United States v. MWI Corporation

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 17, 2015 Decided November 24, 2015
No. 14-5210
UNITED STATES OF AMERICA EX REL. ROBERT R. PURCELL,
APPELLANT/CROSS-APPELLEE
ROBERT R. PURCELL,
CROSS-APPELLEE
v.
MWI CORPORATION,
APPELLEE/CROSS-APPELLANT
Consolidated with 14-5218
Appeals from the United States District Court
for the District of Columbia
(No. 1:98-cv-02088)
Melissa N. Patterson, Attorney, U.S. Department of Justice,
argued the cause for appellant/cross-appellee United States of
America. With her on the briefs were Benjamin C. Mizer,
Principal Deputy Assistant Attorney General, Vincent H. Cohen,
Jr., Acting U.S. Attorney, and Michael S. Raab, Attorney. R.
Craig Lawrence, Assistant U.S. Attorney, entered an
appearance.
2
Brian Tully McLaughlin and Robert T. Rhoad argued the
causes for appellee/cross-appellant MWI Corporation. With
them on the brief were Charlotte E. Gillingham and Jason C.
Lynch.
Joseph J. Aronica argued the cause and filed the brief for
cross-appellee Robert R. Purcell.
Douglas W. Baruch and Jennifer M. Wollenberg were on the
brief for amicus curiae National Association of Manufacturers
in support of defendant-appellee/cross-appellant in support of
reversal of the decisions finding liability under the False Claims
Act.
Before: ROGERS, BROWN and KAVANAUGH, Circuit Judges.
Opinion for the Court filed by Circuit Judge ROGERS.
ROGERS, Circuit Judge: The United States successfully
brought a civil action pursuant to the False Claims Act (“FCA”),
31 U.S.C. § 3729, based on certifications by MWI Corp. to the
Export-Import Bank (“the Bank”) to secure loans financing
MWI’s sale of water pumps to Nigeria. Although the total loan
of $74.3 million was to Nigeria, the Bank required MWI to
certify that it had paid only “regular commissions” to the sales
agent responsible for the sales contract. A jury found the
certifications were false and awarded the government $7.5
million in damages. The damages were trebled to $22.5 million
pursuant to the FCA. Because an FCA defendant is entitled to an
offset from the trebled damages by any amount paid to
compensate the government for the harm caused by the false
claims, see United States v. Bornstein, 423 U.S. 303 (1976), and
the district court considered Nigeria’s repayment of the loan to
be compensatory, MWI’s damages were reduced from $22.5
million to $0. MWI thus was subject only to civil penalties,
3
which the district court imposed at the highest level permitted by
the statute, $10,000 for each of the 58 certifications.
The government, having recovered no damages, appeals. It
contends the district court should have applied only $7.5 million
of Nigeria’s loan repayment as an offset against MWI’s $22.5
million in trebled damages, because, according to the
government, the offset applies against the amount of damages
before trebling, not against the trebled damages, and so it is still
entitled to recover $15 million in damages. MWI cross appeals
on the principal ground that the government failed as a matter of
law to establish that it made a false claim or that it had done so
knowingly, both of which are required to establish FCA liability.
Because the government failed to establish that MWI
knowingly made a false claim, we reverse. At the time MWI
made the certifications, the government had yet to inform
exporters that, contrary to MWI’s understanding of “regular
commissions,” the term refers to what is normally paid in the
industry, and not what an exporter had historically paid to an
individual sales agent. Absent evidence that the Bank, or other
government entity, had officially warned MWI away from its
otherwise facially reasonable interpretation of that undefined and
ambiguous term, the FCA’s objective knowledge standard, as the
Supreme Court clarified while this litigation was pending in
Safeco Insurance Co. of America v. Burr, 551 U.S. 47, 69–70 &
n.20 (2007), did not permit a jury to find that MWI “knowingly”
made a false claim.
I.
