Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-09-05385/USCOURTS-caDC-09-05385-0/pdf.json

Parties Involved:
Chamber of Commerce of the United States of America
Amicus Curiae for Appellant
National Defense Industrial Association
Amicus Curiae for Appellant
Science Applications International Corporation
Appellant
United States of America
Appellee

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 21, 2010 Decided December 3, 2010

No. 09-5385

UNITED STATES OF AMERICA,

APPELLEE

v.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION,

APPELLANT

Appeal from the United States District Court

for the District of Columbia

(No. 1:04-cv-01543)

Theodore B. Olson argued the cause for appellant. With 

him on the briefs were Matthew D. McGill, Amir C. Tayrani, 

Ryan J. Watson, Richard O. Duvall, Jennifer A. Short, 

Lawrence E. Ruggiero, and John P. Rowley III.

Robin S. Conrad, Amar D. Sarwal, James J. Gallagher, 

and Susan A. Mitchell were on the brief of amicus curiae the 

Chamber of Commerce of the United States of America in 

support of appellant.

Jessie K. Liu, David A. Churchill, and Matthew E. Price 

were on the brief of amicus curiae the National Defense 

Industrial Association in support of appellant.

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 1 of 39
2

Thomas M. Bondy, Attorney, U.S. Department of Justice,

argued the cause for appellee. With him on the brief were 

Ronald C. Machen Jr., U.S. Attorney, and Douglas N. Letter, 

Attorney. R. Craig Lawrence, Assistant U.S. Attorney, 

entered an appearance.

Before: SENTELLE, Chief Judge, TATEL and GRIFFITH, 

Circuit Judges.

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge: In this case a jury found, among 

other things, that appellant, a major government contractor, 

violated the False Claims Act (FCA), 31 U.S.C. § 3729, by 

seeking payments at the same time it knew it was violating

contractual provisions governing potential conflicts of 

interest. On appeal, the contractor principally argues that no 

liability may attach for its claims for payment because its 

contract nowhere designated compliance with these conflict 

of interest requirements as express conditions of payment. As 

we explain in this opinion, however, requests for payment can 

be “false or fraudulent” under the FCA when submitted by a 

contractor that has violated contractual requirements material 

to the government’s decision to pay regardless of whether the 

contract expressly designates those requirements as conditions 

of payment. We nonetheless vacate the judgment as to FCA 

liability and remand for a new trial because the district court’s 

“collective knowledge” instruction conflicted with the FCA’s 

scienter standard, the proper application of which is critical to 

ensuring that FCA liability attaches only for false or 

fraudulent claims and not for accidental or even negligent 

breaches of contract.

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 2 of 39
3

I.

The Nuclear Regulatory Commission (NRC) is an 

independent federal agency that regulates the civilian use of 

nuclear materials. Pursuant to its general authority, the NRC

oversees the release into interstate commerce of commercially

valuable recycled radioactively contaminated materials from 

nuclear facilities. Companies wishing to release such

materials must obtain an NRC license and comply with 

license restrictions. Beginning in the mid-1980s, however, 

the NRC sought to establish standards for unrestricted release 

by setting contamination levels that were below “regulatory 

concern.” Am. Compl. ¶ 11. After the NRC’s initial efforts 

encountered Congressional and public opposition, the agency 

commenced new studies aimed at developing scientific

criteria that could inform a future rulemaking to set uniform 

national standards on the recycling and release of radioactive 

materials. 

Appellant Science Applications International Corporation 

(SAIC), a scientific, engineering, and technology applications 

company, entered into a contract with the NRC in 1992 to 

provide technical assistance and expert analysis to support the 

agency’s potential rulemaking. SAIC performed multiple 

tasks under the contract, delivering several reports, including 

both a literature review and a regulatory options paper that the 

NRC published in 1999. In the options paper, SAIC 

calculated radiological dose assessment estimates for 

materials recycled and released from nuclear facilities. In 

1999, SAIC and the NRC executed a follow-on contract to 

allow the company to continue its work in support of the 

agency’s rulemaking.

The 1992 and 1999 contracts included several provisions 

designed to identify and prevent potential conflicts of interest.

Because the two contracts are substantially identical for all 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 3 of 39
4

purposes relevant to this litigation, we shall refer only to the 

1992 contract. SAIC’s contract imposed limitations on the 

company’s ability to “work for others” during the contract 

term. Specifically, SAIC agreed to “forego entering into 

consulting or other contractual arrangements with any firm or 

organization, the result of which may give rise to a conflict of 

interest with respect to the work being performed under [the]

contract.” If SAIC had “reason to believe with respect to 

itself or any employee that any proposed consultant or other 

contractual arrangement with any firm or organization may 

involve a potential conflict of interest,” the contract obliged

SAIC to obtain the NRC’s prior written approval. The 

contract also included disclosure obligations that required 

SAIC to “warrant[] to the best of its knowledge and belief” 

that it had no “organizational conflicts of interest” and would 

make “an immediate and full disclosure in writing” if it 

discovered such conflicts after the contract award. In the 

event SAIC disclosed a conflict, the contract required it to 

provide a mitigation strategy, but the NRC retained the right 

to terminate the contract if doing so was “in the best interest 

of the government.” The contract defined organizational 

conflicts of interest by reference to NRC regulations, which in 

turn defined an organizational conflict of interest as follows:

a relationship . . . whereby a contractor or 

prospective contractor has present or planned 

interests related to the work to be performed under 

an NRC contract which: (1) May diminish its 

capacity to give impartial, technically sound, 

objective assistance and advice or may otherwise 

result in a biased work product, or (2) may result in 

its being given an unfair advantage.

41 C.F.R § 20-1.5402(a) (1979).

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 4 of 39
5

In addition, the contract required SAIC to make several 

“representations” and “certifications.” SAIC certified that its 

contract award resulted in none of the “situations or 

relationships” outlined in 41 C.F.R. § 20-1.5403(b) (1979). 

That regulation, now codified at 48 C.F.R. § 2009.570-3(b), 

lists the following situations or relationships that give rise to 

conflicts: 

(i) Where the . . . contractor provides advice and 

recommendation to the NRC in a technical area in 

which it is also providing consulting assistance in the 

same area to any organization regulated by the NRC.

(ii) Where the . . . contractor provides advice to the 

NRC on the same or similar matter on which it is 

also providing assistance to any organization 

regulated by the NRC.

. . . .

(iv) Where the award of a contract would otherwise 

result in placing the . . . contractor in a conflicting 

role in which its judgment may be biased in relation 

to its work for the NRC, or would result in an unfair 

competitive advantage . . . . 

The contract also provided that “[t]he nondisclosure or 

misrepresentation of any relevant interest may . . . result in the 

disqualification of the [contractor] for awards[,] or if 

nondisclosure or misrepresentation is discovered after the 

award, the resulting contract may be terminated.” 

During the term of the 1992 contract, SAIC and the NRC 

agreed to several modifications, and each time the company

certified that the modification involved none of the above 

situations or relationships. SAIC repeated this certification in

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 5 of 39
6

the 1999 contract. Critical to the issue before us, the preprinted payment vouchers that the NRC required SAIC to 

submit for work performed under the contracts contained no 

express certifications, nor did anything in either contract 

expressly condition payment on such a certification.

At an open NRC meeting in October 1999, a member of 

the public charged that SAIC was involved in projects with 

for-profit companies that potentially created prohibited 

organizational conflicts of interest with respect to SAIC’s 

NRC work. Responding to this allegation, the NRC asked 

SAIC to provide information about the company’s other work 

in the area of nuclear recycling. Based on SAIC’s disclosure

of its existing contracts with two companies—British Nuclear 

Fuels, Ltd. (“British Nuclear”) and the Bechtel Jacobs 

Company (“Bechtel Jacobs”)—the NRC determined that 

SAIC had, without proper disclosure, placed itself in 

potentially conflicting roles. The NRC informed SAIC of this

determination and ordered the company to stop working on 

the 1999 contract. The parties subsequently entered into a nocost settlement terminating that contract.

