False Claims Act Damages
The FCA was enacted to provide restitution to the Government for losses sustained as a result of fraud. The statute authorizes the award of actual damages and civil penalties to ensure that the Government is made whole for losses caused by fraudulent acts.
Any fraud intended to cause the Government to unlawfully pay money falls within the scope of the FCA. Because the FCA covers a wide range of fraudulent acts, there is no “one size fits all” measure of damages for every false claim.
However, the Supreme Court has provided some guidance by establishing two standard formulas to calculate damages under the FCA. In United States ex rel. Marcus v. Hess, the Court held the applicable damage calculation in a collusive bidding case was the Government’s out of pocket payment for each project that was affected by the fraud. Although the Marcus decision measured damages by a simple “out of pocket” test, the Court later adopted a “benefit of the bargain” measure of damages in United States v. Bornstein. The Bornstein Court did not overturn the out of pocket measure of damages used by the Marcus Court, but instead measured damages by the amount that would fairly reimburse the Government for all losses and expenses without creating a Government windfall. However, the Court noted that no set formula applies to all cases, and damages should be calculated on a factual, case-by-case basis. For this reason damage calculations vary according to the type of fraud involved in a particular case. Because of the multiple goals of the FCA to make the Government whole, disgorge all amounts of money attributable to the fraud, and send a message to the corporate community, different types of fraud require different remedies to ensure complete compensation.
2. Mischarge and Overcharge Cases
Generally, the measure of the Government’s damages in an overcharge case is the difference between the amount paid and the amount that would have been paid of the claims for payment had been truthful. An overcharge case occurs when the Government receives goods or services of less value than intended.
A mischarge case occurs when false claims are submitted to the Government for goods or services that are not delivered or performed. Damages in a mischarge case are calculated as if the Government received nothing in return for its payment. A physician who submits claims for Medicare reimbursement that fraudulently certify that services were performed by a program-approved physician can be assessed as damages the total amount paid by the Government, not some differential amount. Courts reason that the Government would not have made any payment to the unqualified physician had it known the truth.
3. Substandard Product and Services Cases
A substandard product or service case may be treated as either an overcharge or a mischarge case for the purpose of calculating damages. Because the facts of every substandard product or service case vary, several types of the standard mischarge and overcharge models have emerged. Therefore, like the damage calculation in mischarge and overcharge cases, a key issue in determining damages in substandard product cases is whether the product or service provided had any value, and, if so, what value is applicable. When the Government fails to return a shipment of substandard products to a defendant, or uses the substandard products, it is difficult for the Government to then prove that the value of the product received was less than the value anticipated when the contract was executed.
There are usually two methods of calculating damages when the Government receives a substandard product or service from a defendant. First, when the value of the goods or services can only be ascertained by referencing the contract price, the “out of pocket” calculation is used to measure damages. Second, when the value of the goods or services supplied may be calculated with reasonable certainty without reference to a contract price, the Government may be entitled to damages based on the “benefit of the bargain” measure. Moreover, in cases where goods or services are so defective that they are deemed to have not value to the Government, the “entire amount expended” measure of damages – the total amount paid as a result of the false claim – may be appropriate.
a. Benefit of the Bargain
Damages awarded under a benefit of the bargain theory are derived from the intrinsic value of the goods or service without reference to a contract price. In order for a court to award damages under this theory, the value of goods and services must be ascertainable with reasonable certainty. Damages under this measure may exceed the contract price. The Supreme Court has held that the Government’s actual damages in substandard product or service cases, when intrinsic value is ascertainable, should be calculated by determining the difference between the market value of the goods and services received and the market value of the goods or services had they been of the specified quality.
b. Out of Pocket
When the value of goods or services cannot be ascertained with reasonable certainty, courts calculate damages based on the difference between the contract price paid by the Government and the value of goods or services received. Instead of determining the intrinsic value of the goods or services, the “out of pocket” measure calculates damages based on the amount the Government actually paid and the market value of goods or services received or actually used by the Government.
c. Repair and Replacement Costs
Although repair and replacement costs are normally not awarded as damages, the Federal Circuit recently awarded full replacement costs to the Government when the actual damages caused by false claims were not ascertainable. Replacement costs may be appropriate if they are not clearly disproportionate to the probable loss suffered by the Government as a result of the false claims.
d. Entire Amount Expended
In cases where goods are services delivered are so defective that they are deemed to have no value to the Government, the measure of damages is the total paid as a result of the false claim. This calculation is similar to the “out of pocket” calculation discussed above, but does not deduct the market value of the goods received from the contract price. Because the “entire amount expended” measure is used when goods are so defective that they are deemed worthless to the Government, the value of the goods is zero, and nothing is deducted from the contract price.
e. Failure to Test
Unique types of damage to the Government may occur in FCA violations that make calculations more complex than the standard damage measures. To deal with the unique nature of Government damages in complex cases, courts must be flexible to insure that the Government is fully compensated for damages resulting from false claims. This flexibility results in damage calculations that extend beyond traditional measures of recovery under the FCA.