The following facts are undisputed. In 1992, MWI agreed
to sell $82.2 million in irrigation pumps and related equipment
to seven states in Nigeria. To facilitate the sales, the parties
sought financing from the Bank, which finances and facilitates
4
export of U.S. goods and services by providing loans to foreign
purchasers, thereby “contribut[ing] to the employment of United
States workers.” 12 U.S.C. § 635(a)(1). The Bank agreed to
lend Nigeria $74.3 million in eight separate loans. Prior to
approving the loans, the Bank had required MWI to submit a
“Letter of Credit Supplier’s Certificate” in which MWI certified
that it had not paid “any discount, allowance, rebate,
commission, fee or other payment in connection with the sale”
except “[r]egular commissions or fees paid or to be paid in the
ordinary course of business to [its] regular sales agents.”
(Emphasis added). Similarly, before it would disburse funds, the
Bank required MWI to make an identical certification.
Altogether, MWI certified in fifty-eight documents that it had
paid only “regular commissions” in connection with the water
pump sales.
In 1998, a former MWI employee, Robert Purcell, filed on
behalf of the government the FCA complaint on which this
lawsuit is based. Purcell, relator here, alleged that non-regular
commissions had been paid, pointing to $28 million in
commissions — over 30% of the loan amount — that MWI had
paid to its long-term (over twelve years) Nigerian sales agent,
Alhaji Indimi. He alleged those commissions were so great that
MWI should have disclosed them to the Bank as payments other
than “regular commissions.”
In 2002, the United States intervened and filed an amended
complaint stating two FCA claims and two common law claims.
See 31 U.S.C. § 3730(b)(2). (The common law claims were
subsequently dropped.) Focusing on the unreported
commissions, the government alleged that MWI both knowingly
submitted false claims for payment or approval in violation of 31
U.S.C. § 3729(a)(1), and knowingly made false statements to
obtain a false or fraudulent claim in violation of 31 U.S.C.
§ 3729(a)(2). The parties filed cross motions for summary
5
judgment.
The district court denied MWI’s motion and granted the
government’s motion in part. United States ex rel. Purcell v.
MWI Corp. (MWI I), 520 F. Supp. 2d 158, 181 (D.D.C. 2007).
MWI argued that the unsettled meaning of the ambiguous term
“regular commissions” precluded, as a matter of law, the
government from establishing the elements of falsity and
knowledge. The district court acknowledged that the Bank had
not issued written guidance on the meaning of the term and that
“the contours of [the Bank’s] interpretation remained unclear
until the parties deposed [Bank] officials and related their
findings to the court in the instant motions.” Id. at 175–76.
Further, it agreed that the undefined, ambiguous term could
support MWI’s understanding that a commission is “regular” if
it is consistent with what had historically been paid to an
individual agent. Id. at 175–77. Nonetheless, the district court
accepted the meaning the government proposed in its summary
judgment briefing: a commission is “regular” only if it is
consistent with industry-wide benchmarks. Id. at 175–78. This
definition was based on the implicit understanding Bank
employees had about the meaning of the term. In view of the
amount of the commissions at issue, the district court concluded
that the term “regular commissions” was not so ambiguous that
MWI had not been on notice that, in the government’s view, the
term “might imply an industry-wide rather than an intra-firm or
(as the defendants quite implausibly propose) an individual-agent
standard.” Id. at 176. To the extent that there was a “nimbus of
uncertainty” that “may linger around commissions that lie at the
fringes of industry-wide benchmarks,” the district court
suggested that MWI ought to have “assumed the featherweight
onus of disclosing any questionable commissions.” Id. at 177.
Having accepted the government’s definition for “regular
commissions,” the district court left to the jury the question
6
whether MWI knowingly made a false claim. See id. at 177–78,
181. In a later round of summary judgment, the district court
determined that the government had proffered sufficient
evidence to create triable issues as to whether MWI’s claims
were false as measured against this industry-wide definition of
“regular commissions,” whether such claims were material, and
whether the government had suffered any actual damages as a
result of the false claims. United States ex rel. Purcell v. MWI
Corp. (MWI II), 824 F. Supp. 2d 12, 26–30 (D.D.C. 2011).
