Veridyne Corporation v. United States , 758 F.3d 1371 ( 2014 )

United States Court of Appeals
for the Federal Circuit
______________________
VERIDYNE CORPORATION,
Plaintiff-Cross-Appellant,
v.
UNITED STATES,
Defendant-Appellant.
______________________
2013-5011, -5012
______________________
Appeals from the United States Court of Federal
Claims in No. 06-CV-0150, Judge Christine O.C. Miller.
______________________
Decided: July 15, 2014
______________________
MARC LAMER, Kostos and Lamer, P.C., of Philadelph-
ia, Pennsylvania, argued for plaintiff-cross-appellant.
ROBERT E. CHANDLER, Trial Attorney, Commercial
Litigation Branch, Civil Division, United States Depart-
ment of Justice, of Washington, DC, argued for defendant-
appellant. With him on the brief were STUART F. DELERY,
Acting Assistant Attorney General, JEANNE E. DAVIDSON,
Director, STEVEN J. GILLINGHAM, Assistant Director, and
DOUGLAS T. HOFFMAN Trial Attorneys.
______________________
Before DYK, CLEVENGER, and WALLACH, Circuit Judges.
2 VERIDYNE CORPORATION v. US
DYK, Circuit Judge.
Veridyne Corporation (“Veridyne”) sued to recover on
its contract with the government. The Court of Federal
Claims (“Claims Court”) held that Veridyne’s contract
claim was forfeited under the Forfeiture of Fraudulent
Claims Act, 28 U.S.C. § 2514, also known as the Special
Plea in Fraud Statute, but awarded Veridyne partial
recovery under a quantum meruit theory. The govern-
ment appeals the quantum meruit award. The Claims
Court also awarded penalties to the government under
the False Claims Act, 31 U.S.C. § 3729, and the antifraud
provision of the Contract Disputes Act, 41 U.S.C. § 604
(2006) (recodified at 41 U.S.C. § 7103). Veridyne cross-
appeals the award of penalties. We reverse the Claims
Court’s quantum meruit award to Veridyne and affirm
the award of penalties to the government under the False
Claims Act and Contract Disputes Act.
BACKGROUND
The contract in question was awarded pursuant to the
Small Business Administration’s (“SBA”) 8(a) program. 15
U.S.C. § 637(a). This program is designed to help small,
disadvantaged businesses. The program sets aside gov-
ernment contracts for businesses that are owned and
controlled at least 51% by socially and economically
disadvantaged individuals. To administer the program,
the SBA contracts with federal agencies to provide goods
and services, and subcontracts the actual performance of
the work to disadvantaged businesses that have been
certified by SBA as eligible for such contracts. Although
the SBA has delegated the authority to negotiate with the
SBA-qualified contractor to the Department of Transpor-
tation, and by extension, the Maritime Administration
(“MARAD”), “the SBA is responsible for approving the
resulting contract before award,” and the formal contract
is between the SBA and the SBA-qualified contractor. 48
VERIDYNE CORPORATION v. US 3
C.F.R. (“FAR”) §§ 19.808-1(c), id. 19.811-1(b). In June
1989, Veridyne, then Shepard-Patterson & Associates,
Inc., was certified by the SBA for participation in SBA’s
8(a) program. Veridyne’s admission to the 8(a) program
was for the standard nine-year term, and it was scheduled
to “graduate” from the program in June 1998.
In March 1995, MARAD awarded to the SBA an indef-
inite delivery, indefinite quantity cost-plus-award-fee
contract for services related to MARAD’s logistics pro-
gram. Later that month, the SBA awarded a subcontract
containing the same terms as its contract with MARAD to
Veridyne for one base year and up to four option years.
The subcontract required Veridyne to provide services to
MARAD “as needed in accordance with authorized written
work orders.” Pl.’s App’x (“P.A.”) 10, 363. MARAD paid
Veridyne $20,324,289.15 for the services performed under
the initial contract period.
