good morning your honors my name is lisa rossano and i am the attorney on behalf of the really terse certain of whom are in the courtroom i'd like to reserve five minutes for a battle by the mandatory nondiscretionary terms  forty two us c eighty two eighty seven eight to be all energy savings performance contracts must pay for themselves through cost savings furthermore the contractor must guarantee that the project will result in savings which comply with that mandatory requirement the critical language at the heart of the statute which honeywell never addressed and the district court never addressed is quote aggregate annual to both utility and energy savings performance contractors may not exceed the amount that the agency would have paid for utilities without an energy savings performance contract the contract shall provide for a guarantee of savings to the agency the key word here is aggregate the district court omitted the crucial part of the statute from it's now assess and what the army would pay for both heat and electricity must be considered  your case here it's not one for noncompliance with that authority correct we're saying they did not comply with the statutory terms but that's a pretty good for the honeywell lie with your intent to lie because this is a part time case this is a cretin case so therefore let's go to the real issue in this case whether the school rules by honeywell estimates actually told the government agency what the cost would be and didn't misrepresent the facts objective lee and didn't do so obviously with the intent that's what i requirements of a false claim that the route to the paperwork between honeywell and the government mis represent the savings they absolutely did explained how it calculated the savings right and never purported to include any electricity costs there and i think that's a testimony of margaret simmons army counsel that the information used in the calculations was available for everyone  and no one tried to hide it was open and aboveboard honeywell presentation dated february twenty ninth two thousand highlighting quote electric cost increase of eight hundred ninety one thousand four hundred thirty seven due to closure of c h p p m proposal to include that increase its estimated quote total annual baseline energy costs so it's they said how they were calculating it and that that honeywell statement of the energy baseline and that expected savings how was that objectively false that the project would reduce for richardson heating costs because the first thing that honeywell must do in order to comply with the statute is a promise guarantee must have the aggregate annual payments for both utilities and the contractor payments are within the statutory limitation and honeywell's feb powerpoint makes no such representations as to what the ultimate outcome was what aaa found the army oddity to see confirmed which is that the project would never pay for itself honeywell never told the government that it's not in that february power point it's not anything that honeywell ever gave the government and never told them and it's obligated to do that it's required to do that never told them it would never pay for it and they're mistaken it's one thing to have mistaken bad math but the evidence in the record was ample as to honeywell's actual knowledge that the guarantee was false the project would never pay for itself at the outset but the first thing that i think that the court should however and this clarifies really what the errors were in the district court's analysis is whether there was an objective false statement and all over vs parsons dictates that in order to make that determination where the case involves a non discretionary legal requirement the court must first determine whether the representation was accurate in light of applicable law and that is not in dispute the  agency found that energy savings guarantee was false did not comply with the statutory limitation and that was in fact the thing that honeywell conceded that fact in order to get to the baseline the guarantee was false in order to enter into it and here at the time he was urging the district court applied the wrong standard and applied basically common law principles of falsity rather than the false claims act definition of a false statement which is a false statement of fact and that it's restricted the court's scope of examination and hendo says falsity is not merely false statement of fact but includes a false statement or fraudulent course of conduct and congress intended the false claims act to embrace not only affirmative factual misrepresentations but hidden violations of law hendo legislative history and the supreme court's recent escobar decision are all in a court materiality is the next thing the court should consider once you've established that there is a false statement which there is the triple establish it and honeywell's thirty six witness richard rogan conceded through his  calculations using honeywell's own data that the project would not pay for itself and suzanne once honeywell's team leader admitted under oath that the project would not pay for itself money will need the project would not paid for itself and she believe that the government did not understand this fact so materiality under the false claims act is defined as having a natural tendency to influence or be capable of influencing the payment or receipt of money or property honeywell's false promise and guarantee hess as an example of materiality and this was not a minor regulatory violation and it was not an inconsequential breach of contract this statutory requirement that the project pay for itself is the heart the critical critical part of the government's award of the contract on the materiality if you look at universal health services versus united states ex relator escobar if you look at nascar the supreme court said that if the government pays a particular claim in full despite its actual knowledge that certain requirements were violated that's very strong evidence that those requirements are not material and in this case the government began paying honeywell's claims to two thousand and three and continued up to at least two thousand and eight despite being where the relator is fraud allegations in two thousand and two the results of the audit in two thousand and three and the problems with the em field and rate since two thousand and four isn't that very