NOTE: This opinion is nonprecedential. 

United States Court of Appeals 

for the Federal Circuit 

__________________________ 

STEVEN CHU, SECRETARY OF ENERGY, 

Appellant, 

v. 

THE BOEING COMPANY, 

(SUCCESSOR-IN-INTEREST OF ROCKWELL 

INTERNATIONAL CORPORATION), 

Appellee. 

------------------------------------------------- 

THE BOEING COMPANY, 

(SUCCESSOR-IN-INTEREST OF ROCKWELL 

INTERNATIONAL CORPORATION), 

Appellant, 

v. 

STEVEN CHU, SECRETARY OF ENERGY, 

Appellee. 

__________________________ 

2011-1304, -1317 

__________________________ 

Appeal from the Civilian Board of Contract Appeals in 

Nos. 337, 338, 339, and 978, Administrative Judge R. 

Anthony McCann. 

__________________________ 

Decided: November 20, 2012 
ENERGY v. BOEING CO 2

__________________________ 

DOMENIQUE KIRCHNER, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, United States 

Department of Justice, of Washington, DC, argued for 

Secretary of Energy. With her on the brief were TONY 

WEST, Assistant Attorney General, JEANNE E. DAVIDSON, 

Director, and BRYANT G. SNEE, Deputy Director. 

JAMES J. GALLAGHER, McKenna Long & Aldridge LLP, 

of Los Angeles, California, argued for The Boeing Company. On the brief was S. JEAN KIM, Chadbourne & Parke 

LLP, of Los Angeles, California. 

__________________________ 

Before BRYSON, O’MALLEY, and WALLACH, Circuit Judges. 

Opinion for the court filed by Circuit Judge WALLACH. 

Opinion concurring-in-part and dissenting-in-part filed by 

Circuit Judge BRYSON. 

WALLACH, Circuit Judge. 

This case arises under the Contract Disputes Act, 41 

U.S.C. §§ 7101-09. The Department of Energy (“DOE”) 

appeals and Rockwell International Company (“Rockwell”) cross-appeals from decisions of the Civilian Board 

of Contract Appeals (“Board”) that certain litigation 

defense costs are allowable under the parties’ management and operating contracts (“contracts”) and thus may 

be recovered by Rockwell.1 We affirm-in-part and reversein-part the Board’s determinations. 

 1 The Boeing Company (“Boeing”) is the successorin-interest of Rockwell. All references herein to Rockwell 

and Boeing are interchangeable. 
3 ENERGY v. BOEING CO

BACKGROUND

A. The Contracts 

Beginning in 1975, DOE entered into a series of contracts with Rockwell for the management, operation, and 

maintenance of the government-owned Rocky Flats Nuclear Weapons Plant in Colorado (“Rocky Flats”). Abraham v. Rockwell Int’l Corp., 326 F.3d 1242, 1244 (Fed. 

Cir. 2003).2 Private industrial firms have managed and 

operated the facility since its construction in the early 

1950s. Id. at 1245. The contracts governing the management and operation of the facility require the Government, not the private firms, to assume almost all 

operational and financial risks because of the inherent 

danger in manufacturing nuclear weapon components. Id. 

Rockwell’s contracts contain cost-reimbursement provisions that enable Rockwell to recover all allowable costs. 

Id. The dispute here centers on whether certain costs 

incurred by Rockwell in defending itself in litigation are 

recoverable. 

The two contracts currently at issue are the 1986 contract effective from January 1, 1986 until December 31, 

1988 and the 1989 contract effective from January 1, 1989 

until December 31, 1989.3 They were both cost-plusaward-fee contracts. 48 C.F.R. § 16.405-2.4 Both contracts 

 2 Previously, in Abraham, we addressed a dispute 

between the same parties regarding the allowability of 

costs incurred in defense of allegations that never ripened 

into criminal charges. See infra n. 7. 

3 The pertinent provisions in the 1986 and 1989 

contracts are identical except for the Fines and Penalties 

Clause, and the differences between these two clauses are 

minor and do not impact our analysis. 