In late 1997 or early 1998, Veridyne approached
MARAD about extending the contract. MARAD was
satisfied with Veridyne’s performance and preferred to
work with Veridyne rather than switch to another SBA-
qualified business. Veridyne wanted to extend the con-
tract before Veridyne graduated from the 8(a) program in
June 1998. At the time, if the new contract award price
exceeded $3 million, it would be subject to open competi-
tion between SBA-qualified businesses and could not be
awarded as a sole-source contract. 15 U.S.C.
§ 637(a)(1)(D)(i)(II). If MARAD opened the new contract
to competition, the process would delay the award until
after June 1998, i.e., until after Veridyne’s graduation
from the program.
In March 1998, Veridyne submitted a proposal to
MARAD for a new indefinite delivery, indefinite quantity,
cost-plus-award-fee contract. Correspondence between
Veridyne and MARAD before the submission specified
4 VERIDYNE CORPORATION v. US
that estimates for the new contract would not exceed
“$3,000,000 in the aggregate.” P.A. 139. As a result, the
“proposed” cost specified in the proposal, including the
five additional option years, was $2,999,949.00. P.A. 171.
The proposal specified that “[a]ll contract terms and
conditions are the same, and the original scope and tech-
nical content remain intact [as the original contract].”
P.A. 147. Veridyne’s representative certified in the pro-
posal that “to the best of [his] knowledge and belief, the
cost or pricing data (as defined in [FAR] 15.801 . . . [i.e.,
‘all the facts that can be reasonably expected to contribute
to the soundness of estimates of future costs’]) submit-
ted . . . in support of [the new contract], are accurate,
complete and current.” P.A. 165 (citing FAR 15.801
(1994)). These statements were inaccurate. Veridyne
well knew that the services to be provided under the
extension would cost far in excess of $3,000,000, indeed,
in excess of ten times that amount. P.A. 4. Veridyne even
admitted that “the costs established in [the proposal] were
never intended to reflect MARAD’s actual needs, but were
developed to meet SBA’s $3 million limit.” P.A. 36.
Similarly, although some MARAD officials did not be-
lieve that the $3,000,000 estimated cost represented the
actual value of the services described in the proposal,
other officials openly conceded that Veridyne had explicit-
ly written the proposal “to remain within SBA’s
$3,000,000 threshold.” P.A. 204. The Claims Court
concluded that “MARAD personnel knew that the $3-
million amount was merely a pretext to get around having
to award [the new contract] subject to competition.” P.A.
60; see also P.A. 11 (“MARAD contracting officials knowl-
edgeable in approving the proposal vehicle and fully
aware of the need to befog the SBA in order to obtain its
approval actively participated in securing that approv-
al.”).
VERIDYNE CORPORATION v. US 5
In April 1998, MARAD officials approved the new con-
tract and submitted a letter to SBA proposing that SBA
approve the new contract without opening it to competi-
tion. Although Veridyne’s proposal was not sent to the
SBA, MARAD’s letter to the SBA included Veridyne’s
misleading data and figures taken directly from the
proposal and noted that “[t]he statement of work is un-
changed from the current contract” and “[t]he total esti-
mated amount of this requirement is $3,000,000.” Resp.
to Panel Request, Attachment A at 2, May 7, 2014, ECF
No. 73. In May 1998, MARAD, Veridyne, and the SBA
executed the new contract extending the service contract,
known as Modification (“Mod”) 0023, which had been
drafted by MARAD to reflect Veridyne’s proposal.
By 1999, even though the stated cost of Mod 0023 was
about $3,000,000, MARAD’s projected internal logistics
budget for the years covered by Mod 0023 and the final
year of the original Contract was $35,974,779. The work
orders issued to Veridyne far exceeded the scope of Mod
0023. From 2001 to 2004, MARAD issued additional work
orders to Veridyne, Veridyne completed the work, and
MARAD paid Veridyne $31,134,931.12 for this work. The
government does not now seek to recover these payments.