For example, in BMY-Combat Systems v. United States, a contractor for the Army agreed to provide the Government with 305 howitzer weapons, subject to compliance with contract specifications. The court found that the contractor violated the FCA by submitting invoices to the Government certifying that the weapons complied with all specifications, but the Government realized, after paying the full contract price, that the weapons had not been tested as required by the contract. As a result, before using the weapons, the Government performed the required testing and discovered the inadequacies. The Government claimed as damages the amount it had paid for weapons that it was not able to use, the amount expended to repair and inspect weapons, and the amount paid for the manufacture of replacement weapons. The contractor claimed that the benefit of the bargain measure of damages –the difference in value between the weapons as delivered and the weapons contracted for—was the appropriate measure of damages. The court rejected the contractor’s proposed measure of damages, stating that the Bornstein benefit of the bargain theory is not mandatory in all FCA cases, and alternatives are available to fit the particular facts of each case. The court awarded the cost of repair, replacement, inspection, and interest on progress payments for items that had not been inspected according to the terms of the contract.
Damages in failure to test cases may also be awarded when a contractor conceals the results of a failed test. For example, if a defendant defrauds the Government by concealing results of a required test, he may be liable for payments made pursuant to the contract and for the costs of repair and retesting. If the contract provided for progress payments to be made to the contractor throughout the term of the project, those payments will be added to the calculation of damages. In addition to the progress payments made for noncomplying goods, the cost of repair and retesting the complying units are awarded to make the Government whole.
4. False Negotiation Cases
False claims made or illegal actions undertaken during negotiating or bidding on Government contracts may constitute a violation of the FCA. These cases present a different issue than those of the mischarge and overcharge cases because in such cases the Government pays the price it actually contracted to pay. FCA liability therefore attaches because the Government would not have entered into the contract had it known the facts at the time of contracting. Moreover, calculation of damages is difficult because the Government has paid the contractual amount. Some common types of FCA liability in false negotiation cases involve bid rigging, defective pricing, illegal kickbacks, fraud in the inducement, and equitable considerations.
a. Bid Rigging Cases
Damages in a collusive bidding case are measured by the difference between the amount actually paid by the Government in reliance on the false claims and the market value amount it would have paid had there been open and competitive bidding.
Courts disagree over whether the profit charged by a fraudulent contractor is included or excluded when calculating the market value of the services rendered for purposes of calculating damages. In Brown v. United States, the Claims Court implicitly allowed the defendant contractor to include the profit in the market price, holding that a trial was needed on the issue because the contractor claimed “[t]hat his profit margin was neither ‘unusual nor excessive.”” In United States v. Cripps, however, a Michigan federal district court refused to include the defrauding contractor’s profit margin in determining the market price, thus allowing the government to recover not only inflated prices but the contractor’s ten-percent profit as well.
b. Defective Pricing Cases
The typical defective pricing case involves a contractor who submits false price data or makes false representations during pre-contract negotiations with the Government, which then relies on the false data and agrees to a contract at a higher than fair market value price. These situations normally arise in “Multiple Award Schedule” cases and cases involving the Truth in Negotiations Act (“TINA”).
i. Damages for Defective Pricing in Multiple Award Schedule Cases
A “Multiple Award Schedule” contract arises from negotiations between a private firm in a competitively structured industry and the General Service Administration (“GSA”). The GSA’s goal in the negotiations is to obtain supplies and services at a reasonable price. In general, the GSA will seek the firm’s best price, or the price given to the most favored customer. To evaluate whether the prices offered are reasonable, the GSA obtains detailed information regarding product quality, commercial pricing policies, and sales practices from the firm. After reviewing this information, the GSA negotiates a price, and, if successful, lists the firm’s product in a Government catalogue from which other agencies can readily order the product.
A violation of the FCA can occur at any point during negotiations between the GSA and the firm. For example, any misrepresentation regarding product quality, price, or prices offered to other customers may form the basis of FCA liability. If the contract was obtained by fraud, all claims submitted pursuant to that contract constitute false claims under the FCA. A violation of the FCA also may occur during the contract period if price reductions are given to certain other customers and not similarly extended to the GSA.