4 48 C.F.R. § 16.405-2 provides: 

A cost-plus-award-fee contract is a costreimbursement contract that provides for a fee 
ENERGY v. BOEING CO 4

provided that “allowable cost shall not include the cost of 

any item described as unallowable . . . .” 

Effective January 1, 1987, the parties adopted Modification M097, which added clause (e)(32) to the 1986 

contract (“clause (e)(32)”), and provided as follows: 

(e) Items of Unallowable Costs. The following 

items of costs are unallowable under this contract 

to the extent indicated: 

. . . . 

(32) Costs incurred in defense of any civil or 

criminal fraud proceeding or similar proceeding

(including filing of any false certification) brought 

by the Government where the Contractor, its 

agents or employees, is found liable or has 

pleaded nolo contendere to a charge of fraud or 

similar proceeding (including filing of a false certification). 

(emphasis added).5

 

consisting of (1) a base amount fixed at inception of the contract, if applicable and at the 

discretion of the contracting officer, and (2) an 

award amount that the contractor may earn in 

whole or in part during performance and that 

is sufficient to provide motivation for excellence in the areas of cost, schedule, and technical performance. See 16.401(e) for the 

requirements relative to utilizing this contract 

type. 

5 Clause (e)(32) is virtually identical to provisions of 

the Department of Defense Authorization Act, 1986 (“the 

1985 Act”), Pub. L. No. 99-145, 99 Stat. 583,683,774-75 

(November 8, 1985). The 1985 Act bars a contractor’s 

recovery of 10 types of costs, and states: 
5 ENERGY v. BOEING CO

Effective January 1, 1989, the parties adopted Modification M124, which provides: 

(d) Items of Allowable Cost. Subject to the other 

provisions of this clause, the following items of 

cost of work done under this contract shall be allowable to the extent indicated: 

. . . . 

(16) All cost incurred by the Contractor with respect to any and all liabilities, claims, demands, 

damage costs, or penalties (such as civil sanctions 

including fines), arising out of, or related to environmental, safety and health activities, including 

costs incurred with respect to investigation, removal, remedial action, ground and surface water 

or other clean-up of hazardous, toxic or contaminated material(s), except for those costs that result from conduct identified in subparagraph 

(e)(17)(ii) of the clause entitled, “Allowable Costs, 

Base Fee and Award Fee.” 

 

(e)(1) The following costs are not allowable under a 

covered contract: 

. . . . 

(C) Costs incurred in defense of any civil or criminal 

fraud proceeding or similar proceeding (including filing of any false certification) brought by the United 

States where the contractor is found liable or has 

pleaded nolo contendere to a charge of fraud or similar proceeding (including filing of a false certification). 

Id. The Board turned to this act and its legislative history in interpreting the contract provisions at issue. See, 

e.g., Boeing Co. v. Dep’t of Energy, CBCA 337, 338, 339, 

978, 11-1 BCA ¶ 34,634 (December 14, 2010). 
ENERGY v. BOEING CO 6

(“Environmental Costs Clause”) (emphasis added). 

Subparagraph (e)(17)(ii) expressly excludes costs that 

“result from willful misconduct or lack of good faith on the 

part of any of the Contractor’s managerial personnel.” 

B. The Stone Suit 

On June 25, 1987, Mr. James Stone6 informed the 

Federal Bureau of Investigations of alleged environmental crimes that occurred at Rocky Flats; the Department of Justice began investigating in 1988.7 

On July 5, 1989, Mr. Stone, instituted a qui tam action alleging violations of the FCA against Rockwell in the 

United States District Court for the District of Colorado. 

However, on December 20, 1996, the Government and Mr. 

Stone (collectively, “plaintiffs”) filed a joint amended 

complaint alleging violations of the FCA (Count 1), common law fraud (Count 2), breach of contract (Count 3), 

payment by mistake (Count 4), and unjust enrichment 

(Count 5); Mr. Stone additionally asserted other FCA 

violations (Count 6). Plaintiffs contended that during 

certain time periods, Rockwell violated the FCA by using 

false or fraudulent statements to obtain its award fees 

and operating costs. Following a jury trial, the district 

 6 From November 1980 through March 1986, Mr. 

Stone worked as an engineer at the Rocky Flats. Rockwell 

Int’l Corp. v. United States, 549 U.S. 457, 460 (2007). 