The United States brought suit against SAIC, raising two 

claims under the False Claims Act. First, the government 

charged SAIC with knowingly submitting false or fraudulent 

claims for payment in violation of 31 U.S.C. § 3729(a)(1) by 

continuing to submit payment invoices after the conflicting 

relationships arose. Second, the government alleged that 

SAIC knowingly made false statements to get false or 

fraudulent claims paid or approved in violation of 31 U.S.C. 

§ 3729(a)(2) when the company certified to the NRC not only 

that it had no organizational conflict of interest relationships, 

but also that it would immediately inform the NRC if such 

relationships developed. The government also brought a 

claim for breach of the 1992 contract.

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 6 of 39
7

The government’s FCA causes of action focused on 

SAIC’s business relationships with contractors participating 

in a project to decommission and decontaminate buildings at a 

Department of Energy (DOE) site in Oak Ridge, Tennessee. 

DOE contracted with British Nuclear in 1997 to work on this 

project, and British Nuclear then engaged SAIC to serve as a 

subcontractor. Although work performed at DOE’s facilities 

was subject only to DOE oversight, the government argued 

that SAIC’s relationship with British Nuclear created a 

potential conflict because the project involved the recycling

and release of radioactive materials that would become

subject to NRC regulation after leaving the DOE facility and

entering into interstate commerce. In addition, one of British 

Nuclear’s other subcontractors on the project, its whollyowned subsidiary Manufacturing Science Corporation (MSC), 

was licensed under NRC standards by the state of Tennessee.

In 1999, SAIC also performed consulting work for Bechtel 

Jacobs, another contractor DOE employed on the Oak Ridge 

project. SAIC helped Bechtel Jacobs with a dose assessment 

and performed a cost-benefit analysis regarding the recycling 

of radioactively contaminated materials from the site. The 

government contended that SAIC’s work for Bechtel Jacobs

closely overlapped with the company’s work for the NRC, as 

illustrated most starkly by the allegation that a company 

employee copied material from a report prepared for the NRC 

and pasted it into one for Bechtel Jacobs.

Beyond SAIC’s work relating to DOE’s Oak Ridge 

decommissioning and decontamination project, the 

government alleged that SAIC possessed other undisclosed 

potential conflicts. For example, the government pointed out

that SAIC Vice President Gerald Motl participated in the 

company’s work for the NRC while at the same time serving 

as an officer and board member of the Association of 

Radioactive Metal Recyclers (ARMR), a trade association 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 7 of 39
8

that advocated for national regulatory standards governing the 

reuse and recycling of radioactive materials.

SAIC moved for summary judgment on the government’s 

FCA and breach of contract claims, which the district court 

denied. In doing so, the district court rejected SAIC’s 

argument that the government failed to present evidence that 

the company’s submissions for payment qualified as false 

claims under the FCA. See United States v. Science 

Applications Int’l Corp. (“Science Applications I”), 555 F. 

Supp. 2d 40, 49–51 (D.D.C. 2008). Although the district 

court recognized that SAIC’s payment invoices themselves 

made no factually false statements about the services 

performed and contained no false express certifications of 

compliance with legal requirements, it nonetheless concluded

that the government could proceed on a theory of “implied 

false certification” because it had presented unrebutted 

evidence that SAIC’s allegedly false certifications of 

compliance with no-conflict requirements “constituted 

‘information critical to the [government’s] decision to 

pay[.]’ ” Id. at 50 (quoting United States v. TDC Mgmt. Corp.

(“TDC II”), 288 F.3d 421, 426 (D.C. Cir. 2002) (alterations in 

original)). In so holding—and setting the stage for the central 

issue before us—the court rejected SAIC’s argument that the 

implied certification theory requires the government to show 

that compliance with the contractual conflict of interest 

provisions is an express condition precedent to the receipt of 

payment. See Science Applications I, 555 F. Supp. 2d at 49–

51. The district court also found that the government had 

offered sufficient evidence to create triable issues as to

whether SAIC submitted false claims and made false 

statements in support of those claims “knowingly,” as well as

whether the government had suffered actual damages as a 

result of the alleged false claims and statements. See id. at 

54–56.

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 8 of 39
9

Following a four-week trial, the jury found SAIC liable 

under FCA sections 3729(a)(1) and 3729(a)(2) and for breach 

of its 1992 NRC contract. Specifically, the jury determined 

that SAIC had “knowingly presented or caused to be 

presented sixty false or fraudulent claims for payment or 

approval by the government” and had “knowingly made, 

used, or caused to be made or used seventeen false records or 

statements to get a false or fraudulent claim paid or approved 

by the United States government.” See United States v. 

Science Applications Int’l Corp. (“Science Applications II”), 

653 F. Supp. 2d 87, 94 (D.D.C. 2009). Based on the district 

court’s instruction, the jury concluded that the government 

suffered FCA damages of $1,973,839.61—the full amount of 

payments made by the government for the claims the jury 

concluded were knowingly false. Pursuant to FCA section

3729(a), the district court then trebled this amount and added 

an additional $577,500 in civil penalties. As to the 

government’s breach of contract claim, the jury awarded only

$78. The district court entered final judgment in the amount 

of $6,499,096.83.

SAIC moved for judgment as a matter of law under 

Federal Rule of Civil Procedure 50(b) and in the alternative 

sought a new trial under Rule 59(a). See id. at 92. As is 

relevant to this appeal, SAIC argued (1) that the government 

failed to prove that the company submitted false claims under 

an implied certification theory because the record contained 

no evidence that payment under the contract was expressly 

conditioned on SAIC’s compliance with organizational 

conflict of interest obligations, (2) that the evidence precluded 

the jury from finding, as it did, that SAIC acted “knowingly”

under the FCA when it submitted false claims and statements 

because SAIC’s belief that it had no conflicts as defined by 

the applicable contractual provisions and regulations was 

reasonable, (3) that various jury instructions were erroneous 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 9 of 39
10

and prejudicial, including an instruction that the jury could 

find that SAIC possessed knowledge based on the “collective 

knowledge” of its employees, and (4) that the government 

failed to prove that it suffered any damages from SAIC’s false 

claims, and in the alternative that the district court’s damages 

instruction was erroneous and prejudicial. See id. at 95–99, 

102–04, 107–09. 

The district court rejected each argument. With respect 

to implied certification, the court reiterated its earlier holding

that this theory of liability has no express condition precedent 

requirement. Id. at 102–03. The court therefore concluded 

that its instruction to the jury that “[a] claim for payment or a 

statement made in order to get payment is false if there is a 

withholding of information that is critical to the government’s 

decision to pay” accurately stated the law of this circuit. Id. at 

103. The court also found sufficient record evidence to 

support the jury’s determination that SAIC’s false 

representations that it had no conflicts of interest were critical 

to the government’s decision to pay. In support, it pointed to 

testimony by NRC and SAIC employees describing the 

importance of the company’s organizational conflict of 

interest obligations to the overall contract and indicating that

the NRC would have withheld payments under the contract 

had it been aware of SAIC’s undisclosed potential conflicts of 

interest. Id. As to scienter, the district court concluded that 

the record contained sufficient evidence to have allowed the 

jury to infer that SAIC’s false claims and statements were 

made knowingly, either on the basis of actual knowledge of 

undisclosed organizational conflicts or as a result of reckless 

disregard for or deliberate ignorance of the truth. Id. at 96–

99. In particular, the court found that “SAIC knew that it had 

relationships with entities . . . that were subject to the 

regulations of the NRC, regardless of whether these entities 

were doing other work for DOE excluded from the NRC’s 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 10 of 39
11

regulatory authority.” Id. at 97. The court also found 

reasonable the government’s use of a “collective knowledge”

theory to help establish scienter, explaining that its instruction

was appropriate “because the jury could have properly 

inferred SAIC’s fraudulent intent from its collective 

knowledge.” Id. at 98–99. Finally, the district court upheld 

the jury’s FCA damages award and rejected SAIC’s challenge 

to the instruction. Under the government’s theory of 

proximate causation, the court explained, had the NRC known 

about SAIC’s organizational conflicts, it would have made no 

payments whatsoever for the consulting advice and technical 

assistance it received. Accordingly, the court concluded, the 

actual value of SAIC’s work was “irrelevant.” See id. at 108–

09.