strong indication that the requirements were not material to absolutely not your honor sorry to interrupt it is absolutely not with all due respect to was a desperate measure the government didn't even know at the time that it entered into maad to that honeywell had always known that the project would not pay for itself it didn't have that critical information at the start and i'm talking much w entered into in two thousand and three and he won't have never told the government in the course of those negotiations in any of the investigation that is that relative to the audit where the audit pretty much says all this stuff what the audit basically says the guarantee was false but nobody knew that honeywell had committed a violation the false claim that the honeywell always knew and that the government had been forced into a contract that never would have worked so much too and if you look at the context of mach two the government not only didn't know this project was a total failure from the outset but they were looking at an unfinished project contractor on base nothing finished and winter coming on and they testify those government officials and i think we've cited in our brief  thoroughly that they didn't have very many options they felt that they had to do the lesser of the two evils one of which was the fifty million dollar terminations cost and the other of which was scramble around and try to find someone else to try to finish this project in it's not uncommon it's not uncommon for a contractor to have to do for the government to have to continue on with the contract because it's in the interest of the public safety and the cases are there as to the government having to do that because for instance that reminded one time right out twice ok and so what did your last complaint look like that was different from the other complaint we alleged more specifically the fraud the court but the court it's not a litmus test the fact that the court continues on a project when the quote when the government has to continue on when it's and when it's conducting investigations that in fact shows materiality when it takes it seriously enough to say we're going to have the army audit agency get involved and when the army audit agency findings prompt in ma defeat modification of the contract that shows that it mattered it would be a different situation if the government just ignored the relator allegations and then judge bay i don't remember they had you only one of our panels actually and i cannot remember the other judge but judge wardlow morgan christian i believe was on the second panel about three minutes your honour's the most important part here that was c n turn this is where i think the court should focus there is actual knowledge in the record that honeywell knew what it was doing at the outset never said that before it's admissions to a team leader that it always knew that the project would not pay for itself it made it that government was not until informed and she admitted that she believed that the government did not understand that the project would not pay for itself but only when there is an absence of that actual knowledge then you get the other couple forms of c n n or the deliberate ignorance and the telling you what the just record set is you almost tell me what's wrong with that construction privatisation was this amorphous discussion and we've pointed out that there was never anything that was firm there was never anything that was secure about privatisation and in any event it was not in the government's economic interest to privatized they had no they had no they were going to be basically destroying a perfectly good well functioning utility system but it wasn't their intent the record does not actually reflect that it reflects discussions it reflects something that was vague a concept but it's not reflect an intent a plan committed funds congressional approval budgeted funds appropriations for any sort of not that privatisation is destroying the very thing that runs the electricity and makes the heat down to about a minute so we do have actual knowledge there was no private initiative any time for about oh sorry i think you're a before the panel today the two prior times this court has heard arguments on this case related to the pleadings phase of the case first will twelve be six that appeal was taken up in tw the panel decided in two thousand and twelve judge bay was on that panel along with judgment q and i believe hawkins it's an h and then the the second time was on ninety grounds again and failure to plead fraud with particularly in the complaint and that panel was judge christian a judge wallace and also were more law thank you and what happened in that second re man is most important today at the time this court said honeywell may ultimately prevail on a motion for summary judgment based on the lack of essential elements were based on the government's knowledge we just can't decide it on a motion to dismiss fast forward several years discovery mountains of evidence twenty two depositions and we put the evidence in the record and the lack of evidence on the essential elements of related claims in front of the district court i would also note that the district court was now a different judge when case was remanded a second time about halfway through the discovery period the district court judge became judge gleason so it's a different district court judge who wrote this summary judgment opinion than the prior opinions looked at at the pleadings face and that opinion is what is being appealed and what is being ignored in large part by all of the arguments made by the appellants in this case was she was talking about on the enter yes and i'm looking at it looks like regarding infiltration rates in two thousand and six the honeywell executive stephen craig said the reason the energy saving for the project could not be realized was because of the end filtration due to the building heating system controls and they occupants opening windows in the doors in the building according to craig this was not something honeywell could control and the government had in fact  d to perform work on these facilities to control the infiltration without this were craig stated that honeywell project was not a viable project why is that not evidence of science  because of the timing and because of what mr craig was discussing in two thousand and six so it's a two party answer