7 In response to these investigations, Rockwell retained legal counsel both for itself and for individual 

employees to defend against the allegations. Some of the 

allegations never ripened into criminal charges. In a 

previous case before this court, we affirmed the Board’s 

decision that costs incurred defending against allegations 

that never ripened into criminal charges were allowable; 

we held that “the legal fees in defense against Uncharged 

Conduct are recoverable because they are within the 

scope of allowable costs under the Environmental Costs 

Clause.” Abraham, 326 F.3d at 1254. 
7 ENERGY v. BOEING CO

court entered judgment against Rockwell solely for Count 

1 for certain time periods. The judgment provided for 

plaintiffs’ recovery of $4,172,327.40 (three times the jury 

award), and the Government’s recovery of a civil penalty 

of $15,000.00. The Tenth Circuit affirmed these awards. 

United States v. Rockwell Int’l Corp., 282 F.3d 787 (10th 

Cir. 2002). 

On April 4, 2006, Rockwell filed a petition for a writ of 

certiorari. The only issue before the Supreme Court was 

“whether respondent Mr. Stone was an original source” 

for purposes of standing to bring suit. Rockwell Int’l Corp. 

v. United States, 549 U.S. 457, 460 (2007). An “original 

source” is “an individual who [1] has direct and independent knowledge of the information on which the allegations 

are based and [2] has voluntarily provided the information to the Government before filing an action under this 

section which is based on the information.” 31 U.S.C. § 

3730(e)(4)(B). This question pertained only to FCA violations involving pondcrete.8 On March 27, 2007, the Court 

held that Mr. Stone was not an “original source” with 

respect to FCA violations involving pondcrete. Rockwell, 

549 U.S. at 479. Therefore, the Court found that the 

district court lacked jurisdiction to enter judgment in 

favor of Mr. Stone, and reversed the Tenth Circuit’s 

holding to the contrary. Id.9 

 8 Pondcrete is a mixture of sludge from solar ponds 

and cement. 

9 With regards to the Government’s actions in the 

case, specifically its intervening and filing of a joint 

amended complaint with Stone, Justice Scalia stated for 

the majority: 

Does this conclusion cast into doubt the courts’ 

jurisdiction with respect to the Government as 

well? . . . . Not even petitioners have suggested 

the bizarre result that the Government's judgment must be set aside. It is readily enough 
ENERGY v. BOEING CO 8

On June 18, 2007, the Tenth Circuit affirmed the 

judgment in favor of the Government for the reasons 

articulated in its prior opinion, United States v. Rockwell 

Int’l Corp., 282 F.3d 787 (10th Cir. 2002), but remanded 

with directions to vacate the portion of the judgment 

entered in favor of Mr. Stone and dismiss his portion of 

the case. United States v. Rockwell lnt’l Corp., 492 F.3d 

1157 (10th Cir. 2007). 

C. Stone Defense Costs 

At the beginning of the Stone suit, when Rockwell was 

served with Mr. Stone’s Complaint on November 13, 1995, 

Rockwell submitted to DOE vouchers for payment of 

related defense costs (“Stone defense costs”). On April 22, 

1993, DOE stated it would provisionally reimburse Rockwell and “reserve[] the right to evaluate the final outcome 

of the case and seek reimbursement from Rockwell for 

any amount paid . . . .” A160. After conditionally reimbursing Rockwell $4,060,669.03 in Stone defense costs, 

DOE notified Rockwell on December 6, 1995, that those 

costs were unallowable pursuant to the DOE and Rockwell contracts. 

