Markus v. Aerojet RocketDyne Holdings, Inc. ( 2022 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 UNITED STATES OF AMERICA ex rel. No. 2:15-cv-02245 WBS AC BRIAN MARKUS, 13 Relator, 14 MEMORANDUM AND ORDER RE: v. CROSS-MOTIONS FOR SUMMARY 15 JUDGMENT AEROJET ROCKETDYNE HOLDINGS, 16 INC., a corporation and AEROJET ROCKETDYNE, INC., a corporation, 17 Defendants. 18 19 ----oo0oo---- 20 Plaintiff-relator Brian Markus (“relator”) brings this 21 action against defendants Aerojet Rocketdyne Holdings, Inc. 22 (“ARH”) and Aerojet Rocketdyne, Inc. (“AR”), arising from 23 defendants’ allegedly wrongful conduct in violation of the False 24 Claims Act, 31 U.S.C. §§ 3729 et seq. Relator brings the 25 following claims against defendants: (1) promissory fraud in 26 violation of 31 U.S.C. § 3729(a)(1)(A); and (2) false or 27 fraudulent statement or record in violation of 31 U.S.C. § 28 1 3729(a)(1)(B). Before the court are the parties’ cross-motions 2 for summary judgment. Relator moves for summary judgment as to 3 the first claim, promissory fraud, of his second amended 4 complaint (“SAC”). (Docket No. 124.) Defendants move for 5 summary judgment as to both claims. (Docket No. 116.) Both 6 parties move for summary judgment on the issue of actual damages. 7 Although the United States declined to intervene in this case, it 8 filed a statement of interest addressing issues raised by 9 defendants’ motion and opposition to relator’s motion. (Docket 10 No. 135.) 11 I. Background 12 Relator Brian Markus was employed by defendants as the 13 senior director for Cyber Security, Compliance & Controls from 14 June 2014 to September 2015. (Second Am. Compl. (“SAC”) ¶ 6 15 (Docket No. 42).) Defendants are in the business of developing 16 and manufacturing products for the aerospace and defense industry 17 and primarily contract with the federal government including the 18 Department of Defense (“DoD”) and the National Aeronautics and 19 Space Administration (“NASA”). (SAC ¶ 7.) Defendant AR is a 20 wholly-owned subsidiary of ARH, and ARH uses AR to perform its 21 contractual obligations. (Id. at ¶ 8.) 22 Government contracts are subject to Federal Acquisition 23 Regulations and are supplemented by agency specific regulations. 24 On November 18, 2013, the DoD issued a final rule, which imposed 25 requirements on defense contractors to safeguard unclassified 26 controlled technical information from cybersecurity threats. 48 27 28 1 C.F.R. § 252.204-7012 (2013).1 The rule required defense 2 contractors to implement specific controls covering many 3 different areas of cybersecurity, though it did allow contractors 4 to submit an explanation to federal officers explaining how the 5 company had alternative methods for achieving adequate 6 cybersecurity protection, or why standards were inapplicable. 7 See id. 8 In August 2015, the DoD issued an interim rule, 9 modifying the government’s cybersecurity requirements for 10 contractor and subcontractor information systems. 48 C.F.R. § 11 252.204-7012 (Aug. 2015). The interim rule incorporated more 12 cybersecurity controls and required that any alternative measures 13 be “approved in writing prior by an authorized representative of 14 the DoD [Chief Information Officer] prior to contract 15 award.” Id. at 252.204-7012(b)(1)(ii)(B). The DoD amended the 16 interim rule in December 2015 to allow contractors until December 17 31, 2017 to have compliant or equally effective alternative 18 controls in place. See 48 C.F.R. § 252.204- 19 1 Defendants submitted a request for judicial notice of, 20 among several other items, certain regulations. (Docket No. 119). The court need not take judicial notice of regulations. Accord 21 Fed R. Evid. 201. Because relator does not object, the court 22 takes judicial notice of Exhibit 37 and 121 of the Declaration of Tammy A. Tsoumas (Docket No. 117), which is data published on 23 USASpending.gov, which is maintained by the United States Department of Treasury and other federal agencies. (See Daniels- 24 Hall v. Nat’l Educ. Ass’n, 629 F. 3d 992 998-99 (9th Cir. 2010) (“It is appropriate to take judicial notice of [information on a 25 government website], as it was made publicly available by government entities . . . and neither party disputes the 26 authenticity of the web sites or the accuracy of the information 27 displayed therein.”) The court does not rely on the remaining items at issue in the request, and therefore the request is 28 denied as moot as to those items. 