In cases involving Multiple Award Schedule contracts, the Government has sought damages based on fraud in the inducement or, the difference between the amount it paid for an item and the amount it should have paid, i.e., the lowest price paid by a commercial customer for the same item. For liability to attach, however, the Government must show that the defendant failed to disclose relevant pricing information concerning transactions that were comparable to the transaction the defendant entered into with the Government. In other words, the Government will not be entitled to damages if the defendant’s nondisclosure concerned transactions that were quite different from those that had been entered into with the Government.
ii. The Truth in Negotiations Act
The Truth in Negotiations Act (“TINA”) provides for liability when a contractor misrepresents cost or pricing information during negotiations. The measure of damages in these cases typically allows the Government to recover overpayments resulting from a contractor submitting false cost or pricing data.
To award damages for overpayment in a TINA case, the Government must establish a logical nexus between nondisclosed data and the possibility of a significantly lowered contract price. This nexus can be established by showing that the information at issue was “cost or pricing” data, the information was not disclosed to the Government, and the Government therefore relied on defective data and overpaid as a result. Once the Government makes a showing of nondisclosure, there is a rebuttable presumption that the “natural and probable” consequence of the Government’s reliance on the defective data was an increase in the contract price. The defendant may rebut this presumption by showing that there was no reliance on the defective data, or that the Government would not have relied on the undisclosed data even if there had been full disclosure. A contractor can also avoid liability for Government overpayments by showing that the non-disclosure did not affect the agreed-upon contract price. For example, if a contractor adds a standard overhead rate to all service contracts, and refuses to enter into any contract without such a charge, failing to disclose the actual overhead would not constitute a TINA violation. That is, because the contractor would not have entered into the contract without charging the standard rate, full disclosure of the actual cost would not result in a lower-priced contract.
c. Fraud in the Inducement Cases
In determining the appropriate damages in “fraud in the inducement,” or promissory fraud, cases, courts have not set forth any single standard. Instead, courts should look towards the “the language and underlying purpose of both the False Claims Act itself and the government program through which the funds were channeled.” In United States ex rel. Longhi v. Lithium Power Technologies, Inc., the defendants were found liable under the FCA for fraudulently misrepresenting their experience and ability in procuring several government research grants under the Small Business Innovation Research Program. The defendants argued that there were recoverable damages because the government had fulfilled the program’s purpose – a small business had received research funding. The court disagreed, noting that the program’s purpose was to fund “eligible deserving small [businesses],” which Lithium Technologies was not. After establishing that the grants would not have been awarded had Lithium Technologies properly represented its abilities, the court found that the damages were all government monies that had been paid to Lithium Technologies through the fraudulently procured grants, trebled.
The Fifth Circuit affirmed the district court’s damages award, reasoning that in cases such as the present, “where there is no tangible benefit to the government and the intangible benefit is impossible to calculate, it is appropriate to value damages in the amount the government actually paid to the Defendants.”
d. Equitable Issues: Void and Voidable Contracts
When a Government contract is tainted with a violation of a statute or regulation, courts are generally bound to strike down the illegal contract by declaring it void ab initio. Specifically, contracts formed in violation of federal statutes prohibiting conflicts of interest, kickbacks, and bribery, are treated as void and unenforceable. Because the detection of fraud in the federal contracting process is inherently difficult, courts have determined that public policy requires contracts infected with these types of violations be deemed void ab initio and hence unenforceable.
Although a contract that is determined to be void ab initio is unenforceable, a contractor may still resort to equitable remedies to recover losses. Requiring a contractor to bear all economic losses when a contract is declared void ab initio may be inappropriate and courts may therefore allow a contractor to recover under the equitable theories of quantum meruit and quantum valebant. In order for a contractor to recover under either of these equitable theories, the Government must have received and retained a “tangible benefit” from the contractor and refused to make payment for those goods or services received. For example, when a Government contractor fails to adhere to the Small Business Administration’s prohibition on certain contract price adjustment formulas, a subcontract containing the restricted price adjustment formula will be deemed void ab initio. Although the contract is hence void and unenforceable, the contractor may be entitled to recover the reasonable value in the marketplace of supplies delivered to the Government under a quasi-contractual theory.
There are two reasons, however, why a contractor who is seeking equitable recovery on a contract that has been deemed void ab initio will be barred from recovery and subject to forfeiture. First, if the Government has not received any tangible benefit from the contractor’s performance on a void contract, then the contractor will not be eligible to recover under an equitable theory. Even if the Government does receive a tangible benefit, no recovery may be had in quantum meruit or quantum valebant if the contract is “fraught with fraud or corruption.” For example, when a Government contractor is awarded a bid as a result of illegal assistance from a Government contracting officer, the ensuing contract will be unenforceable, and the contractor will not be entitled to equitable recovery even if the Government received a tangible benefit.