In May 2005, Rockwell requested a contracting officer’s final decision, seeking $11,344,081.14 as reimbursement for the Stone defense costs incurred from November 

14, 1995, to December 31, 2004. On September 30, 2005, 

the contracting officer issued a final decision denying 

Rockwell’s claim. Additionally, the contracting officer 

 

avoided, as common sense suggests it must be, by 

holding that an action originally brought by a 

private person, which the Attorney General has 

joined, becomes an action brought by the Attorney General once the private person has been determined to lack the jurisdictional prerequisites 

for suit. 

Rockwell, 549 U.S. at 478. 
9 ENERGY v. BOEING CO

rendered a final decision granting the Government’s claim 

against Rockwell for recovery of $4,060,669.03, the 

amount that DOE provisionally advanced as reimbursement for Rockwell’s Stone defense costs, plus interest. 

Rockwell appealed this final decision along with other 

related later decisions to the Board which were consolidated into various appeals before the Board. 

D. Board Decisions 

From July 9, 2007 to March 8, 2011, six Board decisions were issued which currently are being challenged by 

one or both parties.10 The Board considered whether 

Rockwell’s costs incurred defending Stone were unallowable under clause (e)(32) and held that such costs could be 

apportioned on a claim-by-claim basis and determined 

that: (1) costs relating solely to claims where the Government was successful are unallowable; (2) costs relating 

solely to claims where Rockwell was successful are allowable under clause (e)(32); and (3) costs relating to common 

costs, i.e., costs incurred defending against both claims 

where Rockwell was successful and was found liable, are 

unallowable. 

 10 See Boeing Co. v. Dep’t of Energy, CBCA 337, 338, 

339, 2007 WL 5035796 (July 9, 2007); Boeing Co. v. Dep’t 

of Energy, CBCA 978, 08-1 BCA ¶ 33,822 (March 21, 

2008); Boeing Co. v. Dep’t of Energy, CBCA 978, 08-2 BCA 

¶ 33,893 (June 23, 2008); Boeing Co. v. Dep’t of Energy, CBCA 337, 338, 339, 978, 09-1 BCA ¶ 34,026 (December 

10, 2008); Boeing Co. v. Dep’t of Energy, CBCA 337, 338, 

339, 978, 11-1 BCA ¶ 34,634 (December 14, 2010); Boeing 

Co. v. Dep’t of Energy, CBCA 337, 338, 339, 978, 11-1 BCA 

¶ 34,703 (March 8, 2011). 
ENERGY v. BOEING CO 10

DOE filed a timely appeal. Rockwell cross-appealed. 

We have jurisdiction pursuant to 28 U.S.C. § 

1295(a)(10).11 

DISCUSSION

The Board’s factual determinations will be set aside if 

arbitrary, capricious, so grossly erroneous as to necessarily imply bad faith, or not supported by substantial evidence. 41 U.S.C. § 7107(b)(2). The Board’s determinations 

of questions of law, including interpretation of contracts, 

statutes and regulations, are subject to de novo review. 

Lear Siegler Servs. v. Rumsfeld, 457 F.3d 1262, 1265-66 

(Fed. Cir. 2006). 

We first address the term “proceeding” in clause 

(e)(32) and this clause’s interaction with the Environmental Costs Clause within the contract. Next, we turn 

to the Stone defense costs incurred by Rockwell after Mr. 

Stone filed the now reversed qui tam action and before 

the Government intervened. Finally, we turn to the 

“common costs” incurred by Rockwell in defending against 

claims during the period of litigation after the Government intervened where Rockwell was successful on some 

claims but was found liable on others. 

A. “Proceeding” in clause (e)(32) and the Environmental Costs Clause 

The Stone jury found Rockwell liable on three FCA 

violations against the Government. Whether Rockwell’s 

costs of defending this lawsuit are allowable under its 

 11 Previously, the parties appealed to this court; 

however, we held that because the Board had yet to 

determine whether clause (e)(32) allows Rockwell to 

recover common costs, the Board’s decision was not final, 

and we therefore lacked jurisdiction. Chu v. Boeing Co., 375 F. App’x. 10, 12 (Fed. Cir. 2010). 
11 ENERGY v. BOEING CO

contracts with DOE rests in large part on the proper 

interpretation of two provisions found in those contracts: 

clause (e)(32) and the Environmental Costs Clause. 