During this round, the government expanded on its interpretation
of the industry benchmark relevant to determining regularity,
arguing that the commissions paid to Indimi were so high that
they would be considered irregular in any industry. Even so, the
government offered evidence that the commissions paid to
Indimi would be considered irregular in MWI’s industry, which
the government defined as the “business of manufacturing and
selling pumps and related equipment.” Id. at 26–27 & n.6. The
government resisted MWI’s argument that in determining
whether commissions were regular it was appropriate to take into
account the country in which the work giving rise to the
commissions was to be completed.
Because the parties disputed whether MWI’s commissions
complied with this industry-wide standard, the district court
denied both motions for summary judgment on the falsity issue,
stating that “a jury is more than capable of resolving any
borderline definitional issues” presented by the need to apply an
industry-wide standard. Id. at 27 & n.6. The district court also
rejected MWI’s argument that Purcell must be dismissed from
the lawsuit, finding his allegations of fraud had not been based
on information solely found in the public domain — either from
news articles speaking generally about potential fraud associated
with the MWI-Nigeria deal or any related Freedom of
Information Act requests. Id. at 22–24; see 31 U.S.C.
§ 3730(e)(4).
7
A jury found each of MWI’s fifty-eight certifications
violated the FCA under §§ 3729(a)(1) & (2), and that the
government suffered $7.5 million in actual damages. The district
court trebled this amount to $22.5 million pursuant to the FCA,
31 U.S.C. § 3729(a), but accepted MWI’s argument that the
entirety should be offset because Nigeria’s repayments of $108
million (the full loan with interest and fees) constituted
compensatory payments. United States ex rel. Purcell v. MWI
Corp. (MWI III), 15 F. Supp. 3d 18, 23, 30 (D.D.C. 2014). The
district court relied on Bornstein, 423 U.S. at 314–17, in which
the Supreme Court held that an FCA defendant is entitled to an
offset from the trebled damages by any amount paid to
compensate the government for harm caused by the false claims.
MWI was not completely off the hook, however, because the
district court imposed the maximum ($10,000) in civil penalties
for each of the fifty-eight false claims. MWI III, 15 F. Supp. 3d
at 32; see 31 U.S.C. § 3729(a). The district court denied MWI’s
motion for judgment as a matter of law pursuant to Federal Rule
of Civil Procedure 50(b), finding there was sufficient evidence
for a jury to find the Indimi commissions were not regular and to
infer knowledge of falsity. United States ex rel. Purcell v. MWI
Corp. (MWI IV), 50 F. Supp. 3d 33, 39–46 (D.D.C. 2014).
Concluding that it lacked authority to consider whether MWI’s
good faith or reasonable understanding of “regular commissions”
precluded a knowledge finding, because MWI had an
opportunity to argue that theory to the jury, see id. at 44–46, the
district court found no basis to overturn the jury’s determination
that MWI did not have a reasonable or good faith interpretation
of “regular commissions,” id. at 46.
Both the government and MWI appeal. The government
contends that the district court erred in not confining the offset
to the non-trebled portion of the damages award — $7.5 million
— and that it is entitled to recover $15 million in damages.
MWI, on cross appeal, contends that the district court erred in
8
denying its motions for summary judgment and judgment as a
matter of law. MWI maintains it could not have been found
liable under the FCA because it was entitled to rely on its own
reasonable interpretation of “regular commissions” absent timely
notice from the government of the meaning of that undefined and
ambiguous term. MWI also challenges the district court’s ruling
that Purcell’s claims were not jurisdictionally barred under 31
U.S.C. § 3730(e)(4)(A). In view of our disposition of MWI’s
cross appeal, the court need not address the government’s offset
contention. The court also need not address MWI’s contention
that Purcell’s claim is jurisdictionally barred; the court would
have jurisdiction even if Purcell is dismissed as relator in this
lawsuit, see Rockwell Int’l Corp. v. United States, 549 U.S. 457,
476–78 (2007), and the presence of Purcell in the lawsuit makes
no material difference to our consideration of the merits of these
appeals, see Military Toxics Project v. Envtl. Prot. Agency, 146
F.3d 948, 954 (D.C. Cir. 1998); Aamer v. Obama, 742 F.3d 1023,
1042–43 (D.C. Cir. 2014).