SAIC now appeals, seeking judgment as a matter of law 

with respect to liability on all causes of action and with 

respect to FCA damages. Alternatively, it urges us to vacate 

the district court’s judgment and remand for a new trial on all 

claims. In support, SAIC reasserts each of the arguments 

discussed above and objects to various other jury instructions, 

as well as to the constitutionality of the damages award under 

the Eighth Amendment’s Excessive Fines Clause. 

II.

As the False Claims Act existed at the time of the 

conduct giving rise to this litigation, the statute imposed 

liability on any person who

(1) knowingly presents, or causes to be presented, to 

an officer or employee of the United States 

Government or a member of the Armed Forces of the 

United States a false or fraudulent claim for payment 

or approval; [or] (2) knowingly makes, uses, or 

causes to be made or used, a false record or 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 11 of 39
12

statement to get a false or fraudulent claim paid or 

approved by the Government. 

31 U.S.C. § 3729(a)(1)–(2) (2008). The FCA defines claim 

broadly to include “any request or demand, whether under a 

contract or otherwise, for money or property which is made to 

a contractor, grantee, or other recipient if the United States 

Government provides any portion of the money or property 

which is requested or demanded.” Id. § 3729(c). The key 

statutory terms “knowing” and “knowingly” are in turn 

defined to include a defendant’s “actual knowledge,” 

“deliberate ignorance,” or “reckless disregard” of the truth or

falsity of information in the defendant’s claim for payment or 

statements made to get such claims paid. Id. § 3729(b).

Following trial in this case, Congress amended the FCA 

by enacting the Fraud Enforcement and Recovery Act of 2009

(“FERA”), Pub. L. No. 111-21, 123 Stat. 1617. In response to 

SAIC’s post-trial motions in the district court, the government 

argued that the amended version of the statute applies

retroactively. Disagreeing, the district court concluded that 

“FERA has no impact on the present action.” See Science 

Applications II, 653 F. Supp. 2d at 107. On appeal, although 

the government still maintains that the district court erred by 

failing to give retroactive effect to the 2009 amendments, it 

nonetheless assures us that the issue “has no bearing on the 

outcome of this case.” Appellee’s Br. 53. Taking the 

government at its word, we shall assume the correctness of 

the district court’s decision on this point and henceforth refer 

only to the FCA’s pre-2009 language.

“False claims” under the FCA take a variety of forms. In 

the paradigmatic case, a claim is false because it “involves an 

incorrect description of goods or services provided or a 

request for reimbursement for goods or services never 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 12 of 39
13

provided.” Mikes v. Straus, 274 F.3d 687, 697 (2d Cir. 2001).

Here, the government’s case relies on the so-called

“certification theory” of liability, or alternatively “legally 

false certification.” See id. at 696–97. Under this theory, a 

claim for payment is false when it rests on a false 

representation of compliance with an applicable federal 

statute, federal regulation, or contractual term. See id. at 696. 

False certifications can be either express or implied. Courts

infer implied certifications from silence “where certification 

was a prerequisite to the government action sought.” United 

States ex. rel. Siewick v. Jamieson Sci. & Eng’g, Inc., 214 

F.3d 1372, 1376 (D.C. Cir. 2000). 

This circuit has endorsed the implied certification theory, 

albeit implicitly. See id.; United States. v. TDC Mgmt. Corp.

(“TDC I”), 24 F.3d 292, 296–97 (D.C. Cir. 1994) (allowing 

the government to bring an FCA claim based on information 

omitted from a company’s progress reports). Although SAIC 

calls the implied certification theory a “novel, judicially 

crafted expansion of the FCA,” Appellant’s Br. 23, its 

argument actually assumes the theory’s validity and instead 

seeks to limit its scope. Specifically, SAIC contends that 

liability may attach under the implied certification theory 

“only where a statute, regulation, or contractual provision 

makes compliance with a requirement an express condition 

precedent to payment.” Id. By contrast, the government 

argues—and the district court agreed—that a government 

contractor runs afoul of the FCA by submitting claims for 

payment while knowing that it violated contractual provisions 

that are material to the government’s decision to pay. See

Science Applications I, 555 F. Supp. 2d at 49–50.

According to the government, we can resolve this case in 

its favor without deciding whose theory of implied 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 13 of 39
14

certification is correct. Its two arguments in support of that 

proposition, however, are unconvincing. 

The government first points to the jury’s finding that 

SAIC made seventeen express false statements of compliance 

with its contractual conflict of interest obligations, contending 

that “[t]hese express . . . representations are plainly sufficient 

in and of themselves to give rise to [FCA] liability.” 

Appellee’s Br. 23. This argument rests on a 

misunderstanding of the FCA’s structure. Knowingly false 

statements are indeed separately actionable under FCA 

section 3729(a)(2), but only if the contractor used the 

statements “for the purpose of getting ‘a false or fraudulent 

claim paid or approved by the Government.’ ” Allison Engine 

Co. v. United States ex rel. Sanders, 553 U.S. 662, 671 (2008) 

(quoting 31 U.S.C. § 3729(a)(2)); see also United States v. 

Southland Mgmt. Corp., 326 F.3d 669, 675 (5th Cir. 2003) (en 

banc) (“Although § 3729(a)(2) prohibits the submission of a 

false record or statement, it does so only when the submission 

of the record or statement was done in an attempt to get a 

false claim paid. There is no liability under [the FCA] for a 

false statement unless it is used to get a false claim paid.”). 

Therefore, as the district court recognized, because the actual 

claims for payment submitted by SAIC were accurate reports 

of services rendered that made no reference to whether the 

company had complied with organizational conflict of interest 

requirements, and because the government has never argued

that SAIC’s separate express contractual certifications were 

themselves “request[s] or demand[s] for money” so as to fall 

within the statute’s definition of “claims,” see 31 

U.S.C. § 3729(c), the government must prove that SAIC’s 

claims for payment were impliedly false for either FCA cause 

of action to succeed. See Science Applications I, 555 F. Supp. 

2d at 49–50 (“Neither party contends that invoices submitted 

for payment by SAIC were either factually false or that they 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 14 of 39
15

contained express false certifications; the issue is whether the 

government can show that SAIC made implied false 

certifications in submitting its invoices to the NRC.”).

Second, the government believes that even if SAIC’s 

narrower version of implied certification is correct, the 

government’s evidence satisfies that standard because federal 

law makes compliance with conflict of interest obligations an 

express condition precedent to NRC contract awards and 

hence to the receipt of payments under those contracts. The 

NRC’s legal responsibility to evaluate and avoid (or at least 

mitigate) potential conflicts of interest before entering into

contracts certainly helps demonstrate the importance of 

honest and complete conflict of interest disclosures to the 

agency. But the statute the government refers to, 42 U.S.C. 

§ 2210a(a)–(b), imposes obligations only on the NRC and 

nowhere requires that, in order to be eligible for payment, an 

NRC contractor must inform the agency if it has developed 

any potential conflicts of interest.

To resolve this case, we must therefore decide whether an 

FCA plaintiff may state a cause of action against a federal 

contractor who fails to disclose the violation of a contractual 

condition that is material to the government’s decision to pay 

where, as here, that condition is not an express prerequisite to 

payment. Both parties argue that this question is controlled 

by circuit precedent. Both are wrong.

