed Facts ¶ 26.) The contract contained twelve constituent sections, many of which were written only in Spanish.1 (Id. ¶¶ 4-5.) USAID required the inclusion of two of those sections, Attachment A and Attachment B (“the Mandatory Clauses“), which were rendered both in Spanish and in English. (Id. ¶¶ 6-7.)
Multiple provisions in the contract addressed subcontracting. First, Section 28 of the contract provided that “[t]he contractor may not ... subcontract with third parties without obtaining the advance, written consent of FHIS and USAID.” (Id. ¶ 20; Def.‘s First Mot. Summ. J., Ex. 2.) Section 28 further provided that subcontracted work could not exceed 40 percent of the total work budget. (Def.‘s Stmt. Undisputed Facts ¶ 21.) The contract listed five instances in which payment could be withheld, including “[f]ailure of the Contractor to make payments due to subcontractors for materials or labor.” (Id. ¶ 57.)
Second, both Attachment A, in Section 3(G)(2)(e), and Attachment B, in Section 3(F)(2)(e), state that “[u]nder a fixed-price construction contract of any value, the prime contractor may procure locally produced goods and services under subcontracts.” (Id. ¶¶ 16-17; Def.‘s First Mot. Summ. J., Ex. 3.)
Third, both Attachments, in Section 2, provide that “the Contract has reserved to USAID certain rights such as ... the right to approve the terms of this Contract, the Contractor, and any or all subcontracts ... related to this Contract and the Program/Activity of which it is part.” (Def.‘s First Mot. Summ. J., Ex. 3.) Section 2 in Attachment A further states that “[a]ny approval (or failure to disapprove) by USAID shall not bar the Contracting Agency or USAID from asserting any right, or relieve the Contractor of any liability which the Contractor might otherwise have to the Contracting Agency or USAID.” (Id.)2
Finally, Attachment A contains Section 14, entitled “Assignment, Subcontract Clauses and Procurements.” Subsection A provides that “USAID‘s prior written consent to any assignment of obligations under the Contract, in addition to the consent of the Contracting Agency, is required“; subsection B obligates the contractor to include specified provisions of the Attachment in all subcontracts. (Id.)3
II. DRC‘S NEGOTIATIONS CONCERNING SUBCONTRACTING
FHIS issued a notice to proceed on June 23, 2000, two days after the contract was executed, giving DRC fifteen days in which to begin work. (Def.‘s Stmt. Undisputed Facts ¶ 27.) According to DRC‘s Executive Vice President, Sid Vogel, he told FHIS on July 3, 2000 that DRC planned to subcontract and submitted a list of subcontractors for FHIS approval at a meeting with Moises Starkman, the Minister of
Several months later, on November 7, 2000, Cardona sent a letter to DRC stating that FHIS had “been informed” that DRC was engaged in subcontracting and reminding DRC that the project “can only be contracted up to 40 percent of the project, previous authorization from FHIS.” (Def.‘s First Mot. Partial Summ. J., Ex. 9.) The letter concluded, “[w]e would appreciate that you do not effect any subcontractions [sic] without previous authorization.” (Id.) Cardona sent a copy of the letter to Todd Sloan, the head of the USAID section that administered the construction contract. (Def.‘s Stmt. Undisputed Facts ¶¶ 32-33.) On November 8, 2000, DRC submitted “participation contracts” to FHIS in order to receive FHIS‘s legal evaluation of whether those contracts required formal approval under the construction contract. (Id. ¶ 37.) In the preceding months, DRC “had replaced its original subcontracts with ‘participation contracts’ and argued, based on advice of Honduran legal counsel, that the Contract did not require DRC to obtain further approval from FHIS concerning these ‘participation contracts’ and [that] the 40 percent [subcontracting] limit did not apply.” (Def.‘s First Mot. Partial Summ. J., Def.‘s Stmt. of Material Facts (“Def.‘s Stmt. of Material Facts“) ¶ 34 (citing Ex. 11, Pelaez Dep. at 115:16-118:11; 27:22-28:7).) FHIS issued a legal opinion on November 11, 2000 that the participation contracts did require approval and were subject to the limit. (Def.‘s Stmt. Undisputed Facts ¶ 38.)