II.
The False Claims Act prohibits false or fraudulent claims for
payment from the United States. 31 U.S.C. § 3729(a); see
United States ex rel. Davis v. District of Columbia, 679 F.3d 832,
835 (D.C. Cir. 2012). The government alleged that MWI
violated that prohibition in two separate but related ways: (1) it
knowingly presented false claims, 31 U.S.C. § 3729(a)(1), and
(2) it used false statements to get false claims paid, id.§ 3729(a)(2).1 Under either theory, the government had to prove
1
Congress modified and renumbered 31 U.S.C. § 3729(a)
upon enactment of The Fraud Enforcement and Recovery Act of 2009,
Pub. L. No. 111-21, 123 Stat. 1617. The government advises that only
the amendment to § 3729(a)(2) was made retroactive, but states the
amendments are not relevant to this appeal and cites only the pre-2009
9
“that the defendant presented . . . a claim to the government, that
the claim was false, and that the defendant knew that the claim
was false.” United States ex rel. Davis v. District of Columbia,
793 F.3d 120, 124 (D.C. Cir. 2015) (quoting United States ex rel.
Hampton v. Columbia/HCA Healthcare Corp., 318 F.3d 214, 218
(D.C. Cir. 2003)). The jury found that the government had
established liability and damages under both FCA theories.
Focusing on the ambiguity resulting from the government’s
failure to provide guidance to exporters about the meaning of the
term “regular commissions,” MWI contends that these FCA
claims should have never gone to the jury. First, MWI maintains
its reasonable interpretation of the undefined, ambiguous term
prevented a jury from finding either the elements of falsity or
knowledge under the FCA. Second, MWI maintains this
ambiguity means that the district court erred as a matter of law
in concluding that MWI had fair notice of its legal obligations
when the term could, as the district court found, plausibly have
implied MWI’s interpretation.
Of course, the government as plaintiff has the burden of
proving each element of the FCA, and to prevail, MWI need only
show that the government’s proof was lacking as to any one
element. Contentions like these — that a defendant cannot be
held liable for failing to comply with an ambiguous term — go
to whether the government proved knowledge. See United States
ex rel. K & R Ltd. P’ship v. Mass. Hous. Fin. Agency, 530 F.3d
980, 983 (D.C. Cir. 2008); United States ex rel. Oliver v. Parsons
Co., 195 F.3d 457, 463–64 (9th Cir. 1999). And in this context,
resolving the knowledge issue makes resolving the notice
question unnecessary. Strict enforcement of the FCA’s
version of the statute in its brief. Appellant’s Br. 2 n.1. This opinion
refers only to the FCA’s pre-2009 text. See United States v. Sci.
Applications Int’l Corp., 626 F.3d 1257, 1266 (D.C. Cir. 2010).
10
knowledge requirement helps to ensure that innocent mistakes
made in the absence of binding interpretive guidance are not
converted into FCA liability, thereby avoiding the potential due
process problems posed by “penalizing a private party for
violating a rule without first providing adequate notice of the
substance of the rule.” Satellite Broad. Co. v. Fed. Commc’ns
Comm’n, 824 F.2d 1, 3 (D.C. Cir. 1987). There is no doubt that
MWI has been penalized; in addition to damages, the FCA
imposes statutory penalties on those defendants who fail to
comply with its terms. See 31 U.S.C. § 3729(a). And it is
undisputed that the first actual notice of the meaning of “regular
commissions” did not come until long after the conduct giving
rise to this litigation took place. Faced with concerns like these,
a knowledge requirement can play an essential role as it “may
mitigate a law’s vagueness, especially with respect to the
adequacy of notice to the complainant that his conduct is
proscribed.” See Village of Hoffman Estates v. Flipside,
Hoffman Estates, Inc., 455 U.S. 489, 499 (1982).