SAIC insists that we adopted an express condition 

precedent requirement in Siewick, where we held that “false 

certification of compliance with a statute or regulation cannot 

serve as the basis for [an FCA action] unless payment is 

conditioned on that certification.” 214 F.3d at 1376. But 

SAIC’s interpretation divorces Siewick from its facts. In that 

case, a qui tam relator—i.e., a private FCA plaintiff—alleged 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 15 of 39
16

that a government contractor submitted a false claim by 

seeking payment while one of its officers was in violation of a 

criminal statute, 18 U.S.C. § 207, that prohibits “revolving 

door” abuses by former government employees. The contract 

in Siewick made no mention of section 207, so in sharp 

contrast to the facts of this case, compliance with the legal 

requirement the defendant supposedly violated was never 

recognized as a contractual obligation. See Siewick, 214 F.3d 

at 1376 (“Siewick points to nothing suggesting that [the 

contractor] was required to certify compliance with [section]

207 as a condition of its contract.”). As a result, we had no 

need in Siewick to resolve the question we face here, which 

involves a government contract that did require the contractor 

not only to warrant that it had no organizational conflicts of 

interest as defined by applicable regulation, but also to 

immediately disclose if such conflicts arose during the course 

of its performance under the contract.

For its part, the government thinks that we endorsed its 

theory of implied certification in TDC II. There, we found 

“culpable” a company that failed to disclose in progress 

reports to the government that it violated the terms of a 

program by taking a financial position rather than serving as 

an impartial ombudsman between participating companies 

and private investors. See 288 F.3d at 422, 426. To be sure, 

as the government points out, we favorably quoted the 

proposition that “ ‘[t]he withholding of . . . information . . . 

critical to the decision to pay [] is the essence of a false 

claim.’ ” Id. at 426 (quoting Ab-Tech Constr., Inc. v. United 

States, 31 Fed. Cl. 429, 434 (1994)). We said this, however, 

only to explain our refusal to review an error the defendant 

failed to raise in the district court. In determining that no 

“ ‘plain miscarriage of justice’ ” would flow from our 

enforcing the defendant’s waiver, id. at 425 (quoting Hormel 

v. Helvering, 312 U.S. 552, 558 (1941)), we had no need to 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 16 of 39
17

determine the proper scope of the implied certification theory. 

Indeed, neither party in TDC II even briefed the question of 

whether the implied certification theory requires the 

identification of an express condition precedent to payment 

before liability can attach. In other words, nothing in TDC II 

resolves the issue before us.

Thus untethered by precedent, we must determine the 

proper scope of the implied certification theory. According to 

SAIC, a claim can be false under the implied certification 

theory only if the government contractor violates legal 

requirements that are expressly designated as preconditions to 

payment. Of course, nothing in the statute’s language

specifically requires such a rule, and we fear that adopting 

one would foreclose FCA liability in situations that Congress 

intended to fall within the Act’s scope. Cf. S. Rep. No. 99-

345, at 9 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5274 

(stating the position of the Senate Judiciary Committee that 

claims for payment for “goods or services . . . provided in 

violation of contract terms” constitute false claims under the 

Act). For example, under SAIC’s theory, no FCA liability 

would attach where a government contractor (1) knows that it 

violated a contractual requirement, (2) recognizes that 

compliance with that requirement is material to the 

government’s decision to pay (even though the contract 

nowhere formally identifies the condition as a payment 

prerequisite), and (3) submits claims for payment that omit 

any mention of the requirement while knowing that were the 

violation disclosed, no payment would be forthcoming. 

Under this scenario, the contractor would escape FCA 

liability because the absence of an express condition 

precedent to payment would prevent the fact-finder from 

judging the company’s claim to be false despite the 

contractor’s knowledge that its ability to receive payments 

from the government depended on withholding information 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 17 of 39
18

about its non-compliance with a key contractual provision. 

We decline to create such a counterintuitive gap in the FCA 

by imposing a legal requirement found nowhere in the 

statute’s language. 

Instead, we hold that to establish the existence of a “false 

or fraudulent” claim on the basis of implied certification of a 

contractual condition, the FCA plaintiff—here the 

government—must show that the contractor withheld 

information about its noncompliance with material contractual 

requirements. The existence of express contractual language 

specifically linking compliance to eligibility for payment may 

well constitute dispositive evidence of materiality, but it is 

not, as SAIC argues, a necessary condition. The plaintiff may 

establish materiality in other ways, such as through testimony 

demonstrating that both parties to the contract understood that 

payment was conditional on compliance with the requirement 

at issue. 

The logic of our conclusion is perhaps best illustrated by 

way of an example freed from the complexities of this case. 

Consider a company that contracts with the government to 

supply gasoline with an octane rating of ninety-one or higher. 

The contract provides that the government will pay the 

contractor on a monthly basis but nowhere states that 

supplying gasoline of the specified octane is a precondition of 

payment. Notwithstanding the contract’s ninety-one octane 

requirement, the company knowingly supplies gasoline that 

has an octane rating of only eighty-seven and fails to disclose 

this discrepancy to the government. The company then 

submits pre-printed monthly invoice forms supplied by the 

government—forms that ask the contractor to specify the 

amount of gasoline supplied during the month but nowhere

require it to certify that the gasoline is at least ninety-one

octane. So long as the government can show that supplying 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 18 of 39
19

gasoline at the specified octane level was a material 

requirement of the contract, no one would doubt that the 

monthly invoice qualifies as a false claim under the FCA

despite the fact that neither the contract nor the invoice

expressly stated that monthly payments were conditioned on 

complying with the required octane level. 

Stripped of its intricacies, the government’s case against 

SAIC is no different. In our hypothetical, the government 

contracted to purchase gasoline of a certain octane, and here 

the government contracted to buy conflict-free advice and 

technical assistance. Just as the claims for payment for 

nonconforming gasoline were false, here the claims for 

nonconforming counseling and technical assistance were false 

so long as the government can establish that conflict-free 

services were a material condition of the contract.

Although the proper scope of the implied certification 

theory is somewhat unsettled in the circuits, the Tenth Circuit 

employs the same materiality approach that we now adopt. 

See United States ex rel. Lemmon v. Envirocare of Utah, Inc., 

614 F.3d 1163, 1169 (10th Cir. 2010) (“[F]alse certification—

regardless of whether it is implied or express—is actionable 

under the FCA only if it leads the government to make a 

payment which, absent the falsity, it may not have made.”); 

id. at 1170 (concluding that the qui tam plaintiff successfully 

stated an FCA claim by alleging regulatory violations that 

“also constituted material breaches of . . . contractual 

obligations”); Shaw v. AAA Eng’g & Drafting, Inc., 213 F.3d 

519, 531–32 (10th Cir. 2000) (holding that a company’s 

monthly invoices for photography services were false because 

the company implicitly certified that it met contractual 

obligations to recover and dispose of trace silver according to 

Environmental Protection Agency guidelines). The Ninth 

Circuit has likewise held that “[i]mplied false certification 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 19 of 39
20

occurs when an entity has previously undertaken to expressly 

comply with a law, rule, or regulation, and that obligation is 

implicated by submitting a claim for payment even though a 

certification of compliance is not required in the process of 

submitting the claim.” Ebeid ex rel. United States v. 

Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010). 

By contrast, the Second Circuit has recognized an express 

condition precedent requirement for implied certification—

although it did so in a substantially different situation that, as 

in Siewick, involved the violation of no contractual 

requirement. See Mikes, 274 F.3d at 700. Indeed, the Second 

Circuit largely confined its reasoning to claims by medical 

providers under Medicare guidelines, as the court worried that 

broad application of the FCA in that setting would operate as 

an inappropriately “blunt instrument to enforce compliance 

with all medical regulations.” Id. at 699–700; see also United 

States ex rel. Hendow v. Univ. of Phoenix, 461 F.3d 1166, 

1177 (9th Cir. 2006) (recognizing that “the Mikes court was 

dealing with the Medicare context, to which the court 

specifically confined its reasoning”). Given the contextspecific setting of the Second Circuit’s decision, its concerns

have no applicability to the case before us, which involves 

SAIC’s alleged violation of regulatory requirements actually

incorporated into its contract and which implicates none of 

the federalism concerns involved in Mikes. True, the Second 

Circuit has subsequently applied the Mikes standard outside 

the Medicare context, see United States ex rel. Kirk v. 

Schindler Elevator Corp., 601 F.3d 94, 115 (2d Cir. 2010), 

cert. granted, 2010 WL 3116440 (U.S. Sept. 28, 2010) (No. 