After receiving FHIS‘s legal opinion, DRC Project Manager Francisco Pelaez submitted a memorandum on November 15, 2000 addressed to Starkman acknowledging the parties’ difference of opinion about the status of participation agreements and, given FHIS‘s legal position, submitting a list of subcontractors for the approval of both FHIS and USAID. (Def.‘s Stmt. Undisputed Facts ¶¶ 39-40; Def.‘s First Mot. Partial Summ. J., Ex. 18.) The memorandum represented that, regardless of the form of agreement with local companies, the budgeted amount was below the 40 percent threshold. (Id.) A series of meetings and letter exchanges among DRC, FHIS, and USAID followed, lasting several months. (Def.‘s Stmt. Undisputed Facts ¶ 42.) DRC requested USAID and FHIS approval for subcontracting again later in November, along with revised subcontract forms. (Id. ¶¶ 61-63.) A report by a USAID auditor, Christine Byrne, who visited DRC work sites in November noted that at several work sites it appeared that DRC had subcontracted the vast majority of the work. (Def.‘s First Mot. Partial Summ. J., Ex. 12.)
From December through early March, DRC submitted several requests to FHIS requesting approval for subcontractors, copying USAID on the letters. (Def.‘s Stmt. Undisputed Facts ¶¶ 65, 66, 68, 69, 71-73, 75, 76, 78, 79.) In January 2001, Sloan wrote to Cardona and expressed USAID‘s concern about one subcontractor currently working for DRC and requested additional information about the subcontractor. (Id. ¶ 75.) Cardona forwarded USAID‘s request to DRC. (Id. ¶ 76.)4
FHIS eventually, on March 19, 2001, issued a formal resolution approving DRC‘s subcontracting, subject to USAID review. (Id. ¶¶ 43-44.) At a meeting with DRC and FHIS on April 6, 2001, Carlos Flores, a USAID technical officer who worked under Sloan, represented orally that Flores would be the “sole representative of USAID in charge of dealing with matters related to the project” and that approval by USAID “is not necessary to authorize DRC subcontracting endeavors.” (Def.‘s First Mot. Partial Summ. J., Ex. 24 (Memorandum of Francisco Pelaez relating minutes of meeting); see also id., Ex. 11 (Pelaez Dep. 81:9-82:2); Def.‘s Stmt. of Material Facts ¶¶ 46-48.)6
In June 2001, DRC changed the subcontractors assigned to certain project sites and advised FHIS and USAID of the changes. (Def.‘s Stmt. Undisputed Facts ¶ 90.) In August 2001, DRC‘s new project manager, Mario Maciel, sought a formal response from Sloan about subcontracting by sending a copy of the March 2001 FHIS resolution and stating that DRC “assume[d] that [Sloan] had no objections to th[e] approval.” (Def.‘s First Mot. Partial Summ. J., Ex. 66.) Sloan‘s response is a disputed point between the parties. DRC proffers an undated, unsigned “draft response” from Sloan to Maciel, in which Sloan stated that USAID is “concerned that DRC, Inc. previously subcontracted work ... without the prior approval of USAID and FHIS,” but that “[i]n light of the need to complete the work ..., [USAID] will raise no objection to the approval by FHIS set forth in the FHIS Resolution; however, USAID reserves all of its rights with respect to the subcontracting of work by DRC, Inc. ... without the prior approval of USAID and
During the ongoing discussions about DRC‘s subcontracting, USAID issued a Letter of Commitment, on December 5, 2000, in which it “guarantee[d] payment” to DRC “in accordance with the terms and conditions specified in the contract.” (Def.‘s First Mot. Partial Summ. J., Ex. 70.) DRC submitted on December 11, 2000 its first invoice for work performed (Def.‘s Stmt. Undisputed Facts ¶ 53), and it certified that “the services ... for which payment is requested have been satisfactorily performed (delivered) and the payment requested is in accordance with the terms of the contract.” (Compl., Ex. C2.)7 Each subsequent invoice contained an identical certification. (Id., Exs. C3-C28.)
III. THE SUIT
The government filed suit under the False Claims Act in September 2004. The government alleges that DRC made false statements in its pre-qualification documents regarding its inventory, equipment, and personnel (Am. Compl. ¶¶ 16-23), and that it falsely certified performance of work that had actually been completed by unauthorized subcontractors (Am. Compl. ¶¶ 24-34). DRC‘s motion to dismiss for failure to state a claim, lack of personal jurisdiction, and improper venue, or, alternatively, to transfer, was denied.