To be liable under the FCA, a defendant must have made the
false claims knowingly. United States ex rel. Folliard v. Gov’t
Acquisitions, Inc., 764 F.3d 19, 29 (D.C. Cir. 2014); K & R Ltd.,
530 F.3d at 983. An entity acts knowingly under the FCA by
“(1) having actual knowledge, (2) acting in deliberate ignorance,
or (3) acting in reckless disregard.” Folliard, 764 F.3d at 29.
Consistent with the need for a knowing violation, the FCA does
not reach an innocent, good-faith mistake about the meaning of
an applicable rule or regulation. See Oliver, 195 F.3d at 463–64.
Nor does it reach those claims made based on reasonable but
erroneous interpretations of a defendant’s legal obligations. See
K & R Ltd., 530 F.3d at 983–84; United States ex rel. Hixson v.
Health Mgmt. Sys., Inc., 613 F.3d 1186, 1190–91 (8th Cir. 2010);
Commercial Contractors, Inc. v. United States, 154 F.3d 1357,
1366 (Fed. Cir. 1998); cf. Safeco Ins., 551 U.S. at 69–70 & n.20.
As this court has recognized, establishing “even the loosest
11
standard of knowledge, i.e., acting ‘in reckless disregard of the
truth or falsity of the information’” is difficult when falsity turns
on a disputed interpretive question. See United States ex rel.
Siewick v. Jamieson Sci. & Eng’g, Inc., 214 F.3d 1372, 1378
(D.C. Cir. 2000) (quoting 31 U.S.C. § 3729(b)(3)).
MWI reads these precedents to mean that the knowledge
element presents a pure question of law such that a defendant
cannot be held liable under the FCA so long as it has an
objectively reasonable interpretation of an ambiguous provision.
If this understanding is correct, then the court could reverse in
MWI’s favor without considering the evidence presented to the
jury on the question of knowledge. Cf. Feld v. Feld, 688 F.3d
779, 782 (D.C. Cir. 2012). The interpretive questions whether
the term “regular commissions” is ambiguous and whether
MWI’s interpretation is objectively reasonable are legal
questions. See Oliver, 195 F.3d at 463; K & R Ltd., 530 F.3d at
983; Ortiz v. Jordan, 562 U.S. 180, 190 (2011); Feld, 688 F.3d
at 783. But this court, looking to Supreme Court guidance, has
held that a jury might still find knowledge if there is interpretive
guidance “that might have warned [the defendant] away from the
view it took.” K & R Ltd., 530 F.3d at 983 (quoting Safeco Ins.,
551 U.S. at 70). In other words, even if the meaning of “regular
commissions” is ambiguous and MWI’s interpretation is
reasonable, there remains the question whether MWI had been
warned away from that interpretation. That question cannot
readily be labeled as a “purely legal” question. See Ortiz, 562
U.S. at 190–91. Consequently, MWI cannot prevail on the basis
that the issue of knowledge should never have gone to the jury
because it was entitled to summary judgment on a pure question
of law. Proving knowledge is in part an evidentiary question,
and “once evidence is presented at a trial, any challenge to
evidentiary sufficiency at summary judgment becomes moot.”
Feld, 688 F.3d at 782; Ortiz, 562 U.S. at 183–84; Chemetall
GMBH v. ZR Energy, Inc., 320 F.3d 714, 718–19 (7th Cir. 2003).
12
MWI must instead show that the evidence before the jury was
not sufficient for it to find that MWI acted knowingly.