1 7012(b)(1)(ii)(A) (Dec. 2015). 2 Each version of this regulation defines adequate 3 security as “protective measures that are commensurate with the 4 consequences and probability of loss, misuse, or unauthorized 5 access to, or modification of information.” 48 C.F.R. § 252.204– 6 7012(a). 7 Contractors awarded contracts from NASA must comply 8 with relevant NASA acquisition regulations. 48 C.F.R. § 9 1852.204-76 lists the relevant security requirements where a 10 contractor stores sensitive but unclassified information 11 belonging to the federal government. Unlike the relevant DoD 12 regulation, this NASA regulation makes no allowance for the 13 contractor to use alternative controls or protective measures. A 14 NASA contractor is required to “protect the confidentiality, 15 integrity, and availability of NASA Electronic Information and IT 16 resources and protect NASA Electronic Information from 17 unauthorized disclosure.” 48 C.F.R. § 1852.204-76(a). 18 Relator claims defendants fraudulently induced the 19 government to contract with AR knowing that AR was not complying 20 with Defense Federal Acquisition Regulation 48 C.F.R. § 252.204– 21 7012 (“DFARS”) and NASA Federal Acquisition Regulation 48 C.F.R. 22 § 1852.204-76 (“NASA FARS”), which is required to be awarded a 23 government contract. (SAC ¶ 30.) 24 II. Summary Judgment Standard 25 A party seeking summary judgment bears the initial 26 burden of demonstrating the absence of a genuine issue of 27 material fact as to the basis for the motion. Celotex Corp. v. 28 Catrett, 477 U.S. 317, 323 (1986). A material fact is one that 1 could affect the outcome of the suit, and a genuine issue is one 2 that could permit a reasonable trier of fact to enter a verdict 3 in the non-moving party’s favor. Anderson v. Liberty Lobby, 4 Inc., 477 U.S. 242, 248 (1986). 5 The party moving for summary judgment bears the initial 6 burden of establishing the absence of a genuine issue of material 7 fact and can satisfy this burden by presenting evidence that 8 negates an essential element of the non-moving party’s 9 case. Celotex Corp, 477 U.S. at 322–23. Alternatively, the 10 movant can demonstrate that the non-moving party cannot provide 11 evidence to support an essential element upon which it will bear 12 the burden of proof at trial. Id. 13 Summary judgment is appropriate when, viewing the 14 evidence in the light most favorable to the nonmoving party, 15 there is no genuine dispute as to any material fact. Acosta v. 16 City Nat’l Corp., 922 F.3d 880, 885 (9th Cir. 17 2019) (citing Zetwick v. Cty. of Yolo, 850 F.3d 436, 440 (9th 18 Cir. 2017)). 19 Where, as here, parties submit cross- 20 motions for summary judgment, “each motion must be considered on 21 its own merits.” Fair Hous. Council of Riverside Cty., Inc. v. 22 RiversideTwo, 249 F.3d 1132, 1136 (9th Cir. 2001) (internal 23 citations and modifications omitted). “[T]he court must consider 24 the appropriate evidentiary material identified and submitted in 25 support of both motions, and in opposition to both motions, 26 before ruling on each of them.” Tulalip Tribes of Wash. v. 27 Washington, 783 F.3d 1151, 1156 (9th Cir. 2015). Accordingly, in 28 each instance, the court will view the evidence in the light most 1 favorable to the non-moving party and draw all inferences in its 2 favor. ACLU of Nev. v. City of Las Vegas, 333 F.3d 1092, 1097 3 (9th Cir. 2003) (citations omitted). 4 III. Scope of the Claims 5 As an initial matter, the parties dispute the scope of 6 relator’s claims. In his SAC, relator specified eighteen 7 contracts that AR had with the DoD and NASA between February 23, 8 2014 and April 1, 2016. (SAC ¶¶ 84-93, 105-14.) Relator also 9 alleges in his SAC that defendants obtained subcontracts, 10 separate from those listed in the SAC, subject to the DFARS and 11 NASA FARS regulations, by falsely representing that they were 12 compliant with those regulations. However, relator does not 13 produce any evidence as to those subcontracts, and the court will 14 not consider them in deciding the cross motions for summary 15 judgment. (SAC ¶ 126.) 16 A. Contracts Awarded After Litigation Commenced 17 Defendants indicate that six of the contracts were 18 awarded after relator commenced this action. (Defs.’ MSJ at 24.) 