A contract is considered voidable and not void ab initio if the contractor did not contribute to the mistake that results in an award and had no notice that the procedures being followed were improper. In such a case, the contract is deemed to be voidable and may only be cancelled at the convenience of the Government. The Government’s right to cancel an agreement is embodied in a “Termination for Convenience of the Government Clause,” which gives the Government broad powers to cancel contracts without paying the usual contract measure of damages. Instead, the Government must pay for the cost of performance incurred by the contractor in addition to any profits reasonably related to such costs.
5. Medicare and Medicaid Kickback Cases
Medicare anti-kickback and self-referral laws constitute the basis of FCA liability in a growing number of cases. These laws prohibit payment of money, or anything of value, in exchange for the referral of patients to a specific physician. The Anti-Kickback statute also prohibits soliciting or receiving any remuneration in exchange for the purchase or lease of federally funded goods or services. In FCA cases based on an underlying violation of the Anti-Kickback statute and self-referral laws, courts have taken different approaches to measuring damages.
Some courts have held that a defendant who violates anti-kickback or self-referral laws is ineligible for reimbursement and must therefore repay all amounts received from the Government, regardless of whether the defendant actually provided valuable services. These courts reason that, because the Government would not have paid anything to the defendant had it known of the illegal kickbacks, the defendant must disgorge the entire amount the Government paid for the false claims. This is the same damage theory as found in the inducement cases which rejects any defense compensation for fraudulent behavior and rewards the Government beyond actual losses.
Other courts, however, calculate damages based on the Government’s “actual loss”—the amount of money the Government paid by reason of the false statement in excess of what it would have paid absent the false statement. These courts reason that, because the defendant actually provided valuable services, the defendant should not be required to disgorge all amounts received from the Government, but only the amounts attributable to the illegal kickbacks.
6. Damages in False Certification Cases
False certification cases involve a defendant that claims certain statutory benefits after either explicitly or implicitly falsely declaring that specific criteria required by a contract have been met. A false certification of compliance with contractual specifications renders a claim for payment “false or fraudulent” within the meaning of the FCA, regardless of whether the false certification actually affects the performance of the contract. The basic measure of damages in false certification cases is the amount that the defendant’s false statements “caused” the government to pay, i.e., the amount paid that is more than the amount the government would have paid if the statements were true. The measures for damages are very similar to those for tort principles of causation. Under the broad “but for” measure of damages, the calculation may also include incidental expenses paid as a result of the fraud. Because the “but for” measure includes incidental expenses, its application leads to greater recovery than the “actual loss” test.
The circuits are split regarding measuring damages in a false certification case. The Fifth, Sixth, Seventh, and Ninth Circuits recognize the “but for” measure of damages. The Third, Fourth, Eighth, and Eleventh Circuits have rejected the “but for” causation test and, instead, have adopted an “actual loss” test, which focuses strictly on the government’s loss as a result of the false statement. Under this theory, if the government suffered a loss that would have occurred even in the absence of false statements, it may not recover that loss as damages.
a. Actual Loss Test
Some courts have adopted an actual loss analysis primarily when the Government receives some tangible benefits or there is a disconnect between the losses and false representations. The Fourth Circuit applied the actual loss test to a case where a contractor falsely certified that no organizational conflicts of interest (“OCI”) existed with a subcontractor. Filing a certification stating that no OCI existed was a prerequisite to the Department of Energy awarding a contract to the defendant in United States ex rel. Harrison v. Westinghouse Savannah River Co. In that case the government claimed that damages should be measured by the total expended on the contract because it would not have paid anything “but for” the fraud. The court denied the government’s request because there was no evidence that the defendant failed to perform the work under the contract or that the government did not receive the benefit of the work performed. In the absence of such evidence, the court held that the appropriate measure of damages was limited to the additional price paid specifically as a result of the fraud.
b. But For Test
Often courts adopt the “but for” test which allows the government to recover most losses associated with false claims. In United States ex rel. Longhi v. Lithium Power Technologies, Inc., the Fifth Circuit allowed damages in favor of the government, applying the “but for” test, since the government did not receive any tangible or ascertainable benefit for the money it paid. The Ninth Circuit has also used the “but for” test in calculating the damages resulting from the use by a defendant of his father’s Medicare provider code to circumvent Medicare’s cap on the number of physical therapy visits that could be covered for his patients. Although the defendant performed the services provided, the court expressly declined to relieve defendant from paying back the entire amount paid by Medicare. The court reasoned that the falsity was not the defendant’s representation on whether or not the defendant received the physician’s services, but rather the use of his father’s Medicare code. But for the defendant’s false submissions, the government would have known that he was not entitled to receive Medicare payments. Other courts have found damages based on the “but for” test, even if there is some tangible benefit-based public policy concerns, reasoning that there is no such thing as “no harm, no foul” when it comes to government fraud.
c. Reduction for Amounts Reimbursed or Otherwise Paid to the Government
Any amount paid to the government as compensation reduces the amount of damages awarded. For example, in cases where lenders procure FHA insurance by false statements, payments made by the defaulting mortgagors will be deducted from the amount of the original loss. However, the payments are deducted after the amount of original loss is trebled under the statute. Deducting a mortgagor’s payments before trebling damages would benefit the lender who submitted the false claim.