In part due to MARAD’s cost overruns, the Depart-
ment of Transportation Office of Inspector General began
investigating the execution of Mod 0023 in July 2003. By
September 2004, the Inspector General concluded that
Veridyne had obtained Mod 0023 through fraud. In
October 2004, MARAD’s Chief Counsel instructed
MARAD officials that, “[e]ffective immediately, MARAD is
to make no payments to Veridyne on any contract, with-
out express approval by me.” P.A. 337. MARAD did not
notify Veridyne until December 2004, when MARAD
issued a stop order suspending contract performance and
informed Veridyne of its view that Mod 0023 was void ab
initio. At the time of the December stop order, invoices
6 VERIDYNE CORPORATION v. US
numbered 260–264 were outstanding to MARAD and had
not been paid. After the stop order, Veridyne continued to
do work for MARAD and submitted three additional
invoices, numbered 265–267. MARAD never paid Veri-
dyne the amounts invoiced in 260–267.
On June 13, 2005, Veridyne submitted invoices 260–
267 as certified claims pursuant to the Contract Disputes
Act (“CDA”), 41 U.S.C. § 604 (2006) (recodified at 41
U.S.C. § 7103). MARAD informed Veridyne that it would
not issue a final decision on these claims because the
matter involved allegations of fraud, and Veridyne treated
this as a “deemed denial.” 41 U.S.C. § 7103(f)(5). On
February 28, 2006, Veridyne filed a complaint in the
Claims Court to recover $2,267,163.96 on invoices 260–
267, among other claims.
Insofar as is pertinent to this appeal, the government
entered a defense under the Special Plea in Fraud stat-
ute, 28 U.S.C. § 2514, that Veridyne had forfeited its
contract claim. In addition, the government counter-
claimed for a civil penalty under the False Claims Act
(“FCA”), 31 U.S.C. § 3729, for each fraudulent claim
presented and for a penalty under the antifraud provision
of the CDA, 41 U.S.C. § 604 (2006) (recodified at 41 U.S.C.
§ 7103), for the unsupported portion of Veridyne’s CDA
claims.
After a trial on the merits, the Claims Court rendered
a somewhat confusing opinion. It concluded that because
Veridyne’s invoices contained false information, its direct
contract claims were forfeited under the Special Plea in
Fraud statute. But the Claims Court also concluded that
because Veridyne had conferred a benefit on the govern-
ment by performing the contract, it could recover in
quantum meruit. The Claims Court determined that
Veridyne was owed $1,068,636.22 in quantum meruit for
the work performed before MARAD issued the stop order.
VERIDYNE CORPORATION v. US 7
On the government’s FCA counterclaim, the Claims
Court concluded Veridyne’s proposal for the Mod 0023
extension was a false claim. Because the Claims Court
treated each invoice that Veridyne submitted under Mod
0023 as a separate false claim, each claim incurred an
additional penalty under the FCA. The Claims Court
imposed the maximum penalty of $11,000 per claim for
each invoice submitted under Mod 0023, or 127 false
claims. Thus, the government was awarded
$1,397,000.00 in FCA penalties. The Claims Court also
concluded that “[n]o evidence of record suggests that the
SBA was aware that Mod 0023 was a pretext aimed at
avoiding SBA’s competition requirements.” P.A. 60.
Finally, the Claims Court found that Veridyne’s CDA
claims for invoices 265–267 were unsupported and con-
cluded that the government was entitled to CDA damages
in the amount of $568,802.09. 1
The government appealed the Claims Court’s quan-
tum meruit award. Veridyne did not appeal the Claims
Court’s forfeiture finding on its direct contract claim.
However, Veridyne cross-appealed the Claims Court’s
imposition of penalties under the FCA and the CDA. We
have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3). We
review legal conclusions of the Claims Court de novo and
its factual findings for clear error. Daewoo Eng’g &
Constr. Co. v. United States, 557 F.3d 1332, 1335 (Fed.
Cir. 2009).
1 Veridyne asserted various other claims that were
rejected, and Veridyne does not appeal. The Claims Court
also rejected the government’s common law fraud defense,
and the government does not appeal.