In its pending motion for partial summary judgment, DRC argues that its invoices were not false because the underlying contract permitted subcontracting, because the FHIS approved the subcontracting and USAID told FHIS and DRC that USAID approval was unnecessary, and because DRC‘s invoices did not impliedly certify that no unapproved subcontracting had taken place. DRC also argues that it is entitled to judgment on the false invoices claim because DRC lacked the requisite scienter and because the government did not suffer any actual damages from DRC‘s subcontracting. DRC‘s motion for partial summary judgment does not address the government‘s allegations regarding the pre-qualification process.8
DISCUSSION
A party may move for summary judgment on an individual claim or part of a claim.
The FCA created a cause of action against anyone who “knowingly presents, or causes to be presented, to an officer or employee of the United States Government ... a false or fraudulent claim for payment or approval[.]”
A claim may be “legally false” if it represents falsely that the party submitting the claim has complied with an applicable federal statute or regulation, or with a contractual term. United States v. Sci. Applications Int‘l Corp., 626 F.3d 1257, 1266 (D.C.Cir.2010) (”SAIC“). Such a “false certification” can be inferred from silence if “certification was a prerequisite to the government action sought.” Siewick, 214 F.3d at 1376. “To establish FCA liability under an implied certification theory, the plaintiff must prove by a preponderance of the evidence that compliance with the legal requirement in question is material to the government‘s decision to pay.” SAIC, 626 F.3d at 1271. The materiality of a contractual requirement may be evident from “[t]he existence of express contractual language specifically linking compliance to eligibility for payment.” Id. at 1269. But a contractual requirement can also be considered material in the absence of express language if “both parties to the contract understood that payment was conditional on compliance with the requirement at issue.” Id.; see also United States v. TDC Mgmt. Corp., Inc., 288 F.3d 421, 426 (D.C.Cir.2002) (noting that withholding “information critical to the decision to pay” is a false claim (quoting Ab-Tech Constr., Inc. v. United States, 31 Fed.Cl. 429, 434 (Fed.Cl.1994))). Inter
The FCA also imposes a scienter requirement, requiring that a defendant present a false claim knowingly, which entails having “actual knowledge of the information[,]” acting “in deliberate ignorance of the truth or falsity of the information[,]” or acting “in reckless disregard of the truth or falsity of the information.”
Claims for payment submitted under a contract procured by fraud also may be actionable. See United States ex rel. Bettis v. Odebrecht Contractors of Cal., Inc., 393 F.3d 1321, 1326 (D.C.Cir.2005). Congress intended that “‘each and every claim submitted under a contract ... or other agreement which was originally obtained by means of false statements or other corrupt or fraudulent conduct ... constitutes a false claim’ under § 3729(a).” Id. (quoting S.Rep. No. 99-345, at 9 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5274). In United States ex rel. Schwedt v. Planning Research Corp., 59 F.3d 196, 197 (D.C.Cir.1995), the D.C. Circuit considered an FCA action against a defendant who contracted to design software for the government. The court noted that a § 3729(a)(1) claim could rest on allegations that the defendant “made an initial misrepresentation about its capability to perform the contract in order to induce the government to enter into the contract[,]” and “... this original misrepresentation tainted every subsequent claim made in relation to the contract[.]” Id. at 199.10
A defendant who submits a false claim “is liable for civil penalties regardless of whether the government shows that the submission of that claim caused the government damages.” SAIC, 626 F.3d at 1277. The defendant may also be liable for “3 times the amount of damages which the Government sustains because of the act of [the defendant].” Id. at 1277-78 (quoting
I. PRESENTMENT
DRC argues in its reply in support of its motion for partial summary judgment that the government cannot prove its FCA claim because the government was not a party to the contract between DRC and FHIS. (Def.‘s Reply at 7-8.) However, DRC cites no authority for the proposition that liability under the FCA depends on the existence of a contract between the claimant and the government; what matters is whether DRC submitted to the government a claim for payment. Because FHIS may readily be characterized as a grantee of the United States, satisfying the FCA‘s presentment requirement entails showing either that “the Government provides the funds to the grantee upon presentment of a claim [by the defendant] to the Government” or that “after the grantee presents the claim, the Government provides the funds directly to the claimant[.]” United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488, 493 (D.C.Cir.2004) (emphasis omitted). USAID disbursed funds directly to DRC upon receipt of invoices that included certifications from both DRC and FHIS. (See Compl., Ex. C.; see also Def.‘s First Mot. Partial Summ. J., Ex. 3 (Attachment A, Section 13, Alternative II(A)(1)) (“Payments under this Contract shall be made in U.S. Dollars financed with funds made available by USAID. Such payments will be made to the Contractor directly by USAID[.]“)).) This financing arrangement satisfies the requirement that DRC submitted claims for payment to the government.