7. Reverse False Claim Cases
A reverse false claim violation of the FCA occurs when a defendant makes a false statement to conceal, avoid, or decrease an obligation to the Government. Damages under a reverse false claim theory of liability are usually measured by the difference between the amount that was paid and the amount that should have been paid to the Government.
In any action brought under the FCA, the Government is required to prove all essential elements of the cause of action, including damages, by a preponderance of the evidence. The Government need not prove damages with mathematical precision; it is enough that the calculation is not based on speculation or guesswork. Justice and public policy require the wrongdoer to bear the risk of any uncertainty that his own fraud created. In certain circumstances, a court may relax requirements of proof if the difficulty of ascertaining damages is a result of the defendant’s wrongdoing.
1 United States ex rel. Marcus v. Hess, 317 U.S. 537, 551-552, 63 S.Ct. 379, 87 L.Ed. 443 (1943).
2 Id. 317 U.S. at 552.
3 Id. 317 U.S. at 543-544.
4 Because there are a multitude of fraudulent acts that may cause the Government to suffer actual loss, calculation of damages under the FCA is inherently difficult. Damage calculations are generally tailored to the specific facts of each case. Thus, similar conduct in two or more cases may result in the application of different damage calculations for each case based on subtle factual differences.
5 United States ex rel.Marcus v. Hess, N. 1 supra, 317 U.S. at 539.
6 United States v. Bornstein, 423 U.S. 303, 311, 96 S. Ct. 523, 46 L.Ed.2d 514 (1976); United States ex rel. Marcus v. Hess, id., 317 U.S. at 542-543.
7 See. e.g.:
8 Sixth Circuit: United States ex rel. Compton v. Midwest Specialties, Inc., 142 F.3d 296 (6th Cir. 1998) (“damages awarded under the False Claims Act typically are calculated to assure that they afford the Government complete indemnity for the injury done it”).
Federal Circuit: Daff v. United States, 78 F.3d 1566, 1574 (Fed. Cir. 1996) (awarding FCA damages for Government’s inspection and repair costs when the contractor has fraudulently concealed the failure of the product to pass the contractually required test.
Supreme Court: United States v. Bornstein, N. 6 supra, 423 U.S. at 311.
Third Circuit: United States v. Ben Grunstein & Sons Co., 137 F. Supp 197, 209 (D.N.J. 1956) (“The just method of determining damages necessarily varies with the facts of the particular case.”).
Federal Circuit: BMY-Combat Systems v. United States, 44 Fed. Cl. 141, 147-148 (Fed. Cl. 1999).
9 United States v. Woodbury, 539 F.2d 370, 379 (9th Cir. 1966).
10 Peterson v. Weinberger, 508 F.2d 45, 48 (5th Cir. 1975).
11 Id., 508 F.2d at 55 (stating that damages should insure that the Government completely recoups its losses).
12 United States v. Ben Grunstein & Sons Co., 137 F. Supp. 197, 207 (D.N.J. 1956).
13 United States v. Aerodex, Inc., 469 F.2d 1003, 1011 (5th Cir. 1973).
14 Unites States v. Bornstein, 423 U.S. 303, 311, 96 S. Ct. 523, 46 L.Ed.2d 514 (1976) (applying “benefit of bargain” theory of damages); cf., United States ex rel. Marcus v. Hess, 317 U.S. 537, 546-547, 63 S. Ct. 379, 87 L. Ed. 443 (1943) (applying “out of pocket” measure of damages).
15 Henry v. United States, 424 F.2d 677, 678 (5th Cir. 1970).
16 Commercial Contractors Inc. v. United States, 154 F.3d 1357, 1372-1373 (Fed. Cir. 1998).
17 Id., 154 F.3d at 1373. (“In the unusual case in which actual loss in value cannot be ascertained, the injured party may recover the replacement cost, but only if that cost is not clearly disproportionate to the probable loss in value caused by the defects in question.”)