8 VERIDYNE CORPORATION v. US
DISCUSSION
I. VERIDYNE’S AFFIRMATIVE RECOVERY IN QUANTUM MERUIT
The Special Plea in Fraud Statute provides:
A claim against the United States shall be forfeit-
ed to the United States by any person who cor-
ruptly practices or attempts to practice any fraud
against the United States in the proof, statement,
establishment or allowance thereof.
In such cases the United States Court of Federal
Claims shall specifically find such fraud or at-
tempt and render judgment of forfeiture.
28 U.S.C. § 2514. To prevail under section 2514, the
government must “establish by clear and convincing
evidence that the contractor knew that its submitted
claims were false, and that it intended to defraud the
government by submitting those claims.” Daewoo, 557
F.3d at 1341 (quoting Commercial Contractors, Inc. v.
United States, 154 F.3d 1357, 1362 (Fed. Cir. 1998)). The
Claims Court found that Veridyne’s affirmative contract
claim was forfeited under section 2514. Veridyne does not
appeal the forfeiture finding.
Even though the Claims Court found that Veridyne
had forfeited its affirmative contract claim, it awarded
quantum meruit recovery to Veridyne for the value of the
services performed by Veridyne before MARAD’s stop
order. The Claims Court relied on United States v.
Amdahl Corp., 786 F.2d 387, 393 (Fed. Cir. 1986), stating
that “binding Federal Circuit precedent permits a con-
tractor to recover for services already rendered where the
situation does not involve a bribe or conflict of interest.”
P.A. 45; see also P.A. 38–39. On appeal, the government
argues that it was improper for the Claims Court to allow
Veridyne to recover in quantum meruit when its claims
VERIDYNE CORPORATION v. US 9
have been forfeited under the Special Plea in Fraud
Statute. We agree.
One of our predecessor courts, the Court of Claims,
decided this issue in Mervin Contracting Corp. v. United
States, 94 Ct. Cl. 81, 87 (1941). There, the court found
that the contractor’s claim was forfeited for fraud. Id. at
86. The court held that quantum meruit recovery was
unavailable to the contractor, finding that the contract
claim and the quantum meruit claim “were for the same
services, and the claims for those services were forfeited,
regardless of the theory or form in which the claims were
asserted. The second causes of action in quantum meruit
are therefore no more enforceable than the first causes of
action based on the express contracts.” Id. at 86–87. The
Court of Claims in Little v. United States followed Mervin,
recognizing that,“where, as in the present case, fraud was
committed in regard to the very contract upon which the
suit is brought, this court does not have the right to divide
the contract and allow recovery on part of it.” 152 F.
Supp. 84, 87–88 (Ct. Cl. 1957).
The legislative history of the Special Plea in Fraud
Statute confirms the correctness of the Mervin decision.
The Special Plea in Fraud Statute was originally enacted
as part of the Court of Claims Act in 1863, which expand-
ed the jurisdiction of the Court of Claims to include “pri-
vate claims against the Government, founded upon any
law of Congress, or upon any regulation of an executive
department, or upon any contract, express or implied,
with the Government” and gave it the power to issue final
judgments. Court of Claims Act of 1863, §§ 2–3, 12 Stat.
765, 765 (1863). One particular concern was that expand-
ing the Court of Claims’s jurisdiction would enable liti-
gants to perpetrate fraud on the government. Vol. 32 pt.
2 Cong. Globe, 37th Cong., 2d Sess. 1671, 1672 (1862). In
the floor debate, bill sponsors explained that the special
plea provision was intended “to give [the claimants] to
10 VERIDYNE CORPORATION v. US
understand by formal provision of law, that any attempt
at fraud upon their part shall so taint their claim, no
matter whether there be equity in it or not, as to forever
forfeit it to the Government of the United States.” Id. at
1674 (emphasis added).
Neither the Amdahl case, relied on by the Claims
Court, nor Miller v. United States, 550 F.2d 17, 25–26 (Ct.
Cl. 1977), cited by Veridyne, counsels an alternative
result. In Amdahl, pursuant to the Brooks Act, Pub. L.