10-188), but we are unaware of any decision in that circuit 

rejecting an FCA claim where, as the government alleges

here, the defendant sought payment after knowingly violating 

a material requirement of its contract.

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 20 of 39
21

Even though we have rejected SAIC’s effort to cabin the 

implied certification theory, we fully understand the risks

created by an excessively broad interpretation of the FCA. As 

SAIC compellingly points out, without clear limits and 

careful application, the implied certification theory is prone to 

abuse by the government and qui tam relators who, seeking to 

take advantage of the FCA’s generous remedial scheme, may 

attempt to turn the violation of minor contractual provisions 

into an FCA action. In our view, however, instead of 

adopting a circumscribed view of what it means for a claim to 

be false or fraudulent, this very real concern can be

effectively addressed through strict enforcement of the Act’s 

materiality and scienter requirements. In the following pages, 

we discuss each of these requirements and explain why record

evidence of materiality and scienter leads us to affirm the 

district court’s denial of SAIC’s motion for judgment as a 

matter of law on the government’s FCA claims, as well as on 

the government’s breach of contract claim.

Materiality

To establish FCA liability under an implied certification 

theory, the plaintiff must prove by a preponderance of the 

evidence that compliance with the legal requirement in 

question is material to the government’s decision to pay. By

enforcing this requirement rigorously, courts will ensure that

government contractors will not face “onerous and unforeseen 

FCA liability” as the result of noncompliance with any of 

“potentially hundreds of legal requirements” established by

contract. Appellant’s Reply Br. 12. Payment requests by a 

contractor who has violated minor contractual provisions that

are merely ancillary to the parties’ bargain are neither false 

nor fraudulent.

In this case, however, record evidence could have

allowed the jury to conclude that the contract’s conflict of 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 21 of 39
22

interest provisions were far from minor. As the district court

explained, “[n]umerous witness[es] from both the NRC and 

SAIC testified that the [organizational conflict of interest] 

obligations in SAIC’s contracts with the NRC were important 

to the overall purpose of the contract.” Science Applications 

II, 653 F. Supp. 2d at 103. NRC contracting officers and 

specialists also testified that had they been aware of SAIC’s 

apparent or actual conflicts, such as its relationships with 

British Nuclear and Bechtel Jacobs, they would not have 

awarded the two contracts, nor would they have made

payments under those contracts. Id.

Scienter

Strict enforcement of the FCA’s scienter requirement will 

also help to ensure that ordinary breaches of contract are not 

converted into FCA liability. Cf. Shaw, 213 F.3d at 532–33

(endorsing the implied certification theory and explaining that 

the Act’s scienter requirement limits liability to cases where 

the contractor knew its certification of compliance was false). 

For example, FCA section 3729(a)(1) imposes liability only 

when a person “knowingly presents, or causes to be presented 

. . . a false or fraudulent claim.” Establishing knowledge

under this provision on the basis of implied certification 

requires the plaintiff to prove that the defendant knows (1)

that it violated a contractual obligation, and (2) that its 

compliance with that obligation was material to the 

government’s decision to pay. If the plaintiff proves both, 

and does so based on the proper standard for knowledge—

which as we explain below excludes “collective 

knowledge,” see infra Part III—then it will have established 

that the defendant sought government payment through 

deceit, surely the very mischief the FCA was designed to 

prevent. Cf. Cook County v. United States ex rel. Chandler, 

538 U.S. 119, 129 (2003) (explaining that in adopting the 

FCA, “Congress wrote expansively . . . ‘to reach all types of 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 22 of 39
23

fraud, without qualification, that might result in financial loss 

to the Government’ ” (quoting United States v. Neifert-White 

Co., 390 U.S. 228, 232 (1968))).

In this case, having challenged the materiality theory for 

implied certification, SAIC never addresses whether the 

record is sufficient to support a jury verdict that it knew 

adherence to contractual conflict of interest requirements was 

critical to the government’s decision to pay. Instead, SAIC

vigorously argues that the evidence was insufficient to 

support the jury’s conclusion that whatever certifications of 

compliance it did make were false. According to SAIC, it

reasonably believed that its work with DOE contractors posed 

no potential conflicts and led to none of the “situations or

relationships” described in NRC regulations. See 41 C.F.R. 

§ 20-1.5403(b) (1979). In support, SAIC points to the 

existence of a long-recognized “regulatory divide,” 

Appellant’s Br. 6–7, between the NRC and DOE under which 

prime-DOE contractors are exempt from NRC licensing 

requirements for work performed at DOE sites owned by the 

government, see 42 U.S.C. § 2140(a); 10 C.F.R. §§ 30.12, 

40.11, 70.11. SAIC also highlights statements made at public 

meetings by NRC personnel confirming that the NRC lacks

licensing authority over work performed at DOE facilities. 

SAIC dismisses the probative value of other conflicts alleged 

by the government, such as Vice President Motl’s 

participation in ARMR, calling it “manifestly absurd to assert 

that SAIC intentionally or recklessly made false certifications 

of conflict-of-interest compliance” on the basis of a single 

employee’s membership in a trade association. Appellant’s

Br. 41.

To be sure, record evidence does support SAIC’s

contention that any false certifications the company made 

resulted from reasonable mistakes. The record, however, also

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 23 of 39
24

supports a contrary view. For example, trial testimony could 

support a jury conclusion that SAIC employees knew that the 

company, in violation of NRC conflict of interest regulations 

to which it certified compliance, was “providing consulting 

assistance” to organizations “regulated by the NRC” on issues 

relating to the recycling and clearance of radioactively 

contaminated materials that were the subject of SAIC’s work 

for the NRC. See 41 C.F.R. § 20-1.5403(b)(1)(i)–(ii) (1979). 

Specifically, several employees acknowledged at trial that 

British Nuclear and MSC intended to sell materials recycled 

from DOE’s Oak Ridge facility and that such contaminated 

materials would be subject to NRC regulation once released

into general commerce. As the district court found, such 

evidence “could tend to discredit SAIC’s argument that its 

alleged false statements were the result of its belief that the 

entities with which it had relationships were entities wholly 

excluded from NRC regulation,” and could instead permit 

“reasonable jury inferences that SAIC knew that it had 

relationships with entities . . . that were subject to the 

regulations of the NRC, regardless of whether these entities 

were doing other work for the DOE excluded from the NRC’s 

regulatory authority.” Science Applications II, 653 F. Supp. 

2d at 96–97. Public statements by NRC officials on which 

SAIC relies do nothing to undermine this inference. Those 

officials stated that because the NRC regulated neither DOE 

itself nor DOE facilities, none of NRC’s conflict of interest 

policies applied to DOE. That fact, however, is entirely 

undisputed. Moreover, at one of the public meetings SAIC 

references, an NRC official acknowledged that although the 

NRC had no regulatory authority over DOE’s decision to 

release recycled materials from its facilities, it would acquire 

jurisdiction over the materials were they to enter NRClicensed facilities.

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 24 of 39
25

The jury also could have concluded that SAIC employees 

knew that either the company or its employees had other 

relationships that placed SAIC in a conflicting role that might

have biased its judgment. See 41 C.F.R. § 20-

1.5403(b)(1)(iv) (1979). For example, some employees knew

of the significant overlap between, on the one hand, SAIC’s 

work for Bechtel Jacobs, which involved dose assessments for 

contaminated scrap metal at DOE’s Oak Ridge buildings and 

cost-benefit analysis of the recycling of those materials, and, 

on the other, SAIC’s work for the NRC. See Science 

Applications II, 653 F. Supp. 2d at 101 (summarizing 

testimony by several SAIC employees). And contrary to 

SAIC’s argument, the jury could have given some weight to 

the participation of the company’s Vice President in ARMR. 

Although SAIC seeks to minimize the relevance of this 

membership, it overlooks the fact that the Vice President

functioned as more than just a member of the organization;

instead, he served as an officer and board member who 

“played an active part in ARMR’s advocating for a standard 

governing release or recycle of radioactive material.” Id. 