II. IMPLIED FALSE CERTIFICATION
DRC does not contest that it subcontracted work without obtaining written prior approval from USAID. The claims for payment DRC made under the contract may be considered “false” therefore if the contract (1) required DRC to secure USAID‘s prior approval for subcontracting, (2) that requirement was material, and (3) DRC withheld information about its non-compliance with that requirement. The government must also prove that DRC knew that it violated the requirement and knew that its compliance with the requirement was material to the govern
A. Contractual obligations
If FCA liability is to be premised on an implied false certification of compliance with contractual term, the term must be clear and unambiguous because FCA liability is not triggered where parties “simply disagree about how to interpret ambiguous contract language.” Mass. Housing Finance Agency, 530 F.3d at 984; see also United States v. Kellogg Brown & Root Srvcs., Inc., 800 F.Supp.2d 143, 156 (D.D.C.2011) (emphasizing that a contractor “should not face the severe penalties of the FCA for merely tangential violations“). DRC argues that the contract gave it “unconditional authorization to subcontract to local subcontractors” because the Mandatory Clauses provided that “[u]nder a fixed-price construction contract of any value, the prime contractor may procure locally produced goods and services under subcontracts.” (Def.‘s Mem. of P. & A. in Support of First Mot. Partial Summ. J. (“Def.‘s Mem.“) at 4-5.)12 DRC maintains this contention despite the fact that the contract clearly provided that “[t]he contractor may not ... subcontract with third parties without obtaining the advance, written consent of FHIS and USAID” (Def.‘s First Mot. Partial Summ. J., Ex. 2, Section 28). The Mandatory Clauses provide, in Section 15, that, in the event the terms of the contract conflict with provisions of the Mandatory Clauses, the Mandatory Clauses control. (See Def.‘s First Mot. Partial Summ. J., Ex. 3) (“[F]or matters which are addressed in both the text of such Contract and this Attachment, the provisions of this Attachment will constitute additional requirements for the Contract and, in the event of ambiguity or conflict between any provision in the text of the Contract and any provision(s) set forth in this Attachment, the provisions in this Attachment will control.“) Relying on this provision, DRC argues that the Mandatory Clauses’ general dictate that “the prime contractor may procure locally produced goods and services under subcontracts” (id.), without mention of any necessary approval, trumps the approval requirement found in the text of the contract. (Def.‘s Mem. at 6.)