No. 89-306 (codified as amended at 40 U.S.C. § 759
(1982)), the government procurement agency had delegat-
ed to the Department of Treasury the authority to procure
computer equipment, and Treasury contracted with the
Federal Home Loan Mortgage Corporation (“Freddie
Mac”) for this purpose. Amdahl, 786 F.2d at 390. But in
doing so Treasury had violated the statute and regulation
in two respects—it improperly paid for the equipment
upon signing but before physical delivery and failed to
determine whether suitable equipment was available
from other sources. Id. at 391. Because Treasury had
acted beyond the scope of its authority, we held that the
contract was void, and Freddie Mac could not recover
under an illegal contract. Id. at 392–93. However, we
concluded that Freddie Mac could recover under quantum
meruit for the services performed as an “innocent contrac-
tor.” Id. at 395. There is no suggestion in Amdahl that
quantum meruit recovery is available where the contract
claim has been forfeited under a Special Plea in Fraud.
To the contrary, Amdahl contemplated that quantum
meruit recovery “may be different in a case involving
fraud or the like, a matter not involved here.” Id. at 395
n.8. Similarly, Miller did not address whether quantum
meruit recovery was available for forfeited claims, but
concluded that a contractor could obtain quantum meruit
recovery because there was no fraud and the contractor
VERIDYNE CORPORATION v. US 11
was only liable under the FCA on a negligent misrepre-
sentation theory. 550 F.2d at 24.
Therefore, we reverse the Claims Court’s award of
$1,068,636.22 for quantum meruit recovery to Veridyne.
II. THE GOVERNMENT’S FALSE CLAIMS ACT COUNTERCLAIM
Under the FCA, “[a]ny person who . . . knowingly pre-
sents” to the government “a false or fraudulent claim for
payment or approval” “is liable to the United States
Government for a civil penalty of not less than $5,000 and
not more than [$11,000], plus 3 times the amount of
damages which the Government sustains.” 31 U.S.C.
§ 3729(a)(1), as adjusted by the Federal Civil Penalties
Inflation Adjustment Act of 1990, 28 U.S.C. § 2461; see
also 28 C.F.R. § 85.3. To recover under the FCA, the
Government must show “(1) the contractor presented or
caused to be presented to an agent of the United States a
claim for payment; (2) the claim was false or fraudulent;
(3) the contractor knew the claim was false or fraudulent;
and (4) the United States suffered damages as a result of
the false or fraudulent claim.” Young-Montenay, Inc. v.
United States, 15 F.3d 1040, 1043 (Fed. Cir. 1994). The
government must establish a violation of the FCA by a
preponderance of the evidence. 31 U.S.C. § 3731(d);
Daewoo, 557 F.3d at 1340.
The Claims Court found that Veridyne’s proposal to
MARAD for the extension of the contract, the Mod 0023
proposal, was a false claim because it misrepresented the
cost of the services that Veridyne agreed to provide in the
proposal. The Claims Court awarded the government the
maximum penalty for each of the 127 invoices submitted
pursuant to Mod 0023 for a total penalty of $1,397,000.00.
Veridyne first argues that its proposal did not contain
false statements because “the costs established in Modifi-
cation 0023 were never intended to reflect MARAD’s
12 VERIDYNE CORPORATION v. US
actual needs.” P.A. 36. We disagree. The original con-
tract had covered all of MARAD’s logistics needs and the
language in the proposal indicated that Mod 0023 would
have the same scope—that “[a]ll contract terms and
conditions are the same, and the original scope and tech-
nical content remain intact.” P.A. 147. In addition,
Veridyne’s representative had certified “to the best of [his]
knowledge and belief, the cost or pricing data [in the
proposal] (as defined in [FAR] 15.801 [i.e., ‘all the facts
that can be reasonably expected to contribute to the
soundness of estimates of future costs’]) submitted . . . in
support of [Mod 0023] are accurate, complete and cur-
rent.” P.A. 165 (citing FAR 15.801 & FAR 15.804-2
(1994)). The fact that this was an indefinite cost, indefi-
nite quantity contract does not render the misrepresenta-
tions in Veridyne’s proposal irrelevant. In light of the
SBA’s $3,000,000 threshold for awarding sole-source
contracts, these misrepresentations were highly material.