Given that role, the jury was entitled to conclude that the Vice 

President or others aware of his membership knew or 

recklessly failed to know that his simultaneous work for the 

NRC on the same subject matter created a potential conflict of 

interest that the company was obligated to disclose.

Reviewing the record in its entirety and considering, as 

we must, all evidence in the light most favorable to the 

government, see Smith v. Wash. Sheraton Corp., 135 F.3d 

779, 782 (D.C. Cir. 1998), we conclude that record evidence 

is sufficient to have allowed the jury to reasonably believe 

that SAIC knowingly submitted false claims for payment and 

made false statements of compliance with the organizational

conflict of interest requirements set forth in its NRC contracts.

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 25 of 39
26

Breach of Contract

For the same reasons, SAIC’s argument for judgment as a 

matter of law as to the government’s breach-of-contract claim 

necessarily fails. The record was sufficient to permit the jury 

to find that SAIC breached its obligations both to avoid 

potential conflicts and to disclose any that arose during the 

course of performance.

III.

We next consider SAIC’s alternative contention that we 

must vacate and remand for a new trial because the district 

court’s “collective knowledge” instruction was both erroneous 

and prejudicial. Over SAIC’s objection, the district court 

instructed the jury that corporations are “liable for the 

collective knowledge of all employees and agents within the 

corporation so long as those individuals obtained their 

knowledge acting on behalf of the corporation.” Trial Tr. at 

17 (July 28, 2008). The court continued:

Therefore, if a corporation has many employees or 

agents, you must consider the knowledge possessed 

by those employees and agents as if it was added 

together and combined into one collective pool of 

information. If that collective pool of information 

here gives a reasonably complete picture of . . . false 

or fraudulent claims or false statements, you may 

find that SAIC itself possessed a reasonably 

complete picture of the false or fraudulent claims or 

false statements and acted knowingly.

Id. The district court then juxtaposed the possibility of 

inferring corporate knowledge based on “collective

knowledge” with an alternative, i.e., establishing corporate 

scienter based on the state of mind of individual employees. 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 26 of 39
27

Specifically, it instructed the jury that it could find that SAIC 

“acted knowingly” if it determined that

at least one individual employee of SAIC had actual 

knowledge of an organizational conflict of interest 

that contradicted SAIC’s statements and claims that 

were made and presented to the NRC, or . . . that the 

individual employee acted in deliberate ignorance or 

in reckless disregard of such information. . . . This 

individual need not have been an employee who 

actually submitted certifications or claims to the 

NRC.

Id. 

SAIC and one of its amici argue that the “collective 

knowledge” component of this instruction improperly allowed

the government to prove FCA liability without having to 

demonstrate that any particular SAIC employee knew that the

company’s claims were false or that SAIC employees acted in 

deliberate ignorance or reckless disregard of their truth or 

falsity. Whether the district court’s instruction is consistent 

with the FCA’s scienter requirement presents a question of 

law that we review de novo. See United States v. Orenuga, 

430 F.3d 1158, 1166 (D.C. Cir. 2005). Under the harmless 

error rule, we will vacate a judgment only if an instructional 

error “affected the substantial rights of the parties.” Williams 

v. U.S. Elevator Corp., 920 F.2d 1019, 1022 (D.C. Cir. 1990) 

(quotations and alterations omitted).

In non-FCA cases, we have expressed a good deal of 

skepticism about corporate intent theories that rely on 

aggregating the states of mind of multiple individuals. In 

Saba v. Compagnie Nationale Air France, 78 F.3d 664 (D.C. 

Cir. 1996), in which we held that the plaintiff had failed to 

establish that the defendant engaged in the “willful 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 27 of 39
28

misconduct” necessary to impose liability under Article 22 of 

the Warsaw Convention, we explained that though “negligent 

acts of employees can be fairly imputed to the corporation[,] 

[i]ndividual acts of negligence on the part of employees . . . 

cannot . . . be combined to create a wrongful corporate 

intent.” Id. at 670 n.6. More recently, in United States v. 

Phillip Morris USA Inc., 566 F.3d 1095 (D.C. Cir. 2009), we 

explained that “[l]ike . . . other courts, we are dubious of the 

legal soundness of the ‘collective intent’ theory,” under 

which, as we explained, a corporation’s specific intent to 

defraud can be inferred if the company’s public statements 

contradict the accumulated “collective knowledge” of the 

corporation’s employees. Id. at 1122. In contrast to these two 

non-FCA cases, Congress defined the FCA’s scienter element 

to require “no proof of specific intent.” See 31 U.S.C. 

§ 3729(b). We nonetheless believe that under the FCA,

“collective knowledge” provides an inappropriate basis for

proof of scienter because it effectively imposes liability, 

complete with treble damages and substantial civil penalties, 

for a type of loose constructive knowledge that is inconsistent 

with the Act’s language, structure, and purpose. 

Congress established the FCA’s scienter requirement

when it amended the Act in 1986 “to clarify” that even absent 

evidence of specific intent to defraud, “defendants were 

subject to liability . . . if they had ‘actual knowledge’ of the 

falsity of their claims or acted with ‘deliberate ignorance’ or 

‘reckless disregard’ of the truth or falsity of their claims.” 

TDC I, 24 F.3d at 297–98 (quoting 31 U.S.C. § 3729(b)). 

According to the Senate Committee Report to the 1986 

amendments, Congress adopted this definition of 

“knowingly” to capture the “ ‘ostrich-like’ conduct which can 

occur in large corporations” where “corporate officers . . .

insulate themselves from knowledge of false claims submitted 

by lower-level subordinates.” S. Rep. No. 99-345, at 6

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 28 of 39
29

(1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5272. That 

said, Congress clearly had no intention to turn the FCA, a law 

designed to punish and deter fraud, into a vehicle for either 

“punish[ing] honest mistakes or incorrect claims submitted 

through mere negligence” or imposing “a burdensome 

obligation” on government contractors rather than a “limited 

duty to inquire.” Id. at 6, 19. The resulting statutory 

language demonstrates the care Congress took to balance

competing objectives. Although Congress defined 

“knowingly” to include some forms of constructive 

knowledge, its definition of that term imposes liability for 

mistakenly false claims only when the defendant deliberately 

avoided learning the truth or engaged in aggravated gross 

negligence. See United States v. Krizek, 111 F.3d 934, 942 

(D.C. Cir. 1997) (equating “reckless disregard” with 

“aggravated gross negligence”); see also Wang v. FMC Corp., 

975 F.2d 1412, 1420 (9th Cir. 1992) (explaining that although 

section 3729(b) of the FCA adopts a less exacting definition 

of scienter than common law fraud, “innocent mistakes” and 

“negligence” remain defenses under the Act).

Lacking such balance and precision, the “collective 

knowledge” theory allows “a plaintiff to prove scienter by 

piecing together scraps of ‘innocent’ knowledge held by 

various corporate officials, even if those officials never had 

contact with each other or knew what others were doing in 

connection with a claim seeking government funds.” United 

States ex rel. Harrison v. Westinghouse Savannah River Co., 

352 F.3d 908, 918 n.9 (4th Cir. 2003). In other words, even 

absent proof that corporate officials acted with deliberate 

ignorance or reckless disregard for the truth by submitting a 

false claim as the result of, for instance, a communication 

failure, the fact-finder could determine that the corporation 

knowingly submitted a false claim. In this case, the district 

court’s instruction goes even further, drawing no distinction 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 29 of 39
30

between the knowledge of corporate officers and that of 

potentially thousands of ordinary employees, including the 

knowledge of all employees in the “collective pool” of 

information imputed to the corporation. The district court’s 

instruction thus allowed the jury to find that SAIC knowingly 

submitted false claims for payment even if the jury also 

concluded (1) that no individual at SAIC was simultaneously 

aware (or was recklessly unaware) of the company’s NRC 

contract and its relationships with other companies involved 

in the recycling of radioactive materials, and (2) that SAIC, 

acting on the basis of the knowledge of its individual 

employees, took reasonable steps to identify potential 

conflicts. 