On the legal questions, we agree with MWI that the meaning
of the term “regular commissions” is ambiguous and that MWI’s
interpretation is reasonable. No party contests that the meaning
of “regular commissions” is ambiguous. As the district court
found, the term could imply at least three different standards:
industry-wide, intra-firm, or individual-agent. MWI I, 520
F. Supp. 2d at 176–77. So understood, MWI’s individual-agent
interpretation of “regular commissions” is objectively
reasonable. Furthermore, the definition of “regular” makes clear
that something can be “regular” either because it is not unusual
in relation to societal norms or because it is not unusual for that
individual. See, e.g., The American Heritage Dictionary of the
English Language (5th ed. online 2015). Consequently, MWI
could reasonably have concluded that Indimi’s commissions
were regular because they were consistent with what MWI had
been paying him for over twelve years and were calculated using
the same formula MWI used to determine commissions for all of
its agents. Moreover, even if “regular commissions” is best
understood as referring to an industry-wide standard in light of
the Bank’s mission, which includes “ridding taxpayer-financed
loans of tainted commissions,” MWI I, 520 F. Supp. 2d at 177,
that does not mean MWI’s interpretation is objectively
unreasonable. This knowledge inquiry is necessary only because
MWI’s understanding of the term proved to be “erroneous” once
the government announced the term’s meaning in this litigation.
See Safeco Ins., 551 U.S. at 69. Had the government interpreted
the term as MWI does, there can be little doubt that the court
would owe deference to that interpretation as reasonable. See
Satellite Broad., 824 F.2d at 3.
Accepting the reasonableness of MWI’s interpretation, the
factual question remains whether there was sufficient evidence
13
that MWI was warned away from its interpretation. The court
will not overturn a jury verdict “unless the evidence and all
reasonable inferences that can be drawn therefrom are so one-
sided that reasonable men and women could not disagree.”
Williams v. Johnson, 776 F.3d 865, 870 (D.C. Cir. 2015)
(quoting Scott v. District of Columbia, 101 F.3d 748, 753 (D.C.
Cir. 1996)). MWI has met this demanding standard, for the
government has not pointed to sufficient record evidence that
there was “guidance from the courts of appeals” or relevant
agency “that might have warned [MWI] away from the view it
took.” Safeco Ins., 551 U.S. at 70; K & R Ltd., 530 F.3d at 983.
It is undisputed that the government has never published any
written guidance on what the term meant. MWI I, 520 F.
Supp. 2d at 175–76. The Bank first revealed its understanding
of “regular commissions” only after this litigation began.
Indeed, Bank officials acknowledged at trial that the Bank had
preferred to keep the standard flexible in order to make the loan
approval process more efficient, having moved away from an
overly cumbersome system where exporters listed all expenses
and commissions. See Tr. at 17–26 (testimony of Warren Glick)
(Nov. 20, 2013, PM Session). And even though the Bank was
concerned about bribery escaping its detection, it was wary of
adopting a rigid standard for “regular commissions” in view of
the wide variety of transactions the Bank financed. Tr. at 69–78
(testimony of Dr. Rita Rodriguez) (Nov. 14, 2013, AM Session).
In keeping the standard flexible, however, the Bank (and the
government) afforded exporters such as MWI the right to rely on
its reasonable interpretation of that flexible standard until the
Bank (or a court, Congress, or an appropriate agency) indicates
otherwise.
Unable to establish that the Bank had made known its
implicit understanding of “regular commissions,” the
government attempts to salvage the jury’s knowledge finding by
emphasizing other record evidence. First, the government
14
highlights that even though the Bank’s standard was not formally
published, there was, in the government’s view, evidence that
MWI had been warned away from its individual-agent
understanding of “regular commissions.” The government’s best
evidence on this point is testimony by a former MWI employee
that the Bank, through its Nigeria country officer, had told MWI
that even though there were no definitive guidelines for
commissions, they should be somewhere near five percent. Tr.
at 20–22 (testimony of Juan Ponce) (Nov. 13, 2013, AM
Session). But this suggestion hardly amounts to the necessary
“authoritative guidance” from the Bank. In Safeco Insurance,
the Supreme Court explained that informal guidance like the
kind described here — in that case an informal letter from staff
of the Federal Trade Commission — is not enough to warn a
regulated defendant away from an otherwise reasonable
interpretation it adopted. See id. at 70 n.19.