Therefore, the Claims Court did not err in finding that
Veridyne’s proposal meets the first criterion of the FCA of
being a “false or fraudulent claim for payment or approv-
al.” 31 U.S.C. § 3729(a)(1)(A).
Second, Veridyne argues that even if the proposal con-
tained false statements, Veridyne did not have the requi-
site intent to defraud MARAD because MARAD knew
that these statements were false, relying on United States
ex rel Ubl v. IIF Data Solutions, 650 F.3d 445, 452–53
(4th Cir. 2011), United States. ex rel Durcholz v. FKW,
Inc., 189 F.3d 542, 544–45 (7th Cir. 1999), United States
ex rel Hagood v. Sonoma County Water Authority, 929
F.2d 1416, 1421 (9th Cir. 1991).
Although Veridyne may be correct that MARAD had
knowledge that the Mod 0023 proposal contained false
statements, the FCA inquiry does not end with MARAD’s
knowledge. Veridyne’s contract was with the SBA, not
with MARAD. And it is undisputed that “[n]o evidence of
VERIDYNE CORPORATION v. US 13
record suggests that SBA was aware that the Mod 0023
proposal was a pretext aimed at avoiding SBA’s competi-
tion requirements.” P.A. 60. In other words, regardless of
MARAD’s knowledge, the SBA did not have knowledge
that Veridyne’s statements were fraudulent.
Even though the Mod 0023 proposal was never sent to
the SBA, SBA was aware of and relied on the fraudulent
cost data in the proposal. When MARAD requested
permission from SBA for the extension of the Contract
with Veridyne, it transmitted the false statements and
figures from Veridyne’s Mod 0023 proposal, stating that
“[t]he total estimated amount of this requirement is
$3,000,000” and assuring SBA that “[t]he acquisition for
the incumbent [Veridyne] will be a follow-on or renewal
contract with no change in the scope of work.” Resp. to
Panel Req., Attachment A at 2–3, May 7, 2014, ECF No.
73 (emphasis added). Even if Veridyne believed that
MARAD officials were not misled by its proposal, it is
clear that these false statements, certified as true by
Veridyne, misled the SBA to enter the contract with
Veridyne and that Veridyne intended that the SBA rely
on the false statements. As a result, Mod 0023 was
infected with fraud.
Third, Veridyne argues that even if the Mod 0023
proposal was procured by fraud, the invoices submitted
pursuant to Mod 0023, on which the FCA penalties were
based, did not contain any false statements and cannot
support FCA penalties. Veridyne’s contentions are una-
vailing. The Supreme Court has held that claims submit-
ted pursuant to a fraudulently obtained contract are FCA
violations even if the claims themselves do not contain
false statements. United States ex rel. Marcus v. Hess,
317 U.S. 537, 543–44 (1943), superseded by statute on
other grounds as recognized by Schindler Elevator Corp. v.
United States ex rel. Kirk, 131 S. Ct. 1885, 1893–94
(2011). In Marcus, the electrical contractors, in obtaining
14 VERIDYNE CORPORATION v. US
contracts with local governments that were funded by the
federal government, used collusive bidding to obtain the
contracts while certifying that these bids “were genuine.”