We find that a plain reading of clause (e)(32) suggests 

that the Board’s more limited reading of “proceeding” 

found within this provision is correct. Read in its entirety, the clause disallows 

[c]osts incurred in defense of any civil or criminal 

fraud proceeding or similar proceeding (including 

filing of any false certification) brought by the 

Government where the Contractor, its agents or 

employees, is found liable or has pleaded nolo contendere to a charge of fraud or similar proceeding 

(including filing of a false certification). 

DOE contends that in “Clause (e)(32), the choice of the 

word ‘charge,’ which Rockwell agrees means a claim, 

stands in contrast to the choice of the word ‘proceeding.’” 

Response and Reply Br. of the Secretary of Energy at 8 

(internal citation omitted). We disagree. In this context, 

“charge of fraud” is immediately followed by “or similar 

proceeding,” illustrative that a “charge of fraud” is a type 

of “proceeding.” This indicates that a “proceeding” means 

something less than an entire litigation action as DOE 

contends. Additionally, “proceeding” is twice followed by 

“including filing of any false certification,” which again is 

a claim, not an entire case.12 However, as pointed out by 

 12 We will not adopt the interpretation of the word 

“proceeding” from our prior case law that dealt with a 

different statute and a different contract. In Rumsfeld v. 

General Dynamics Corporation, 365 F.3d 1380 (Fed. Cir. 

2004), we held that, in the context of section 2324(k) of 

the Major Fraud Act (10 U.S.C. § 2324), the Armed Services Board of Contract Appeals incorrectly “required the 

apportionment of legal costs for defending against differ-
ENERGY v. BOEING CO 12

the DOE, “proceeding” is also joined to the words “civil” 

and “criminal,” two types of actions, not two types of 

claims.13 

 

ent claims with different outcomes within a single proceeding.” Id. at 1381. In General Dynamics, which involved awarding government subcontracts in exchange for 

bribes and kickbacks, we determined that “proceeding” 

“must be given a broad meaning, such that it includes all 

claims or causes of action within a particular case, action 

or proceeding.” Id. at 1386. We found the text, other 

sections of the Major Fraud Act, and the legislative history to support this interpretation. Id. General Dynamics

presented a situation unlike the one currently before us. 

In General Dynamics, we did not define “proceedings” for 

all future purposes; unlike here, the relevant text, context, and legislative history supported a broad reading of 

the term “proceeding,” as it was used in 1988 in section 

2324(k) of the Major Frauds Act. Additionally, as we 

stated clearly in General Dynamics, the “holding of this 

case is limited to its facts” and specifically to situations 

“where there is a disposition of proceeding by consent or 

compromise,” a situation not currently before us. Id. at 

1385 n.2, 1387. 

13 The dissent finds further interpretation beyond 

the plain meaning warranted and turns to the 1985 Act, 

its legislative history, background, and regulatory interpretation in order to determine the proper definition of 

“proceeding.” However, reading the contract as a whole, it 

is unnecessary to consider extrinsic evidence to interpret 

the term at issue. Coast Fed. Bank, FSB v. United States, 

323 F.3d 1035, 1038 (Fed. Cir. 2003) (citing McAbee 

Constr., Inc. v. United States, 97 F.3d 1431, 1435 (Fed. 

Cir. 1996)) (“Where, as here, the provisions of the Agreement are phrased in clear and unambiguous language, 

they must be given their plain and ordinary meaning, and 

we may not resort to extrinsic evidence to interpret them . 

. . . The Agreement must be considered as a whole and 

interpreted so as to harmonize and give reasonable meaning to all of its parts.”). 