We know of no circuit that has applied the “collective 

knowledge” theory to the FCA. Indeed, in a closely 

analogous case involving claims that were legally false 

because of undisclosed conflicts of interest, the Fourth Circuit 

recognized the theory’s troubling implications for FCA 

liability. See Harrison, 352 F.3d at 918 n.9. 

Defending the district court’s instruction, the government 

relies primarily on United States v. Bank of New England, 821 

F.2d 844 (1st Cir. 1987), in which the First Circuit held in a 

non-FCA case that a collective knowledge instruction was 

“entirely appropriate.” Id. at 856. That case is easily 

distinguishable. First, as we explained in Saba, although the 

First Circuit in Bank of New England allowed the jury to infer 

corporate knowledge of facts through the accumulation of 

individual knowledge, proof of “the proscribed intent” in that 

case “depended on the wrongful intent of specific 

employees.” Saba, 78 F.3d at 670 n.6. By contrast, the 

“collective knowledge” instruction in this case gave the jury 

an alternative basis for finding the requisite scienter. Second,

and more important, the First Circuit’s justification for the 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 30 of 39
31

“collective knowledge” theory has no applicability here. 

There the court concluded that in the context of corporate 

criminal liability, the trial court’s “collective knowledge” 

instruction “was not only proper but necessary” to prevent 

corporations from evading liability by “compartmentaliz[ing]

knowledge, subdividing the elements of specific duties and 

operations into smaller components.” Bank of New England, 

821 F.2d at 856. This “compartmentalization” problem, 

however, is exactly what Congress had in mind when it

defined “knowing” and “knowingly” in the 1986 FCA 

amendments. Under the FCA, if a plaintiff can prove that a 

government contractor’s structure prevented it from learning 

facts that made its claims for payment false, then the plaintiff 

may establish that the company acted in deliberate ignorance 

or reckless disregard of the truth of its claims. But if the 

plaintiff in such a scenario fails to prove that the corporation 

acted with deliberate ignorance or reckless disregard, then no 

liability may attach under the FCA’s plain language.

Even though the government relied on the “collective 

knowledge” theory throughout the proceedings in the district 

court and repeatedly invoked it in closing arguments to the 

jury, see Trial Tr. 48–50 (July 28, 2008), it nonetheless claims

that any instructional error was harmless because “the jury . . .

could find that SAIC had the requisite scienter here wholly 

apart from [the] collective knowledge rubric.” Appellee’s Br. 

42. We agree that the jury, relying entirely on evidence of

actual knowledge possessed by individual company 

employees, could have found that SAIC knowingly submitted 

false claims and made false statements. Alternatively, relying 

on evidence regarding the actions of employees or SAIC’s

systems and structure, the jury could also have concluded that 

the company acted recklessly or with deliberate ignorance of 

the truth. For example, as noted above, record evidence 

suggests that some employees who knew about SAIC’s

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 31 of 39
32

organizational conflict of interest obligations to the NRC were 

also aware of the company’s business relationships with 

British Nuclear, MSC, and Bechtel Jacobs. See supra at 20-

21. If the jury found that these individuals knew or recklessly 

failed to know that SAIC, by having these conflicts and 

failing to disclose them, violated a requirement under its NRC 

contract that was material to the receipt of payment, then that 

finding would be enough to establish SAIC’s scienter.

The harmless error standard, however, demands more 

than a counterfactual assessment of what verdict the jury 

might have reached without relying on the offending 

instruction. In order to find that the error had no effect on 

SAIC’s substantial rights, we would have to be able to say 

“ ‘with fair assurance[] that the judgment was not 

substantially swayed by the error.’ ” Williams, 920 F.2d at 

1022–23 (quoting Kotteakos v. United States, 328 U.S. 750, 

765 (1946) (internal alterations omitted)). This we cannot do, 

for the “collective knowledge” instruction may have misled 

the jury into believing that the standard for knowledge under 

the FCA is lower for corporate defendants. That is, the jury 

might have concluded that SAIC acted knowingly, as defined 

in the challenged instruction, if the company could have or 

should have realized it had potential conflicts based on the 

“collective pool of information,” Trial Tr. at 17 (July 28, 

2008), derived from all of its individual employees. As a 

result, even though the jury might well have accepted SAIC’s 

arguments that its compliance system was generally adequate 

and that individual employees with knowledge of the 

company’s conflicting business relationships honestly and 

reasonably believed that these relationships created no 

potential conflicts, it still might have concluded based on the 

company’s “collective knowledge” that SAIC knew about the 

conflicts (and by extension knew that its express

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 32 of 39
33

representations and implied certifications of compliance were 

false).

To be sure, the district court did instruct the jury that for 

the government to satisfy its burden of proof, “more than an 

honest mistake or mere negligence [on the part of SAIC] must 

be found.” Id. at 16. But by providing an alternate route to 

proof of scienter, the “collective knowledge” instruction 

undermined the clarity of this separate “no mere negligence 

instruction” and allowed the jury to impose liability for what 

is essentially negligence or mistake by another name. Given 

the essential role that proof of scienter plays under the FCA,

and given our lack of confidence that the jury here based its 

verdict on the proper legal standard, we decline to affirm on 

the ground that the error was harmless. This is especially so 

in view of the fact that we must be sure, as we explained 

above, that liability in this implied certification suit attaches 

only for fraud and not for ordinary breach of contract. See 

supra at 22–23. We shall thus vacate the judgment for the 

government with respect to its two FCA causes of action.

Given the foregoing, we have no need to address SAIC’s 

challenges to other instructions with respect to its FCA 

liability save for one that is also relevant to the breach of 

contract verdict. SAIC argues that the district court erred by 

failing to instruct the jury as to the meaning of the phrase 

“regulated by the Nuclear Regulatory Commission”—key 

language that appears in two of the conflict of interest 

“situations or relationships” described in NRC regulations, 41 

C.F.R. § 20-1.5403(b)(1)(i)–(ii) (1979). But even assuming 

that the district court should have defined this phrase for the 

jury, we see no prejudice to SAIC. As the district court 

explained in its post-trial opinion, “the term ‘regulated by the 

NRC’ does not carry a specialized definition under the NRC 

regulations, and the jury was adequately informed of the 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 33 of 39
34

ordinary definition of ‘regulated by the NRC’ throughout 

trial.” Science Applications II, 653 F. Supp. 2d at 110. That 

ordinary definition, as SAIC’s former employee 

acknowledged in his testimony, simply equated “regulated by 

NRC” with “subject to the regulations of NRC.” Trial Tr. at 

50 (July 3, 2008 (P.M.)) (testimony of Thomas Rodehau). 

We thus have no reason to believe that the jury was left “free 

to speculate about the meaning of this legal phrase.” 

Appellant’s Br. 50. Accordingly, we shall affirm the 

judgment as to the breach of contract claim.

IV.

This brings us finally to SAIC’s challenges to the jury’s 

award of damages. Recall that the jury awarded the 

government FCA damages of $1,973,839.61, which the 

district court then trebled and combined with an additional 

$577,500 in civil penalties. Given our decision to vacate the 

judgment and remand as to the government’s FCA claims, we 

have no need to reach the company’s argument that the award 

violates the Eighth Amendment’s Excessive Fines Clause. 

See Krizek, 111 F.3d at 940 (declining to reach the 

defendant’s Excessive Fines Clause argument after vacating 

on other grounds “in keeping with the principle that courts 

should avoid unnecessarily deciding constitutional 

questions”). But given our remand and in the interest of 

judicial economy, we shall consider SAIC’s arguments (1) 

that the government failed to prove that it suffered any actual 

FCA damages and (2) that the district court’s damages 

instruction was erroneous.

The FCA “imposes two types of liability.” United States

ex rel. Bettis v. Odebrecht Contractors of Cal., Inc., 393 F.3d 

1321, 1326 (D.C. Cir. 2005). First, a defendant who submits 

a false claim or makes a false statement to get a false claim 

paid is liable for civil penalties regardless of whether the 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 34 of 39
35

government shows that the submission of that claim caused 

the government damages. See id. Second, the defendant is 

liable for “3 times the amount of damages which the 

Government sustains because of the act of [the defendant].” 