19 This court has already held that “[t]he contracts government 20 agencies entered with AR after relator commenced this litigation 21 are not at issue.” United States v. Aerojet Rocketdyne Holdings, 22 Inc., 381 F. Supp. 3d 1240, 1248 (E.D. Cal. 2019). The court 23 sees no reason to depart from this holding, and once again will 24 not consider contracts entered into after the commencement of 25 litigation as bases for the SAC’s claims, specifically the six 26 contracts awarded after the original complaint was filed.2 27 2 Relator filed his first complaint on October 29, 2015. 28 Therefore, the court will not consider the following six 1 B. Contracts Explicitly Containing FARS Clauses 2 Defendants argue that the scope of relator’s claim must 3 be limited to only those contracts that contain the DFARS or NASA 4 FARS clauses. (Defs.’ Mot. for Summ. J. (“Defs.’ MSJ”) at 22 5 (Docket No. 116); Defs.’ Reply to Relator’s Resp. to Defs.’ 6 Statement of Undisputed Facts (“Defs.’ SUF”) ¶ 32, 35, 38, 40-43, 7 46, 49, 51, 53 (Docket No. 138).) However, the parties agree 8 that six of the remaining 12 contracts do include the 9 cybersecurity clauses. 10 Defendants argue that one of these six contracts with 11 the FARS clause, #NNC15CA07C (awarded Mar. 31, 2015), should not 12 be considered because, prior to contracting, it was determined 13 that AR did not have access to any information requiring 14 protection under the NASA FARS clause. However, defendants’ 15 evidence indicates that NASA was still contemplating whether the 16 clause was relevant to the contract in 2016. (See Decl. of Tammy 17 A. Tsoumas Decl. in Support of Defs.’ Mot. for Summ. J. (“Tsoumas 18 Decl.”), Ex. 166, (“clause probably applies,” “clause is 19 relevant,” and “we should be enforcing the clause.”) Therefore, 20 #NNC15CA07C remains at issue for relator’s claims. 21 C. Contracts Not Containing FARS Clauses 22 Relator claims the six contracts without the clauses 23 would have incorporated the clauses through other methods. 24 Relator explains that contracts without the DFARS clause would be 25 accompanied by DD Form 254, “which required that AR comply with 26 contracts entered into: #NNM16AB22P (awarded Nov. 17, 2015), 27 #NNM16AA02C (awarded Nov. 19, 2015), #NNM16AB21P (awarded Dec. 14, 2015), #W31P4Q-16-C-0026 (awarded Dec. 23, 2015), #NNH16CP17C 28 (awarded Jan. 15, 2016), and #NNM16AA12C (awarded Apr. 1, 2016). 1 all laws and regulations governing access to ‘Unclassified 2 Controlled Technical Information,’” or another NASA FARS clause 3 imposing the cybersecurity regulations on AR despite them not 4 being in the contract. (Relator’s Opp’n at 11-12; Relator’s 5 Reply at 8 (Docket No. 139).) Defendants note that only three of 6 the specified contracts in the SAC contain the DD Form 254 or the 7 other NASA FARS clause, but two of those were awarded after 8 litigation and are not being considered by the court as explained 9 above. (Defs.’ Reply at 4 (Docket No. 138); Defs.’ SUF ¶ 32, 49, 10 51.) Contract no. #W31P4Q-14-C-0075 does incorporate DD Form 254 11 and will be considered by the court. 12 Relator claims defendants’ evidence of which contracts 13 contained the pertinent clause is flawed because (1) the 14 defendants’ supporting evidence consists of only order forms, 15 rather than complete contracts; (2) the parent award (which is 16 not produced) does contain the clause; or (3) the orders produced 17 state that they do not list all applicable clauses. (Defs.’ SUF 18 ¶ 32, 35, 38, 40-43, 46, 49, 51, 53.) However, relator merely 19 argues that these other documents incorporated the clauses but 20 does not produce any evidence to that effect. Therefore, the 21 court cannot assume that the other documents relator describes 22 actually contain the clauses. 23 In sum, relator’s SAC specifies 18 contracts that he 24 alleges were obtained in violation of the False Claims Act. Six 25 of those 18 were obtained after litigation commenced. Six of the 26 remaining 12 explicitly contain the clauses, and one incorporates 27 DD Form 254 which has the DFARS clause. Therefore, the court 28 will only consider the seven contracts which have the clauses 1 either explicitly listed or are incorporated, as shown through 2 the parties’ evidence.3 3 IV. Relator’s Claims under the False Claims Act 4 Relator brings two claims for fraud under the False 5 Claims Act, which impose liability on anyone who “knowingly 6 presents, or causes to be presented, a false or fraudulent claim 7 for payment or approval,” 31 U.S.C. § 3729(a)(1)(A), or 8 “knowingly makes, uses, or causes to be made or used, a false 9 record or statement material to a false or fraudulent 10 claim,” id. § 3729(a)(1)(B). 