Even if the proper definition of “proceeding” is ambiguous, it is “a fundamental precept of common law that 
13 ENERGY v. BOEING CO

When construing a contract containing conflicting 

terms, general rules of interpretation apply. It is a general rule of contract interpretation that terms should not 

be interpreted so as to render them ineffective or super-

 

the intention of the parties to a contract control its interpretation.” Beta Sys. Inc. v. United States, 838 F.2d 1179, 

1185 (Fed. Cir. 1988) (citing Firestone Tire & Rubber Co. 

v. United States, 444 F.2d 547, 551 (Ct. Cl. 1971); see also

Alvin Ltd. v. United States Postal Serv., 816 F.2d 1562, 

1565 (Fed. Cir. 1987) (“In the case of contracts, the 

avowed purpose and primary function of the court is the 

ascertainment of the intention of the parties.”). In this 

case, as we recognized in Abraham, the contracts were 

negotiated with an express DOE intent to assume almost 

all liability: “Because of the inherent danger in manufacturing nuclear weapons components, the [Plant] contracts 

required the government to assume virtually all operational and financial risks in performing the contracts.” 

326 F.3d at 1245. See, e.g., Rockwell Int’l Corp, EBCA 

Nos. C-9509187, C-9509220, C-9509221 (October 31, 

2001) (“Typically, at least at the times relevant here, 

M&O contracts allocated virtually all operational and 

financial risks to the United States Government. Limiting contractor risk has always been a prerequisite to 

engaging suitable companies as contractors. DOE officials 

recently recognized that ‘[i]f the Department did not fully 

indemnify its contractors, . . . the risks to the contractors 

would be so great, that the Department would be unable 

to find qualified contractors willing to run the Department’s facilities.’”); see also A984, 1000, 1033-41. This 

intent counsels for a more limited meaning of “proceeding,” consistent with our above analysis. 

While it is true that congressional intent is also relevant to ascertaining the contracting parties’ intent when 

statutory provisions are incorporated into a contract, 

Roedler v. Dep’t of Energy, 255 F.3d 1347, 1352 (Fed. Cir. 

2001), the intent behind the 1985 Act of Congress cannot 

outweigh the plain meaning of the provision, which is 

evident when the provision is read in context. Nor does 

the legislative history outweigh other persuasive evidence 

of the parties’ contractual intent. 
ENERGY v. BOEING CO 14

fluous. Lockheed Martin IR Imaging Sys. v. West, 108 

F.3d 319, 322 (Fed. Cir. 1997); see also Restatement 

(Second) of Contracts § 203(a) (“an interpretation which 

gives a reasonable, lawful, and effective meaning to all 

the terms is preferred to an interpretation which leaves a 

part unreasonable, unlawful, or of no effect”). The narrow 

reading of clause (e)(32) adopted by the Board is necessary to avoid conflict with other provisions of the contract, 

particularly the Environmental Costs Clause, which 

clearly provide for reimbursement of costs incurred in 

defending claims related to environmental, safety, and 

health activities except in cases of willful misconduct or 

lack of good faith. 

The Environmental Costs Clause states that “all cost 

incurred . . . with respect to any and all liabilities, claims, 

demands, damage costs, or penalties (including fines), 

arising out of, or related to environmental, safety and 

health activities” are allowable for reimbursement. As we 

have previously stated concerning this clause: 

The clause refers to “all costs . . . with respect to 

any and all . . . penalties (such as civil sanctions 

including fines), arising out of, or related to environmental . . . activities.” Further, it expressly refers to the costs incurred “with respect to 

investigation.” Tellingly, the clause specifically 

excludes “costs that result from conduct identified 

in subparagraph (e)(17)(ii).” That subparagraph 

refers to costs that “result from willful misconduct 

or lack of good faith on the part of any of the Contractor’s managerial personnel.” The limited nature of this exclusion suggests a broad scope of 

coverage where, as here, there is no claim of willful misconduct or lack of good faith by managerial 

personnel. 
15 ENERGY v. BOEING CO

Abraham, 326 F.3d at 1252-1253. 