your honor first in two thousand when the contract was being negotiated with the government honey put honeywell put in proposed future infiltration rates that would be achieved one certain energy measures were put into place when the contract is actually entered into two thousand in two thousand both task order eight and t allocates certain things to the government to do and i believe it's in section two point four point three of the task order and the contract in proposal number four and so honeywell as the contractor cannot control the physical actions of the members of the military on the base so if it gets too hot things that were observed in the preprocessor phase were opening windows and doors in the middle of the alaska winter to cool off the buildings honeywell can't control that if that happens once the project is completed because they don't control those individuals at the base the government does and so it's the government's responsibility to control compliance with the energy cost savings that are put into place such as we've got new thermostats we've got ways to distribute the heat better so it's not as an even making certain rooms hot and the government is going to take on that responsibility related argue that craig statement carried an implicit admission in crank statement that honeywell was completely aware of the easily verifiable fact that the buildings on the base were forty year old well weathered buildings and nevertheless intentionally chose to employ infiltration rates which were significantly less than recommendations i think that's what they're arguing and i think that's that's now their argument on infiltration and i will say this the infiltration rate issue is a complete red herring because at the end of the day whether or not those infiltration rates are achieved at any given point in the contract twenty five year performance goes to the heart of whether honeywell gets paid if honeywell can actually demonstrate the savings that it promised and however they're going to be measured by the government honeywell does not get paid and in fact that is what happened with the infiltration and if you look at the record citations the deposition of earl johnson who was the contracting officer after m signed earle johnson's deposition is in the supplemental excerpts of record starting at page ten and it was his testimony under oath that he was aware of an infiltration issue once we get to performance on the contract it was examined and payments made to honeywell were just it were adjusted in accordance with whether or not certain future rates were cheap if a savings was not achieved the payment was reduced where savings were achieved then the payment was made and that's the way it's taken care of and the other thing to note is that there is substantial evidence in the record that the contract saves energy and the contract saves energy dollars and that was noted both in the district court's opinion and it's noted in the of the government witnesses including earl johnson who has signed on and made the payments to honeywell since madhu was executed in two thousand and three when you were correct and it was that the contract was modified before any payments were requested or made and i just want to clarify that your honor and that happened on august thirteenth two thousand and three that modification was executed by the government and by honeywell and it was modeled after the before the on it was after the audit the audit started at the very end of two thousand and two and continued through the first half of two thousand and three the tripoli's final report was july of two thousand and three and the aaa is the entity that came up with what the stipulated and adjusted savings guarantee would be for the modification that the government ultimately entered i did want to talk a little bit about the thing the primary thing that related contend was the alleged fraud which was the adjustment to the baseline to  to reflect the flak reflect the fact of a close central heat and power plant so this is as your honor was pointing out the privatization issue there is record evidence that indicated the military was proceeding with a privatization initiative and the you can see it in the supplemental excerpts of record in one seventy three and you can see it again in the supplemental excerpts of record  three twenty and three thirty two that was the stated purpose of the government at the time it was negotiating with honeywell those were going to close the central heat and power plant at fort richardson and privatized the electricity and honeywell was asked to calculate what the savings would look like given those two assumptions those were the calculations that were made and the fact that this adjustment was taken into account before the contract was entered the baseline was adjusted to say the power plant is now closed because that's the assumption the government has given us those calculations were not false as a matter of law this isn't a case where the government said please do one calculation and honeywell did another or the government said use these input variables and honeywell used different input variables honeywill took the information provided to it by the government the assumptions provided to it by the government and then showed its work at every step of the contracting process before the contract was awarded and said this is how we are calculating energy savings and it shows it in the feb twenty ninth two thousand power point which was jointly given by the us army corps of engineers honeywell and by the d p w at fort richardson all three of those individuals or individuals from all three of those entities participated in giving that presentation it's also the baseline adjustment shows up clearly in proposal number three excerpts of record five sixty eight proposal number four which is excerpts of record one sixty two to sixty three and to seventy two to seventy three and the government even asked specific  the electrical baseline adjustment so it's not something that was hidden it's not something you didn't understand you can see the specific question u s army corps of engineer tim brown made and the response given by honeywell at excerpts of record eight fifty one eight fifty three i'm sorry i think the argument is that honeywell knew that if either assumption changed then it could not provide the guarantee do you agree with in other words that the if  fact