11 Outside of the context where “the claim for payment is 12 itself literally false or fraudulent,” the Ninth Circuit 13 recognizes two different doctrines that attach False Claims Act 14 liability to allegedly false or fraudulent claims: (1) false 15 certification and (2) promissory fraud, also known as fraud in 16 the inducement. See United States ex rel. Hendow v. Univ. of 17 Phoenix, 461 F.3d 1166, 1170-71 (9th Cir. 2006) (citation 18 omitted). 19 Under either promissory fraud or false certification, 20 “the essential elements of [False Claims Act] liability remain 21 the same: (1) a false statement or fraudulent course of conduct, 22 (2) made with scienter, (3) that was material, causing (4) the 23 government to pay out money or forfeit moneys due.” Id. 24 A. Promissory Fraud 25 Both sides move for summary judgment on the promissory 26 3 Specifically, the court will consider contract nos. 27 #W31P4Q-14-C-0075, #NNC10BA13B (parent award for #NNC13TA66T), #N00014-14-C-0035, #FA8650-14-C-7424, #N68936-14-C-0035, 28 #NNC15CA07C, and #HR001115C0132. 1 fraud claim. The promissory fraud approach to the False Claims 2 Act is broader than the false certification approach and “holds 3 that liability will attach to each claim submitted to the 4 government under a contract, when the contract or extension of 5 government benefit was originally obtained through false 6 statements or fraudulent conduct.” Hendow, 461 F.3d at 1173. 7 For the following reasons, the court cannot grant summary 8 judgment for either side on relator’s promissory fraud claim. 9 1. False Statement or Fraudulent Course of Conduct 10 Under the False Claims Act, “the promise must be false 11 when made.” Hendow, 461 F.3d at 1174 (citations omitted). 12 Further, “innocent mistakes, mere negligent misrepresentations, 13 and differences in interpretations are not sufficient for” False 14 Claims Act liability. Id. (citations omitted). 15 Relator contends defendants made false statements 16 regarding AR’s cybersecurity status by not disclosing the full 17 extent of AR’s noncompliance with the DFARS and NASA FARS 18 clauses. (Relator’s Mot. for Summ. J. (“Relator’s MSJ”) at 16; 19 United States’ Statement of Interest at 6 (Docket No. 135).) 20 Relator argues any disclosures to DoD agencies “softened,” or 21 downplayed, the state of AR’s noncompliance which resulted in 22 omissions of information the government would want to know to 23 make assessment about the safety of its information.” (See 24 Relator’s MSJ at 8, 16.) 25 The evidence indicates that AR disclosed on multiple 26 occasions to the DoD and NASA that it was not compliant with the 27 DFARS clause. AR disclosed whether it was compliant with each 28 control identified in the DFARS clause by providing a compliance 1 assessment matrix via email or letter, though its accuracy is in 2 question as discussed below. (Tsoumas Decl., Ex. 60-61, 65, 78, 3 83, 89, 110, 111 (Docket No. 117).) AR also disclosed its 4 noncompliance to agencies via documented meetings and 5 teleconferences. (Tsoumas Decl., Ex. 55, 56, 58, 61, 65, 66; 6 Defs.’ SUF ¶ 74, 75, 113, 114.) However, there is no record of 7 what was stated during those meetings or conferences. 8 Defendants correctly point out numerous instances where 9 the government acknowledged AR’s noncompliance and was even 10 working with AR to implement a waiver. (See Tsoumas Decl., Ex. 11 253, Dep. of Laurie Hewitt 60:6-61:5, 63:15-16 (“With this letter 12 it was my understanding that Aerojet was not in compliance with 13 the DFARS clause”)); (Tsoumas Decl., Ex. 85, 86, 91, 92, 115.) 14 Defendants’ evidence produced on summary judgment shows that AR 15 disclosed information to NASA about noncompliance and NASA 16 acknowledged it. (Tsoumas Decl., Ex. 162,168, 169, 180.) Though 17 defendant has produced evidence demonstrating disclosures of 18 noncompliance, these disclosures hold less weight when they are 19 incomplete. 