31 U.S.C. § 3729(a). SAIC’s two arguments focus only on

the award of damages.

SAIC contends that notwithstanding any technical 

violations of the company’s conflict of interest obligations, 

the government is entitled to no damages because it received 

the full value of the services covered by the contract. This is 

so, SAIC says, because it not only “delivered . . . all the work 

product that it promised to deliver under its NRC contracts” 

but also because reviewing NRC officials “uniformly praised” 

that work product. Appellant’s Br. 54. As the government 

points out, however, SAIC’s NRC contract obligated the 

company to provide “advice and assistance that was both 

technically sound and free from potential bias.” Appellee’s

Br. 46. As a result, a jury could rationally conclude that no 

matter how technically proficient SAIC’s performance, the 

value of that performance to the NRC was compromised by 

the appearance of bias created by the company’s failure to 

live up to its contractual conflict of interest obligations. The 

jury could therefore award FCA damages for any loss in value 

to the NRC attributable to SAIC’s failure to provide the 

completely impartial conflict-free services required by the 

NRC contracts. See TDC II, 288 F.3d at 428 (“[T]he evidence 

allowed the district court to find that the value of the ‘best 

efforts’ provided by TDC was vitiated by TDC’s fraudulent 

concealment of its rent-seeking behavior.”).

We nonetheless agree with SAIC that the district court’s 

damages instruction was flawed. The district court began by 

describing the standard for causation, informing the jury that 

“[t]he damages that the United States is entitled to recover 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 35 of 39
36

under the False Claims Act are the amount of money that the 

government paid out by reason of the false claims over and 

above what it would have paid out had SAIC not made the 

false claims.” Trial Tr. at 21 (July 28, 2008). So far so good.

But the court went on to provide the following additional 

guidance:

Your calculations of damages should be limited to 

determining what the Nuclear Regulatory 

Commission paid to [SAIC] over and above what the 

NRC would have paid had it known of SAIC’s 

organizational conflicts of interest. Your calculation 

of damages should not attempt to account for the 

value of services, if any, that SAIC conferred upon 

the Nuclear Regulatory Commission.

Id. at 21–22. By requiring the jury to “limit[]” its calculation 

of damages to the government’s payments, the instruction 

compelled the jury to assess as damages the actual amount of 

payments the government made to SAIC. This automatic 

equation of the government’s payments with its damages is 

mistaken.

In calculating FCA damages, the fact-finder seeks to set 

an award that puts the government in the same position as it 

would have been if the defendant’s claims had not been false. 

See United States ex rel. Miller v. Bill Harbert Int’l Const., 

Inc., 608 F.3d 871, 904 (D.C. Cir. 2010); Harrision, 352 F.3d 

at 922–23. In a case where the defendant agreed to provide 

goods or services to the government, the proper measure of 

damages is the difference between the value of the goods or 

services actually provided by the contractor and the value the 

goods or services would have had to the government had they 

been delivered as promised. Proper application of this 

benefit-of-the-bargain measure depends on the particular 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 36 of 39
37

circumstances of the case. Where a contractor’s fraud 

consists of knowingly submitting nonconforming goods with 

ascertainable market value, the Supreme Court has instructed 

that “[t]he Government’s actual damages are equal to the 

difference between the market value of the [product] it 

received and retained and the market value that the [product] 

would have had if [it] had been of the specified quality.” 

United States v. Bornstein, 423 U.S. 303, 316 n.13 (1976). 

But if the value that conforming goods or services would have 

had is impossible to determine, then the fact-finder bases 

damages on the amount the government actually paid minus 

the value of the goods or services the government received or 

used. See Joel M. Androphy, Federal False Claims Act & 

Qui Tam Litigation § 11.03[2] (2009).

Under this benefit-of-the-bargain framework, the 

government will sometimes be able to recover the full value 

of payments made to the defendant, but only where the 

government proves that it received no value from the product 

delivered. See Harrison, 352 F.3d at 923 & n.17 (denying 

plaintiff’s claim for disgorgement of the government’s total 

contract payments but recognizing that “factual scenarios 

could exist in which the contractor’s performance so lacks 

any value as to make recovery of all monies paid by the 

government an appropriate remedy”); TDC II, 288 F.3d at 428 

(“Once TDC deviated from its contracted role as impartial 

ombudsman . . . the district court . . . could properly find that 

the Program no longer had any value to the government.”

(emphasis added)); United States ex rel. Schwedt v. Planning 

Research Corp., 59 F.3d 196, 197–98, 200 (D.C. Cir. 1995)

(holding that payments for computer software system 

components induced by false representations in a contractor’s 

progress reports could constitute FCA damages where the 

individual components were supposedly “worthless on their 

own”). In some cases, such as where the defendant 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 37 of 39
38

fraudulently sought payments for participating in programs 

designed to benefit third-parties rather than the government 

itself, the government can easily establish that it received 

nothing of value from the defendant and that all payments 

made are therefore recoverable as damages. See TDC II, 288 

F.3d at 428; see also United States ex rel. Longhi v. Lithium 

Power Techs., Inc., 575 F.3d 458, 473 (5th Cir. 2009)

(calculating damages as the amount the government paid to 

the defendants where “[t]he contracts entered . . . did not 

produce a tangible benefit” to the government and were 

instead part of a grant program designed to award money to 

deserving small businesses); United States v. Rogan, 517 F.3d 

449, 453 (7th Cir. 2008) (concluding that the defendant, who 

submitted false claims for Medicare and Medicaid payments,

was required to repay the full amount of the claims as 

damages because the defendant “did not furnish any medical 

service to the United States,” and instead effectively sought a 

government subsidy to which it was not entitled). Here, 

however, the damages instruction essentially required the jury 

to assume that SAIC’s service had no value even in the face 

of possible evidence to the contrary. To establish damages, 

the government must show not only that the defendant’s false 

claims caused the government to make payments that it would 

have otherwise withheld, but also that the performance the 

government received was worth less than what it believed it 

had purchased. 

Because SAIC’s services under its NRC contract had no 

ascertainable market price, the district court should instruct 

the jury to calculate the government’s damages by 

determining the amount of money the government paid due to

SAIC’s false claims over and above what the services the 

company actually delivered were worth to the government. 

Of course, the government remains free to argue that the 

value of SAIC’s advice and assistance was completely 

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 38 of 39
39

compromised by the existence of undisclosed conflicts, 

making the full amount paid to SAIC the proper measure of 

damages. SAIC, however, must also be allowed to offer 

evidence to the contrary, such as evidence about the technical 

quality of its work, the fact that the NRC continued to use 

SAIC’s work product after the potential conflicts were 

identified and the 1999 contract was terminated, and 

testimony by NRC’s project manager that SAIC’s actual work 

product “constituted the opposite of a conflict,” Trial Tr. at 9–

10 (July 3, 2008 (P.M.)) (testimony of Dr. Robert Meck), due 

to its transparency and fairly conservative results.

We recognize the difficulty the jury will face in

calculating the value of services tainted by potential conflict, 

although the district court’s breach of contract instruction 

asked the jury to make just such a valuation. See Trial Tr. at 

24 (July 28, 2008). The government, however, bears the 

burden of proving damages, see 31 U.S.C. § 3731(d), and we 

see no basis for adopting an irrebuttable presumption—

essentially what the government seeks—that treats services 

involving expert advice and analysis affected by potential 

organizational conflicts as categorically worthless.

V.

We affirm the district court’s denial of SAIC’s motion for 

judgment as a matter of law, as well as its judgment as to both

liability and damages on the government’s claim for breach of 

contract. With respect to the judgment as to liability and 

damages under FCA sections 3729(a)(1) and 3729(a)(2), we 

vacate and remand for further proceedings consistent with this 

opinion. 

So ordered.

USCA Case #09-5385 Document #1281086 Filed: 12/03/2010 Page 39 of 39