18 United States v. Aerodex, Inc., 469 F.2d 1003, 1011 (5th Cir. 1973).
19 United States ex rel. v. Compton v. Midwest Specialties, No. 3:91-CV7095, 1995 WL 811966 (N.D. Ohio Sept. 27, 1995).
20 BMY-Combat Systems, Division of Harsco Corp. v. United States, 44 Fed. Cl. 141, 148 (Fed. Cl. 1999).
21 Id., 44 Fed. Cl. at 147-148
22 Id. at 143-144
23 Id. at 147.
26 Id., 44 Fed. Cl. at 148-149.
27 Id. at 147.
28 Id. at 148.
29 Id. at 149-150. In awarding interest on the amount prematurely paid by the Government, the court noted that the Young-Montenay court did not award interest for the loss of use on money paid prematurely. However, the BMY court stated that the circumstances were different than Young-Montenay because the combination of damages for cost of repair, replacement, and inspection, combined with the interest on the prepaid money, was necessary to make the Government whole. See Young-Montenay, Inc. v. United States, 15 F.3d 1040 (Fed. Cir. 1994).
30 Daff v. United States, 78 F.3d 1566, 1569 (Fed. Cir. 1996).
31 Id., 78 F.3d at 1574-1575.
24 United States v. Cripps, 460 F.Supp. 969, 976 (E.D. Mich. 1978); Brown v. United States, 524 F.2d 693, 705-706, 207 Fed. Cl. 768 (Fed. Cl. 1976). “Bid rigging” generally includes collusion between competing contractor who scheme to cause the Government to pay a higher price for the requested service than it would in open and competitive bidding. Because the price the Government ultimately pays is accepted through the bidding process, actual damages cannot be more than the contract price.
35 Brown, 524 F.2d at 706.
37 Truth in Negotiations Act (“TINA”), Pub. L. No. 87-653, 76 Stat. 528 (Sept. 10, 1962), as amended, 10 U.S.C. §§2304 et seq.
38 48 C.F.R. § 501.
39 United States v. Data Translation, Inc., 984 F.2d 1256, 1258 (1st Cir. 1992).
40 United States ex rel. Frascella v. Oracle Corp., 751 F. Supp. 2d 842, 844 (E.D. Va. 2010).
41 48 C.F.R. § 538.270(a).
42 Data Translation, Inc., 984 F.2d at 1258; Frascella, 751 F. Supp. 2d at 844.
43 Data Translation, Inc., 984 F.2d at 1258.
44 Id., 984 F.2d at 1263–64.
45 Id.; see also United States ex rel. Vosika v. Starkey Laboratories, Inc., No. Civ.01-709, 2004 WL 2065127 (D. Minn. Sept. 8, 2004).
46 United States ex rel. Ubl v. IIF Data Solutions, No. 1:06cv641, 2007 WL 2220586, at *4 (E.D. Va. Aug. 1, 2007).
47 48 C.F.R. § 552.238-75; see X-Corp. v. Doe, 816 F. Supp. 1086, 1094 (E.D. Va. 1993).
48 See infra 4(c), Fraud in the Inducement.
49 See Data Translation, Inc., 984 F.2d at 1266.
50 Id., 984 F.2d at 1264–66.
52 Id., 984 F.2d at 1264–66; see also X-Corp., 816 F. Supp. at 1094 (defendant cannot be liable for failing to give the Government notice of deeper discounts that it has offered to others for less valuable products).
52 10 U.S.C. § 2306.
53 Singer Co. v. United States, 576 F.2d 905, 919 (1978).
54 United States v. United Technologies Corp., 51 F. Supp. 2d 167, 189 (D. Conn. 1999).
57 Universal Restoration, Inc. v. United States, 798 F.2d 1400, 1406 (1986).
60 United States ex rel. Harrison v. Westinghouse Savannah River Co., 352 F.3d 908, 922 (4th Cir. 2003).
62 United States ex rel. Longhi v. Lithium Power Technologies, 530 F. Supp.2d 888, 890 (S.D. Tex. 2008).
63 Id., 530 F. Supp. 2d at 893-894.
64 Id., 530 F. Supp. 2d at 897.
65 Id., 530 F. Supp. 2d at 898-899.
66 United States ex rel. v. Longhi v. Lithium Power Technologies, Inc. 575 F.3d 458, 473 (5th Cir. 2009).
67 Alabama Rural v. United States, 572 F.2d 727 (Fed. Cl. 1978); Schoenbrod v. United States, 410 F.2d 400 (Fed. Cl. 1969).
68 Supreme Court: United States v. ACME Processing, 385 U.S. 138, 146-148, 87 S. Ct. 350, 17 L. Ed. 2d 249 (1967) (illegal kickbacks); United States v. Mississippi Valley Generating Co., 364 U.S. 520, 564-565, 81 S. Ct. 294, 5 L. Ed. 2d 268 (1961) (conflict of interest).