DRC‘s interpretation of the contract is not tenable. The term of the Mandatory Clauses allowing DRC to subcontract for local services does not conflict with Section 28. The two provisions are complementary, and the Mandatory Clauses may be harmonized with other, more specific provisions. Although nothing in the Mandatory Clauses’ express reservation to USAID of “the right to approve ... subcontracts” (Def.‘s First Mot. Partial Summ. J., Ex. 3, Section 2) makes clear that DRC would be required to make a formal submission to USAID for approval before subcontracting, the specific contract language in Section 28 explicitly does require prior written approval from USAID. The Mandatory Clauses’ general grant of permission to use subcontracts simply does not provoke “ambiguity or conflict” regarding whether approval is necessary, because it is easily read alongside the more specific provisions describing the circumstances under which subcontracting may occur. In sum, the contract did not provide unconditional authority for DRC to subcontract, but rather permitted subcontracting subject to the
B. Materiality and scienter
DRC‘s invoices can be considered false under an implied false certification theory only if they represent falsely that DRC complied with a contractual term that is material to payment. SAIC, 626 F.3d at 1269. USAID pre-approval of subcontractors could not be considered material per se, because no contractual provision expressly linked pre-approval to DRC‘s eligibility for payment. Id. The contract enumerated five instances in which payment could be withheld, and did not include failure to obtain prior approval for subcontracting among them. (Def.‘s Stmt. Undisputed Facts ¶ 57.) In the absence of an express link to payment eligibility, the materiality of USAID approval must rest on record evidence that “both parties to the contract understood that payment was conditional on compliance with the requirement at issue.” SAIC, 626 F.3d at 1269. The materiality inquiry into the parties’ understanding of the importance of specified terms overlaps with the FCA‘s scienter requirement that a defendant have submitted false claims knowingly. Articulating the scienter standard, the D.C. Circuit stated that the government must “prove that the defendant knows that it (1) ‘violated a contractual obligation, and (2) that its compliance with that obligation was material to the government‘s decision to pay,‘” SAIC, 626 F.3d at 1271.14 Where materiality is estab
Although only DRC and FHIS were “parties to the contract” at issue here, as is discussed above, the financing arrangement suffices to expose DRC to liability if the “government‘s decision to pay,” SAIC, 626 F.3d at 1271, depended on DRC‘s false implied certification of compliance with its obligation to seek prior authorization for subcontractors. To survive summary judgment, the government must provide evidence that USAID, rather than FHIS, considered DRC‘s securing of USAID approval sufficiently important and that DRC knew it had violated the pre-approval requirement and that the requirement was material to payment. The extensive record demonstrates that there are triable issues regarding these facts.
The government contends that DRC‘s understanding that USAID‘s approval was important can be inferred from DRC‘s actions during the pre-qualification stage. DRC‘s Executive Vice President signed numerous documents during the pre-qualification stage of the public competition for the host country contract, including “every page of what became attachment A [of the Mandatory Clauses],” representing that DRC did not intend to subcontract. (Pl.‘s Opp‘n at 10-11.) The government argues that prompt execution of subcontracts following award of the host country contract demonstrates DRC‘s preexisting intent to subcontract on a large scale and in violation of the terms of the host country contract. (Id.) DRC maintains that, because FHIS required DRC to begin work only weeks after the execution of the contract, DRC was “forced ... to abandon its original approach and to subcontract a portion of each project.” (Def.‘s Mem. at 7.) The government proffers evidence suggesting that DRC intend
The government also argues that DRC‘s replacement of its original subcontracts with “participation agreements” DRC hoped would avoid the prior approval requirement also tends to show DRC‘s perception that prior approval for subcontracting was an important contractual obligation.16 DRC maintains that it attempted to use participation agreements on the advice of its Honduran counsel, and that it promptly submitted the agreements to FHIS in order to determine their status under the contract and did so before submitting any work invoices under the contract. (Def.‘s Mem. at 8.) Assessing the credibility and implications of DRC‘s representations is not an appropriate task on summary judgment. The evidence is sufficient to raise a jury question whether DRC‘s pursuit of participation agreements in lieu of subcontracts tends to prove that DRC understood the proce
In addition to establishing a triable issue whether the pre-approval requirement was material to payment, the record reflects a triable issue whether DRC possessed the requisite knowledge of materiality when it submitted its claims for payment. The government‘s awareness of a defendant‘s activities is relevant to determining a defendant‘s knowledge that its claims for payment are impliedly false. “The fact that the government knew of [a contractor‘s] mistakes and limitations, and that [the contractor] was open with the government about them, suggests that while [the contractor] might have been groping for solutions, it was not cheating the government in the effort.” Wang ex rel. United States v. FMC Corp., 975 F.2d 1412, 1421 (9th Cir.1992). Although there is some evidence favoring DRC‘s position that it was forthcoming with its subcontracting plans, there is also evidence that supports the opposite conclusion. On the one hand, DRC initiated communication with FHIS regarding subcontracting as early as July 3, 2000, less than two weeks after the execution of the host country contract on June 21, 2000. Early openness about subcontracting would tend to support DRC‘s argument that it was forthcoming with its plans and engaged in good faith negotiations to meet its contractual obligations. And, according to Vogel, Starkman told Vogel the day after the July 3, 2000 meeting that DRC should “go to work,” which Vogel testified he understood to constitute “approval [for DRC] to ... go out there and go to work with these subcontractors.” (Vogel Dep. 72:11-15.) On the other hand, Section 28 of the contract required prior written consent of both FHIS and USAID. Whatever a jury might find concerning what Vogel believed Starkman‘s consent to mean, DRC offers no evidence that DRC sought USAID approval of subcontractors in July 2000, or at any point over the following three months.