In Abraham we found that the Environmental Costs 

Clause prevailed over the Contesting Actions Clause14 in 

the context of allegations against Rockwell that had not 

ripened to criminal charges. Id. at 1254. Abraham is 

informative in this context. As in this case, we were 

confronted with a conflict between the Environmental 

Costs Clause and a clause under “Items of Unallowable 

Costs.” In Abraham, we rejected DOE’s argument that 

the unallowable costs provision at issue excluded costs 

allowable under the Environmental Costs Clause because 

instead of “partially limit[ing] the coverage of the [Environmental Costs Clause],” the Government’s reading 

“effectively . . . rewr[o]te the clause” to render it “entirely 

inapplicable to all proceedings brought under the federal 

environmental laws, an area that the clause was explicitly 

drafted to cover.” 326 F.3d at 1253. 

Similarly here, DOE’s interpretation would render the 

Environmental Costs Clause completely inapplicable to 

an entire action involving liabilities and claims related to 

environmental, safety and health activities whenever, as 

part of that entire action, liability was found for fraud or 

claims similar to fraud. This is an area the Environmental Costs Clause was explicitly drafted to cover. See

A1054-55 (the Environmental Costs Clause covers “any 

 14 The Contesting Actions Clause makes unallowable the following: 

Legal, accounting, and consulting services and related costs incurred in connection with the preparation and issuance of stock rights, organization or 

reorganization, prosecution or defense of antitrust 

suits, prosecution of claims against the United States, 

contesting actions of [sic] proposed actions of the 

United States, and prosecution or defense of patent 

infringement litigation. 

Abraham, 326 F.3d at 1248 n.3. 
ENERGY v. BOEING CO 16

and all liabilities [and] claims . . . arising out of, or related 

to environmental, safety and health activities”). By 

contrast, there is nothing in the text of clause (e)(32) or 

elsewhere in the record that indicates clause (e)(32) was 

explicitly drafted to cover claims related to environmental, safety and health activities or any claims that are 

not “fraud... or similar proceeding[s]” and where Rockwell 

was not “found liable.” Indeed, the “proceedings” as 

articulated in this clause are limited to “fraud” proceedings and therefore renders themselves distinct from other 

types of proceedings, e.g., those related to environmental 

claims. 

DOE argues at length that there are adequate applicable regulations, statutes, legislative history, and case 

law to indicate that “proceeding” means “action.” However, these indications do not overcome the expansive 

language of the Environmental Costs Clause. DOE’s 

interpretation overlooks the explicitly broad scope of the 

Environmental Costs Clause and the explicitly narrow 

limitation of clause (e)(32) to “fraud . . . or similar proceeding[s]” where the contractor is “found liable.” We 

therefore affirm the Board’s interpretation of “proceeding.”

B. Stone Defense Costs and the Supreme Court 

DOE contends that the Board “erred in applying its 

‘restrictive’ definition of ‘proceeding’ to Rockwell’s claim 

for Stone defense costs incurred from the time the suit 

was filed to the date the Government moved for leave to 

intervene, and determining such costs ‘could be considered to have been expended in a different and separate 

suit or proceeding.’” Opening Br. of the Secretary of 

Energy at 51. DOE argues, notwithstanding the findings 

of the Supreme Court, “[t]here was only one Stone suit.” 

Id. 
17 ENERGY v. BOEING CO

Rockwell contends that it does not matter how many 

suits there were in Stone, only that “as the Board correctly concluded, allowability turns on whether the Government Claim involves costs of defending a ‘fraud . . . or 

similar proceeding’ where Rockwell was ‘found liable.’” Br. 

of Rockwell at 51. Rockwell also contends that the Board 

was correct in determining that the issues before it were 

identical and actually litigated in the Supreme Court 

action, and thus collateral estoppel applied. 