if you assume different things going into the contract you wouldn't assume the same result and i understand that but i think that's or claim is that honeywell should have told the government look if if you look i think two assumptions this will never work well if you actually look at the calculations provided and what honey no one had asked the question if we assume different facts than the facts were  happens and so there's no evidence in the record that honeywell knew that either because it was a question not asked if we make different assumptions than the ones we're all agreeing to make what will happen that was not a question that was asked by the government or by honeywell at the time and there's nothing in the record that indicates it was anyway a false knowingly false actually false deliberate disregard or reckless by the flop no actually it was a change of fact right and that's what the market simmons memos detail margaret simmons is the attorney for huntsville corps of engineers she signed off as the legal reviewer on the on the issuance of a contract themselves at the time of the award and then she also performed the the reviews in two thousand and three that ultimately lead to modification number two and margaret simmons memos from april and may two thousand and three detail that the mistake made was the assumption that the plant would close and the army would privatized the electricity and that's a mistake made by the army not by honeywell and that's what was deposition and by mr rogan as the thirty six designee for honeywell it was a mistake made by the government honeywell agreed to modification number two because the aaa the corps of engineers and honeywell came up with a way to make the contract work even with the tripoli's finding that you couldn't have this baseline adjustment as initially proposed the parties got together and renegotiated a workable contract and the determinations by the contracting officer at the time sharon butler is there was no fraud in the procurement there was no fraud in mud to and the news in the best interest of the government in honeywell to come up with a contract that does work that does save energy and save energy dollars and that's what happened and those facts are undisputed and it's also undisputed that the government has only ever paid based on the modified contract as entered into into two thousand in two thousand and three did you have any other questions or i also just want to point out for the record that at least seven different government agencies have looked at this case government agencies who investigate fraud and government agencies who are vested with looking at whether a false claims act exist and every government agency that has looked at this has concluded that there is no fraud and one of the reasons they concluded is because of what this court says in the hey good to opinion honeywell did in this case what the core bid it to do and it told the court what it was doing when it did it and the court with full knowledge accepted that contract proposal when it was later determined that there was a change in fact and a change in circumstances that made the electrical baseline adjustment no longer a valid adjustment the contract was modified so that the government could save energy and energy dollars and the contractor could get paid and that's what's happened ever since then and specifically i would refer the court to the f b i s determination of no fraud that exists that docket forty nine thirty five at one and forty nine dash thirty six that one through eleven and the army criminal investigative commands determination of no civil or criminal false claims act violations and that exists that supplemental excerpts of the record three thirty seven through three thirty eight plus all of the accompanying interview one hundred percent of the cost for the operations and maintenance for producing both heat and electricity and open plant well simultaneously claiming the cost of commercial was commercially purchased an electricity from a closed plant that was the hidden violations were and that that demonstrates site entered as well because when they're taking all of the credit and then saying well you are responsible for your purchase of electricity then why is honeywell taking the credit that the savings and giving it to himself as part of this project for the purchase of electricity and the other point is that money will is is is be seen in this case it's good faith defense on the on what the government knew but now what on  information that it received from its attorneys and he was counsel should the district court that honeywell had no intention of be seen the advice of its counsel at issue in this case and it's not going to be the basis of any defense they ever presented in this case but in a good when you're determining good faith to see enter that that was just merely negligence in that honeywell didn't have knowledge or should have known as a reasonable prudent contractor that the project was not going to make it it should have consulted with its attorneys and the real should have been a title to that discovery in order to examine the good and bad faith information good and bad faith compliance of the law information that there is under all of vs parsons analysis in light of applicable law that is the before and after cost plant being closed the cost of sorry producing heat and electricity the cost must be evaluated based on existing conditions not in some amorphous privatization event and the other thing is richard broken denied in this deposition in twenty fifteen that the base was not privatizing we cited that in our brief and then they changed their position a year later and he testified that they were privatizing so there's a disputed material fact here richard rogan is honeywell study b six witness and we have shifting stories as to what happened this privatization theory and i'm sorry in any trouble in tripoli never mind a finding of no fraud is what i meant to say i'm sorry and with all of the information that honeywell says it has told the government and you look at its proposals it merely posed a hypothetical if this happens it never said that the project would not comply with the statute and honeywell's thirty six witnesses testified he admitted that the government was relying on honeywell to prepare a truthful honest and or g c guarantee this project was meant to comply with the law as the as the