The course of the discussions concerning DRC‘s subcontracting, which began in November 2000, also could lead a jury to draw different conclusions. In December 2000, in the midst of those negotiations, USAID issued a letter of commitment guaranteeing payment to DRC under the contract and DRC submitted its first work invoice. (Def.‘s Stmt. Undisputed Facts ¶¶ 53, 108.) USAID paid this invoice and twenty one others submitted between December 11, 2000 and March 4, 2002. (Id. ¶ 98.) That the government committed to paying and indeed paid DRC even after it knew that DRC had subcontracted without approval could be found to support DRC‘s argument that it did not know the pre-approval requirement was important to payment. DRC argues that USAID did not respond to its multiple requests to approve its subcontractors, and instead simply facilitated negotiations between DRC and FHIS, including encouraging FHIS to raise the 40% limit on subcontracting, precluding a finding that DRC knew prior USAID approval was important to payment. The undisputed fact that on April 6, 2001, USAID technical officer Flores told DRC orally that USAID pre-approval was not necessary lends further support for this position. (Id. ¶¶ 46-47.)
However, a reasonable jury might conclude from other evidence regarding the negotiations that DRC did possess the requisite scienter. In January 2001, a USAID official responded to a subcontracting request, via FHIS, by requesting additional information from DRC. (Id. ¶¶ 75-76.) FHIS‘s letter to DRC informing DRC of USAID‘s request urged DRC to “send[] the requested information as soon as possible in order to obtain the approval from USAID for the subcontracts.” (Def.‘s
In light of the above evidence regarding scienter, the record establishes a triable issue for all but one period—the distinct period of time from April 2001 to October 2001. In April 2001, Flores told DRC that USAID would not require DRC to seek prior approval from USAID for subcontracting. The government does not dispute the fact of Flores’ representation and does not proffer any evidence tending to qualify or contradict Flores’ remarks. The government‘s general argument that USAID was forced into a position of not being able to insist on compliance with contractual requirements does not suffice to explain how DRC could have known pre-approval was important at all, much less critical to payment, after a USAID official explicitly told DRC that USAID‘s approval was not necessary. Presented with the undisputed fact of Flores’ remarks, no reasonable jury could find DRC possessed the requisite scienter that claims submitted after Flores’ remarks—at least until October 2001—were false.
The government has, however, proffered evidence sufficient to revive its case with respect to claims for payment following October 2001. In response to DRC‘s August 2001 request for a “formal response” from USAID regarding subcontracting approval, the government says Sloan informed DRC in October 2001 that prior authorization was required and that USAID could not retroactively approve the subcontractors. Sloan‘s letter set out the eight kinds of information that USAID would need in order to approve subcontractors in the future. (Pl.‘s Opp‘n, Ex. 15.) The inconsistency between Sloan‘s representation and Flores’ oral represen
CONCLUSION AND ORDER
The contract underlying this dispute required USAID approval for DRC subcontracting. The record is insufficient to support DRC‘s entitlement to judgment as a matter of law with respect to claims submitted from December 2000 to April 2001 and from October 2001 through March 2002. With respect to claims submitted following Flores’ representation on April 2, 2001 and before Sloan‘s alleged communication to DRC on or about October 16, 2001, however, the government has failed to create a triable issue that DRC knew that compliance with the contract‘s pre-approval requirement was material to payment. Therefore, it is hereby
ORDERED that DRC‘s first motion [43] for partial summary judgment be, and hereby is, GRANTED IN PART AND DENIED IN PART. Judgment is granted to DRC on the government‘s claim of implied false certifications on DRC‘s invoices submitted between April 2, 2001 and October 16, 2001. The motion is otherwise denied. It is further
ORDERED that the parties meet and confer and file a joint status report by May 23, 2012 reflecting their progress in concluding discovery and proposing three mutually agreeable dates for a continued post-discovery status conference.
RICHARD W. ROBERTS
UNITED STATES DISTRICT JUDGE