Id. at 540, 543 (internal quotation marks omitted). The
contractors then drew checks from a joint federal and
local government bank account to pay for the work. Id. at
543. Each check was treated as a separate claim. Id.
Even though it was undisputed that the contractors had
actually performed the contracted-for work, and these
checks were not independently fraudulent, the initial
fraud to obtain the contracts tainted all the claims. Id. at
543–44. The Supreme Court held that a contractor’s
“fraud [does] not spend itself with the execution of the
contract. . . . The initial fraudulent action and every step
thereafter taken pressed ever to the ultimate goal—
payment of government money to persons who had caused
it to be defrauded.” Id. Because Mod 0023 was obtained
by fraud, each invoice submitted pursuant to that con-
tract was tainted by that fraud. 2 See also United States
ex rel. Harrison v. Westinghouse Savannah River Co., 352
2 Veridyne also relies on United States v. Bornstein
for the proposition that each invoice should not constitute
a separate penalty. 423 U.S. 303, 311–12 (1976). In
Bornstein, even though the subcontractor United sent
only three shipments of falsely marked tubes to contractor
Model, Model incorporated those tubes into kits it shipped
to the government and sent the government thirty-five
invoices for payment. Id. at 307. The Bornstein Court
distinguished Marcus, finding that United was only liable
for the three false claims it had filed because the statute
“penalizes a person for his own acts, not for the acts of
someone else.” Id. at 312. Here, Bornstein is inapplica-
ble, as it is Veridyne and not another party that has
submitted 127 tainted invoices to the government, and
the statute penalizes that conduct.
VERIDYNE CORPORATION v. US 15
F.3d 908, 920 (4th Cir. 2003) (“[T]he initial false certifica-
tion by [the contractor] tainted all of the following invoic-
es, and the district court properly determined that [the
contractor] could be held liable on all twenty-six of the
submissions by [the contractor] seeking government
funding.”); United States ex rel. Alexander v. Dyncorp,
Inc., 924 F. Supp. 292, 298 (D.D.C. 1996) (“It has been
established that claims for payment submitted to the
government pursuant to a fraudulently obtained contract
violate the FCA, even if the claims themselves do not
contain false statements.”).
Veridyne also contends that these 127 invoices were
only submitted to MARAD, not to the SBA, and therefore,
these invoices were not sent to the contracting party.
Marcus held it irrelevant that the contractors’ false claims
were made to the bank holding federal funds and not to
the federal government directly; it is not necessary that
the SBA be misled with respect to each of the 127 invoic-
es. Marcus, 317 U.S. at 543–44. It is equally irrelevant
here that Veridyne submitted its claims for payment to
MARAD rather than the SBA directly, when the claims
would be paid from federal funds.
We affirm the Claims Court’s award of $11,000 for
each FCA violation, or $1,397,000.00 for Veridyne’s 127
false claims.
III. THE GOVERNMENT’S CONTRACT DISPUTES ACT
COUNTERCLAIM
The Contract Disputes Act requires that an author-
ized corporate official certify that “the claim is made in
good faith, that the supporting data are accurate and
complete to the best of his knowledge and belief, [and]
that the amount requested accurately reflects the contract
adjustment for which the contractor believes the govern-
ment is liable.” 41 U.S.C. § 605(c)(1) (2006) (recodified at
41 U.S.C. § 7103(b)(1)(A)–(D)). Under the antifraud
16 VERIDYNE CORPORATION v. US
provision of the CDA, 41 U.S.C. § 604 (2006) (recodified at
41 U.S.C. § 7103(c)(2)),
[i]f a contractor is unable to support any part of
his claim and it is determined that such inability
is attributable to misrepresentation of fact or
fraud on the part of the contractor, he shall be lia-
ble to the Government for an amount equal to
such unsupported part of the claim.
A “misrepresentation of fact” is “a false statement of
substantive fact, or any conduct which leads to a belief of
a substantive fact material to proper understanding of the
matter in hand, made with intent to deceive or mislead.”
41 U.S.C. § 601(9) (2006) (recodified at 41 U.S.C.
§ 7101(9)). “The government must establish this falsity
and intent by a preponderance of the evidence.” Daewoo,
557 F.3d at 1335. Congress enacted the fraud provision of
the CDA “out of concern that the submission of baseless
claims contributes to the so-called horsetrading theory
where an amount beyond that which can be legitimately
claimed is submitted merely as a negotiating tactic.” Id.
at 1340 (alterations in original omitted) (quoting S. Rep.