Federal Circuit: Brown Construction Trades, Inc. v. United States, 23 Cl. Ct. 214 (Fed. Cl. 1991) (bribery).
69 Supreme Court: United States v. ACME Processing, id., 385 U.S. at 146-148; United States v. Mississippi Valley Generating Co., id., 364 U.S. at 564-565.
Federal Circuit: Alabama Rural v. United States, N. 67 supra; Schoenbrod v. United States, N. 67 supra; Brown Construction Trades, Inc. v. United States, id.
70United States v. Amdahl, 786 F.2d 387, 393 (Fed. Cir. 1986) (“Even though a contract be unenforceable against the Government, because not properly advertised, not authorized, or for some other reason, it is only fair and just that the Government pay for goods delivered and services rendered and accepted under it.”).
71 Id. (“No one would deny that ordinary principles of equity and justice preclude the United States from retaining the services, materials, and benefits and at the same time refusing to pay for them on the ground that the contracting officer’s promise was unauthorized, or unenforceable for some other reason.”).
72 United States v. Mississippi Valley Generating Co., 364 U.S. 520, 564-565, 81 S. Ct. 294, 5 L. Ed. 2d 268 (1961).
73 Urban Data Systems, Inc. v. United States, 699 F.2d 1147, 1150 (Fed. Cir. 1983).
74 Id., 699 F.2d at 1155.
75 Mississippi Valley Generating Co., N. 68 supra, 364 U.S. at 566.
76 Supreme Court: Mississippi Valley Generating Co., id.
Federal Circuit: United States v. Amdahl, 786 F.2d 387, 393 (Fed. Cir. 1986).
77 K&R Engineering Co. v. United States, 616 F.2d 469 (Fed. Cl. 1980).
78 Id., 616 F.2d at 475.
79 United States v. Amdahl, 786 F.2d 387, 393 (Fed. Cir. 1986); John Reiner & Company v. United States, 325 F.2d 438, 440 (Fed. Cl. 1963).
80 Id. (Amdahl), 786 F.2d at 396.
81 48 C.F.R. § 52.249-2(a). “The Government may terminate performance of work under this contract in whole or, from time to time, in part if the Contracting Officer determines that a termination is in the Government’s best interst.”
82 United States v. Scoggins, 224 F.2d 517, 521-522 n.7 (5th Cir. 1955).
83 Fifth Circuit: Scoggins, id.
Federal Circuit: Nicon, Inc. v. United States, 331 F.3d 878 885-886 (Fed. Cir. 2003).
84 See, e.g.;
Second Circuit: United States v. Incorporated Village of Island Park, 888 F. Supp. 419 (E.D.N.Y. 1995)
Sixth Circuit: United States ex rel. Pogue v. American Healthcare Corp., Inc., 914 F. Supp. 1507, 1509 (M.D. Tenn. 1996); United States ex rel. Roy v. Anthony, 914 F. Supp. 1504 (S.D. Ohio 1994).
Federal Circuit: Ab-Tech Construction, Inc. v. United States, 31 Fed. Cl. 429 (Fed. Cl. 1994).
85 42 U.S.C. § 1320a-7b.
86 42 U.S.C. § 1320a-7b(b).
87 Fifth Circuit: Peterson v. Weinberger, 508 F.2d 45, 54 (5th Cir. 1975).
Seventh Circuit: United States v. Rogan, 517 F.3d 449, 453 (7th Cir. 2008).
D.C. Circuit: United States v. Science Applications International Corp., 653 F. Supp. 2d 87, 107–09 (D.D.C. 2009), aff’d, 626 F.3d 1257 (D.C. Cir. 2010).
88 Seventh Circuit: United States v. Rogan, 517 F.3d 449, 453 (7th Cir. 2008) (“The government offers a subsidy (from the patients’ perspective, a form of insurance), with conditions. When the conditions are not satisfied, nothing is due. Thus, the entire amount that Edgewater received on these 1,812 claims must be paid back.”).
89 Fourth Circuit: United States ex rel. Harrison v. Westinghouse Savannah River Co., 352 F. 3d 908, 922–23 (4th Cir. 2003).
Eleventh Circuit: United States v. Vaghela, 169 F.3d 729, 736 (11th Cir. 1999); United States v. Killough, 848 F.2d 1523, 1531–32 (11th Cir. 1988).
90 Fourth Circuit: United States ex rel. Harrison v. Westinghouse Savannah River Co., 352 F. 3d 908, 922–23 (4th Cir. 2003) (“Although Westinghouse ran afoul of the fair bidding requirements, there was no evidence adduced at trial suggesting that GPC failed to perform the work that it was required to perform under the subcontract or that the government did not receive the benefit of the work performed . . . As such, the district court correctly disallowed Harrison from recovering disgorgement of all $9 million that the government paid for the subcontracted work.”).