20 Relator bases his claim partially on the alleged 21 nondisclosure of data breaches AR experienced. (Relator’s MSJ at 22 2.) A memo by an outside firm dated September 4, 2013, outlines 23 four incidents that occurred which resulted in “huge quantities 24 of data leaving the Rocketdyne network.” (Decl. of Gregory 25 Thyberg ISO of Relator’s Mot. for Summ. J (“Thyberg Decl.”), Ex. 26 A at 60 (Docket No. 125).) Defendants respond that the attack 27 took place on Pratt & Whitney Rocketdyne’s network before it was 28 merged with the Aerojet General Corp. and defendants did not 1 “control critical IT and security resources” (Defs.’ Opp’n at 20 2 (Docket No. 130)); (Thyberg Decl., Ex. A at 71.) Steps were 3 taken to remedy the problem, however, the report only details 4 steps that were taken for two of the four incidents it outlines. 5 (Thyberg Decl., Ex. A at 62-63.) Further, the report made a set 6 of recommendations as the “current infrastructure will still 7 allow malware to enter and cause further problems such as data 8 leakage” and “large quantities of data are still being detected 9 leaving the network.” (Id. at 59, 61, 77, 79.) 10 Even though the network at issue was not fully in 11 defendants’ control at the time of the breaches, defendants note 12 the information technology systems integrated later. (Defs.’ 13 Response to Relator’s Statement of Facts (“Relator’s SUF”) ¶ 11 14 (Docket No. 130-2).) This evidence creates a genuine dispute of 15 material fact concerning whether the problems outlined in the 16 reports stemming from the 2013 breaches were still occurring when 17 the companies were integrated. There is no evidence that the 18 recommendations in the 2013 report were acted upon. Further, 19 there is no showing that these 2013 breaches were disclosed to 20 the contracting agencies, or were not relevant to compliance with 21 the necessary regulations. 22 Relator also bases his claim on annual cybersecurity 23 audits done by outside agencies. (Relator’s MSJ at 3.) These 24 audits concluded AR was not fully compliant with the necessary 25 DFARS and NASA FARS controls. (Relator’s MSJ at 3.) Defendants 26 do not dispute these findings by outside agencies and note that 27 AR disclosed this information to the DoD and NASA. (Relator’s 28 SUF at ¶ 29-31.) However, the nature of the disclosures creates 1 a genuine dispute as to material fact because the evidence does 2 not suggest that AR revealed the full picture. 3 Defendants do not dispute that a 2014 outside audit 4 determined that AR was only compliant with 5 of the 59 required 5 controls under DFARS 252.2014-7012. (Relator’s SUF ¶ 29); (2d. 6 Decl. of Tammy A. Tsoumas (“Tsoumas 2d. Decl.”) (Docket No. 130- 7 1), Ex. 215, 216, (internal emails focused on creating matrix of 8 controls and acknowledging that “AR is compliant with 5” of the 9 controls).) In September 2014, AR disclosed its “position on 10 DFARS” 252.204-7012 to the Army, but identified, in a compliance 11 matrix created by AR, that 10 controls were “in place and 12 compliant.” (Tsoumas Decl., Ex. 78.) This compliance matrix 13 which listed 10 compliant controls was sent to multiple 14 government agencies as part of AR’s purported disclosures. (Id., 15 Ex. 60, 65, 78, 83, 110, 111.) Defendants provide no explanation 16 or evidence for the differing number of compliant controls 17 between the audit and the information sent to agencies. 18 Further, the outside audits found that AR had several 19 high, moderate, and low risk deficiencies and a low security 20 monitoring score from 2013 to 2015. (Relator’s SUF ¶ 31-33, 35.) 21 An auditing firm was able to penetrate AR’s network within four 22 hours, requiring the firm to recommend immediate action. 23 (Relator’s SUF ¶ 34.) Defendants point out that these audits do 24 not necessarily translate to AR being non-compliant with DFARS or 25 NASA FARS as the audit reports do not specify as such. 26 However, part of the DFARS clause requires contracts to 27 provide “adequate security” which requires the contract to 28 implement certain controls “at a minimum.” 48 C.F.R. § 252.204– 1 7012(b). Adequate security is defined as “protective measures 2 that are commensurate with the consequences of probability of 3 loss, misuse, or unauthorized access to, or modification of 4 information.” 48 C.F.R. § 252.204–7012(a). A reasonable trier 5 of fact could find that the government agencies with whom AR was 6 contracting would not see AR as providing adequate security if 7 they were aware of the audit findings. There is no evidence 8 showing that the government agencies were aware of the findings 9 from these audits, or that the findings were not relevant to 10 compliance. 