No. 95-1118, at 20 (1978) as reprinted in 1978
U.S.C.C.A.N. 5235, 5254). Here, Veridyne’s chief execu-
tive officer certified with respect to each claim that the
claim was “made in good faith, that the supporting data
[were] accurate and complete . . . , [and] that the amount
requested accurately reflect[ed] the contract adjustment
for which the contractor believe[d] the government was
liable.” 41 U.S.C. § 605(c)(1), (5) (2006) (recodified at 41
U.S.C. § 7103(b)(1)). The Claims Court found that invoic-
es 265–267, where Veridyne billed for the work completed
after MARAD’s stop order, were unsupported. 3
3 The Claims Court also found that these misrepre-
sentations in invoices 265–267 would have supported FCA
VERIDYNE CORPORATION v. US 17
MARAD relied on Veridyne’s submitted invoices to
show how funds for the Contract were allocated so that
they could be paid. The Claims Court found that invoice
265 was unsupported because Veridyne misrepresented
MARAD’s own allocation of funds and falsely communi-
cated to MARAD that MARAD had sufficient funds to pay
invoice 265. Veridyne argues that it had no opportunity
to confirm its fund allocation with MARAD because
MARAD had stopped communicating with Veridyne
before invoice 265 was submitted. But the failure of
MARAD to communicate with Veridyne does not excuse
Veridyne’s conduct.
Veridyne’s misrepresentations in invoices 266 and 267
are equally clear. A CDA claim requires a certification
that the claimant has acted in good faith in claiming
compensation for work performed. 41 U.S.C. § 605(c)(1)
(2006) (recodified at 41 U.S.C. § 7103(b)(1)). In invoice
266, Veridyne charged MARAD its actual overhead rate,
even though Veridyne had assured MARAD that it would
only charge a “discounted” overhead rate, and had used
that rate for the previous ten years. The Mod 0023 pro-
posal also stated that
[t]he overhead rate . . . is anticipated to be no
greater than [the historic 64.5% overhead rate] in
years 4 & 5 of the current contract vehi-
cle . . . . For this current proposal, [Veridyne] will
bid and cap the overhead rates at 64.4%, 62.5%,
61%, 58%, and 56% for Option Years 5, 6, 7, 8, and
9 respectively.
P.A. 147–48. Therefore, Veridyne was not entitled to
payment at the higher overhead rate, and invoicing at
that rate was a misrepresentation.
penalties, but declined to impose two penalties for the
same claim.
18 VERIDYNE CORPORATION v. US
In invoice 267, Veridyne had rebilled MARAD for pre-
viously unpaid expenses. But instead of making clear
that the expenses were rebilled expenses, Veridyne in-
cluded the rebilled lease expenses as part of overhead,
making it difficult to identify these as twice-billed items.
Therefore, while it is not unsupported to rebill for unpaid
expenses, Veridyne’s invoice could have induced the
government to pay twice for the same expenses. Veri-
dyne’s invoicing violated the statute.
Finally, we consider whether a single claim can be the
source of liability under both the FCA and the CDA, as
the Claims Court found here. We have previously consid-
ered this question, and have held that the same false act
in “[a] certified claim may be a source of liability under
both the Contract Disputes Act and the False Claims Act.”
Daewoo, 557 F.3d at 1340–41 (citing UMC Elecs. Co. v.
United States, 249 F.3d 1337, 1339–40 (Fed. Cir. 2001));
Commercial Contractors, 154 F.3d at 1375.
Therefore, we hold that the Claims Court did not err
in finding that invoices 265–267 were unsupported, and
affirm the Claims Court’s award of $568,802.09 to the
government as a CDA penalty.
CONCLUSION
We affirm the Claims Court’s award of $1,965,802.09
to the government on its FCA and CDA counterclaims. 4
We reverse the Claims Court’s award of $1,068,636.22 to
Veridyne under a quantum meruit theory.
AFFIRMED-IN-PART, REVERSED-IN-PART
4 Veridyne also argued that it relied on the advice
of counsel in taking its actions with respect to Mod 0023
and in its actions with respect to invoices 265–267. We
find no error in the Claims Court’s rejection of this de-
fense.
VERIDYNE CORPORATION v. US 19
COSTS
Costs to the United States.