Eleventh Circuit: United States v. Vaghela, 169 F.3d 729, 736 (11th Cir. 1999) (“[U]nless we are to believe that DHHS received no value at all for Extendicare’s work . . . we must assume that the loss suffered by DHHS is an amount equivalent to the amount it paid  in excess of the value of services rendered . . . it is not unreasonable to assume that DHHS was overcharged in the amount of the kickbacks, and that the loss DHHS suffered was equivalent to that amount.”).
91 See United States v. Aerodex, Inc., 469 F.2d 1003, 1007 (5th Cir. 1972) (“The mere fact that the item supplied under contract is as good as the one contracted for does not relieve defendants of [FCA] liability if it can be shown that they attempted to deceive the Government.”).
92 United States v. Ekelman & Associates, Inc. 532 F.2d 545, 550 (6th Cir. 1976).
93 Fifth Circuit: United States ex rel. Longhi v. Lithium Power Technologies, Inc., 575 F.3d 458 (5th Cir. 2009).
Sixth Circuit: United States v. Ekelman & Associates, Inc., id., 532 F.2d at 550.
Seventh Circuit: United States v. Rogan, 517 F.3d 449, 453 (7th Cir. 2008); United States v. First National Bank of Cicero, 957 F.2d 1362, 1373 (7th Cir. 1992).
Ninth Circuit: United States v. Mackby, 339 F.3d 1013 (9th Cir. 2003).
94 Third Circuit: United States v. Hibbs, 568 F.2d 347 (3d Cir. 1977).
Fourth Circuit: United States ex rel. Harrison v. Westinghouse Savannah River Co., 352 F.3d 908, 914 (4th Cir. 2003).
Fifth Circuit: United States v. Miller, 645 F.2d 473 (5th Cir. 1981).
Eighth Circuit: United States v. Cooperative Grain and Supply Co., 476 F.2d 47, 63-64 (8th Cir. 1973).
Eleventh Circuit: United States v. Vaghela, 169 F.3d 729 (11th Cir. 1999); United States v. Killough, 848 F.2d 1523 (11th Cir. 1988).
95 Id. (United States v. Hibbs), 568 F.2d at 347.
96 United States ex rel. Harrison v. Westinghouse Savannah River Co., 352 F.3d 908, 914 (4th Cir. 2003).
97 Id., 352 F.3d at 916.
98 Id., 352 F.3d at 922.
100 Id., 352 F.3d at 923 (“Harrison presented no evidence that the government did not get what it paid for or that another firm could have performed the work for less. As such, the district court correctly disallowed Harrison from recovering disgorgement of all $9 million that the government paid for the subcontracted work.”).
101 United States ex rel. Longhi v. Lithium Power Technologies, Inc., 575 F.3d 458, 473 (5th Cir. 2009).
102 United States v. Mackby, 339 F.3d 1013, 1014-1015 (9th Cir. 2003).
103 Id., 339 F.3d 1019.
106 United States v. Rogan, 517 F.3d 449 (7th Cir. 2008); United States v. Mackby, id.
107 United States v. Globe Remodeling Co., 196 F. Supp. 652, 657 (D. Vt. 1961).
108 Second Circuit: United States v. Globe Remodeling Co., id., 196 F. Supp. at 657.
110 Id. For example, if the Government insures a $100,000 mortgage based on a lender’s false statements, the amount of the Government’s original loss in the case of mortgagor default is $100,000. After trebling the original loss pursuant to the statute, the amount of actual damages awarded to the Government totals $300,000. If a defaulting mortgagor makes a payment of $50,000 to the Government, it will be deducted from $300,000, leaving the Government with actual damages of $250,000. If the $50,000 payment is deducted before trebling the $100,000, the Government would receive only $150,000 [3 x ($100,000 (50,000)]. If the $50,000 payment is deducted before trebling the $100,000 original loss, the lender who submitted the false claim would benefit from the defaulting mortgagor’s payment.
111 American Textile Manufacturers’ Institute Inc. v. The Limited Inc., 190 F.3d 729, 734 (6th Cir. 1999).
112 Id., 190 F.3d at 734-735. But see, Pickens v. Kanawha River Towing, 916 F. Supp. 702, 705 (S.D. Ohio 1996) (finding a valid reverse false claim where defendant failed to note discharges of pollution in a vessel’s marine log in order to avoid paying fines to the Government).
i Author of treatise, Federal False Claims Act and Qui Tam Litigation, Law Journal Press (2010), research source of the issues discussed in this article.
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