Second, the government focuses on testimony by that same
MWI employee that he and his fellow employees knew they
were applying the wrong definition of “regular commissions”
and had concerns about not disclosing Indimi’s commissions in
the certifications to the Bank. Tr. at 33–36 (testimony of Juan
Ponce) (Nov. 13, 2013, AM Session). In the face of an
undefined and ambiguous regulatory requirement, it is no
wonder that employees of the regulated entity were concerned.
More fundamentally, all this evidence might imply is that MWI
did not hew to its reasonable interpretation in good faith. Since
this litigation began, the Supreme Court clarified that subjective
intent — including bad faith — is irrelevant when a defendant
seeks to defeat a finding of knowledge based on its reasonable
interpretation of a regulatory term. See Safeco Ins., 551 U.S. at70 n.20. Under the FCA’s knowledge element, then, the court’s
focus is on the objective reasonableness of the defendant’s
interpretation of an ambiguous term and whether there is any
evidence that the agency warned the defendant away from that
15
interpretation. See id. at 70 & nn.19–20; K & R Ltd., 530 F.3d
at 983.
These generalized concerns about the regularity of Indimi’s
commissions also fail to support a finding that MWI acted
recklessly by failing to seek a legal opinion from the Bank
resolving MWI’s concerns. In K & R Ltd., 530 F.3d at 983–84,
the court rejected a similar argument, explaining that the
defendant’s “failure to obtain a legal opinion or prior [agency]
approval cannot support a finding of recklessness without
evidence of anything that might have given it reasons to do so.”
Although MWI may have been concerned generally, there is no
evidence that the Bank gave it particular reason to formally
inquire about these commissions.
The government’s final evidentiary theory fares no better.
It maintains that because the sheer amount of these commissions
— both in absolute dollar amount and percentage terms — was
so much greater than those paid elsewhere, MWI must have
known that they were irregular. As an initial matter, the record
does not support that these commissions were so far out of sync
with what is seen elsewhere in the world. At oral argument,
government counsel emphasized that the basis for this argument
was testimony by a former Bank board member, Dr. Rita
Rodriguez, that she had never seen commissions in any industry
at the rate given to Indimi. Tr. at 27–39, 79–86 (Nov. 14, 2013,
AM Session). On cross examination, however, Dr. Rodriguez
acknowledged that the Bank pays its own insurance brokers
commissions of up to forty percent. Id. at 80–87. Although Dr.
Rodriguez suggested that the percentages paid by the Bank were
likely this high only because the absolute dollar amounts were
small, id. at 90, the state of the record is far from clear that the
government established that Indimi’s commissions were so
innately irregular that MWI must have known the commissions
should have been disclosed.
16
Even assuming the jury was convinced that these
commissions were beyond the pale, the government’s position
that this establishes knowledge amounts to a backdoor challenge
to whether MWI’s interpretation was reasonable. The
government’s desire to avoid results like these — where the
Bank may not have assessed whether a high commission
represents the financing of non-U.S. employment or a bribe —
might confirm that MWI’s interpretation of “regular
commissions” is incompatible with the Bank’s basic purposes
and the government’s interpretation the better one. That MWI’s
interpretation may not be the best interpretation does not
demonstrate that MWI’s interpretation was necessarily
unreasonable. Absent evidence that the negative consequences
of an interpretation render it unreasonable, such consequences
can play no role in evaluating whether an FCA defendant acted
knowingly. Cf. Safeco Ins., 551 U.S. at 70 n.20. Had the
government wanted to avoid such consequences, it could have
defined its regulatory term to preclude them. Of course, the
government may instead determine that its goals are better
served by not doing so, much as the Bank officials’ testimony
implied. This may be the government’s choice, but then the
FCA may cease to be an available remedy if the government
concludes after the fact that a particular commission is not
“regular” because it is too high.
Accordingly, we reverse and remand the case with
instructions to enter judgment for MWI, and we do not address
the damages question presented by the government’s appeal or
MWI’s challenge to the denial of dismissal of relator Purcell.