11 In sum, though defendants disclosed noncompliance with 12 the at issue regulations, the extent of the disclosure is unclear 13 from the evidence presented at this stage. A genuine dispute of 14 material fact exists as to the sufficiency of the disclosures 15 about the 2013 breaches and information gathered in audits done 16 by outside firms. 17 Because the court cannot conclude as a matter of law 18 that the first element of promissory fraud is met, plaintiff’s 19 motion for summary judgment on the promissory fraud claim must be 20 denied. Defendants’ motion for summary judgement on the 21 promissory fraud claim may be granted if defendant can show the 22 absence of a genuine issue of material fact and negate one or 23 more of the remaining three elements of promissory fraud. The 24 court accordingly analyzes the remaining elements below for this 25 purpose. 26 2. Scienter 27 If defendants made false statements or engaged in a 28 fraudulent course of conduct, they must have done so “knowingly.” 1 31 U.S.C. § 3729(a)(1)(A). The term knowingly is defined as 2 having “actual knowledge,” acting with “deliberate ignorance of 3 the truth or falsity of the information,” or acting in “reckless 4 disregard of the truth or falsity or the information.” Id. at § 5 3729(b)(1)(A)(i-iii). 6 Relator’s supporting evidence shows that defendants 7 knew AR needed to comply with the DFARS and NASA FARS clauses, 8 and were aware of AR’s noncompliance and the information obtained 9 through outside audits. (Relator’s SUF ¶ 40-48, 59, 60-66.) 10 Given the evidence cited by relator, and the contradictions in 11 information that AR had versus what was presented to the 12 government agencies, defendants have not demonstrated the absence 13 of a genuine dispute of fact on the scienter element. 14 Accordingly, the court cannot grant defendants’ motion for 15 summary judgment on the promissory fraud claim based on the that 16 element. 17 3. Materiality 18 Under the False Claims Act, materiality means a 19 defendant’s fraud has “a natural tendency to influence” or was 20 “capable of influencing” the government’s payment decision. 31 21 U.S.C. § 3729(b)(4). “[M]ateriality looks to the effect on the 22 likely or actual behavior of the recipient of the alleged 23 misrepresentation.” Universal Health Servs., Inc. v. United 24 States ex rel. Escobar, ––– U.S. ––––, 136 S. Ct. 1989, 2002 25 (2016) (alternations omitted) (“Escobar”). 26 Defendants note that materiality is not established 27 merely because the “[g]overnment designates compliance with a 28 particular statutory, regulatory, or contractual requirement as a 1 condition of payment.” Escobar, 136 S. Ct. at 2003. The mere 2 fact that a regulation is a requirement does not dispositively 3 mean it is a condition of payment or that it is material. See 4 id. However, it does not follow that the incorporation of a 5 regulation as a condition of the contract may not be taken into 6 account in determining whether compliance with the regulation is 7 material. 8 Here, compliance with the relevant clauses was an 9 express term of the contracts. (See Tsoumas Decl., Ex. 129 (“The 10 Contract shall comply with the following Federal Acquisition 11 Regulation (FAR) clauses”).) It may be reasonably inferred that 12 compliance was significant to the government because without 13 complete knowledge about compliance, or noncompliance, with the 14 clauses, the government cannot adequately protect its 15 information. (See Tsoumas Decl., Ex. 34, DoD Presentation Apr. 16 26, 2018, at 45:5-7.) Therefore, a genuine dispute of fact 17 exists as to the materiality element. 18 Defendants argue that compliance with DFARS and NASA 19 FARS was nonmaterial because the government awarded contracts to 20 other contractors and AR despite knowledge that they were 21 noncompliant. (Defs.’ SUF at ¶ 160, 179, 178, 193, 199, 162, 22 171, 174, 180, 183, 186, 189, 195, 201, 204, 207, 210, 213, 216, 23 219, 222.) However, without some evidence of the circumstances 24 of those other contracts, the court cannot speculate as to other 25 contractors’ level of non-compliance when analyzing whether 26 similar “particular type[s]” of claims were paid. Escobar, 136 27 S. Ct. at 2003-04. Specifically for AR, as discussed above, a 28 genuine dispute of material fact exists as to whether the 1 government had “actual knowledge that certain requirements were 2 violated” due to the sufficiency of AR’s disclosures. Escobar, 3 136 S. Ct. 2003-04 (emphasis added). 4 Defendants have not shown an absence of a genuine 5 dispute of material fact on the element of materiality. 6 Therefore, the court cannot grant summary judgment for defendants 7 on the promissory fraud claim based on the materiality element. 8 4. Causation 9 The False Claims Act requires “a causal rather than 10 temporal connection between fraud and payment.” Hendow, 461 F.3d 11 1174 (citations omitted). The relator must show actual, but-for 12 causation, meaning defendant’s fraud caused the government to 13 contract. See United States ex rel. Cimino v. Int’l Bus. Machs. 14 Corp., 3 F.4th 412, 420 (D.C. Cir. 2021) (concluding that in a 15 False Claims Act fraudulent inducement claim the relator “was 16 required to plead actual causation under a but for standard.”) 17 Because of the dispute as to whether AR fully disclosed 18 its noncompliance, a reasonable trier of fact could find that the 19 government might not have contracted with AR, or might have 20 contracted at a different value, had it known what relator argues 21 AR should have told the government. Accordingly, the court 22 cannot grant summary judgment for defendants on the promissory 23 fraud claim based on the causation element. 24 In sum, a genuine dispute of material fact exists 25 regarding each element of the promissory fraud claim for the 26 seven contracts. Therefore, both sides’ motions for summary 27 judgment on the promissory fraud claim must be denied. 28 B. False Certification 1 Defendants also move for summary judgment on the second 2 claim of the SAC, false certification. Under a false 3 certification theory, the relator can allege either express false 4 certification or implied false certification for knowingly 5 presenting “a false or fraudulent claim for payment or 6 approval,” 31 U.S.C. § 3729(a)(1)(A). 7 As noted above, contracts awarded after this litigation 8 commenced will not be considered. Relator’s claim for false 9 certification is based solely on an invoice payment under a NASA 10 contract that was entered into after relator brought this action 11 and is therefore not a proper basis for his false certification 12 claim. (See Relator’s Opp’n at 14; Tsoumas Decl., Ex. 121, Row 13 126 (the contract at issue was awarded on April 28, 2016).) 14 Because relator provides no other examples of alleged false 15 certifications, defendants’ motion for summary judgment on 16 relator’s second claim of false certification will be granted. 17 V. Damages 18 Relator moves for summary judgment on the issue of 19 damages, contending that he has established as a matter of law 20 that the damages amount to $19,044,039,117.00, which amounts to 21 three times the sum of each invoice paid under each contract that 22 was obtained through the allegedly false statements or fraudulent 23 conduct. Conversely, defendants move for summary judgment on the 24 issue of damages, contending that there is no evidence that the 25 government suffered actual damages. In essence, relator would 26 have the court find as a matter of law that what the government 27 received under the contracts had no economic value whatsoever, 28 whereas defendants would have the court find that the government nee een mee ene ene SN EO IS ED ee 1 received the full economic value of goods and services AR was 2 contracted to provide. 3 Neither of these propositions is supported by the 4 record before the court at this time. The amount of statutory or 5 actual damages, if any, to which relator would be entitled is for 6 the trier of fact to determine and cannot be adjudicated on 7 summary judgment. Therefore, both sides’ motions for summary 8 judgment on the issue of damages will be denied. 9 IT IS THEREFORE ORDERED that defendants’ motion for 10 summary judgment (Docket No. 116) be, and the same hereby is, 11 DENIED on the promissory fraud claim and GRANTED on the false 12 certification claim of relator’s Second Amended Complaint. 13 IT IS FURTHER ORDERED that relator’s motion for summary 14 judgment (Docket No. 124) be, and the same hereby is, DENIED. 15 | Dated: February 1, 2022 bitten th. 2d. beE—~ 16 WILLIAM B. SHUBB UNITED STATES DISTRICT JUDGE 17 18 19 20 21 22 23 24 25 26 27 28 19