Given our interpretation of the applicable contract 

provisions above, Rockwell is correct that allowability of 

costs turns on whether the claim involves costs of defending a “fraud . . . or similar proceeding” where Rockwell 

was “found liable.” We find that because the Supreme 

Court determined that Mr. Stone was not an original 

source and therefore the district court was unable to 

properly exercise jurisdiction over his part of the litigation, it follows that Rockwell could not be liable for that 

part of the litigation. As pointed out by the Board, “the 

claims where Rockwell was found liable were not even 

asserted until the amended complaint was filed.” DOE’s 

argument that the “gravamen of the initial and amended 

complaints was the same, i.e., Rockwell concealed from 

the Government environmental problems involving unstable pondcrete in order to get claims paid or approved,” 

may be true, Response and Reply Br. of the Secretary of 

Energy at 33; however, the contracts require Rockwell be 

found liable before the costs are disallowed–Rockwell 

cannot be held liable for costs incurred defending against 

claims brought by a plaintiff who has no standing. Accordingly, costs incurred prior to the Government’s intervention are allowable reimbursements. 
ENERGY v. BOEING CO 18

C. Common Defense Costs 

With regards to the claims or issues Rockwell both 

won and lost after the Government’s intervention, i.e., the 

“common costs,” Rockwell argues that “[w]hile the Board 

correctly concluded that clause (e)(32) does not bar all 

Stone defense costs, it erred in limiting Rockwell’s recovery.” Br. of Rockwell at 53. Rockwell argues that “the 

Board had discretion to award Rockwell all its costs . . . . 

But the Board found that it lacked the power to do so, or 

even apportion costs, despite Rockwell’s limited liability 

in Stone.” Id. at 66. 

We agree with Rockwell that the Board has the authority to apportion costs based on Rockwell’s liability in 

Stone. In Abraham, we noted that 

Normally the costs of a database used for more 

than one purpose should have been apportioned in 

some manner to reflect both the allowable and 

unallowable uses. Here, however, the government 

did not argue for the apportionment of those costs, 

but rather followed an all or nothing approach, 

arguing only that these costs be found unallowable in their entirety for the same reasons that it 

urged that the corporate defense costs were unallowable. Having found that the corporate defense 

costs are allowable, the database costs are similarly allowable because the government has 

waived its right to argue for apportionment. 

Abraham, 326 F.3d at 1255. This language clearly contemplates the ability of the Board, under these contract 

terms, to apportion costs in certain cases. Additionally, 

this ability is consistent with our limited construction of 

the term “proceeding” above. To disallow such costs in 

every situation where liability for fraud or similar pro-
19 ENERGY v. BOEING CO

ceeding is found is too broad of a contention, encouraging 

potential piecemeal litigation, judicial inefficiency, and 

unfair results. 

However, we find that the Stone litigation involved a 

“common core of facts” and was “based on related legal 

theories.” See Hensley v. Eckerhart, 461 U.S. 424, 435 

(1983). As stated by other circuits, there are circumstances “[w]here several claims arise out of a common 

factual core or are based on related legal theories, separating out the legal services rendered with respect to 

these overlapping claims would be an exercise in futility.” 

Munson v. Milwaukee Bd. of School Directors, 969 F.2d 

266, 272 (7th Cir. 1992); see also Garrity v. Sununu, 752 

F.2d 727, 735 (1st Cir. 1984). Here, the Board expressly 

recognized that the claims at issue were interrelated and 

based on the same core facts: “Counts 1 through 5 all 

involved issues relating to pondcrete and saltcrete . . . . 

Those core facts all supported to some degree alleged 

claims for FCA violations, common law fraud, breach of 

contract, payment by mistake, and unjust enrichment.” 

A34. In this case, we find that because there is a common 

core of facts all relating to the fraud for which Rockwell 

was found liable, apportionment is inappropriate in this 

case. See A491-94, Department of Justice’s Amended 

Complaint. 

CONCLUSION

Because the Board correctly determined that costs relating to claims sounding in fraud where the Government 

was successful are unallowable and that costs relating to 

claims where Rockwell was successful are allowable under 

clause (e)(32), we AFFIRM IN PART. Because we find 

that the Board had the authority to apportion costs, we 

REVERSE IN PART. However, apportionment is inap-
ENERGY v. BOEING CO 20

propriate in this case; therefore, it is unnecessary to 

remand.

AFFIRMED-IN-PART, REVERSED-IN-PART 

COSTS

No costs. 
NOTE: This disposition is nonprecedential.

United States Court of Appeals 

for the Federal Circuit 

__________________________ 

Steven Chu, SECRETARY OF ENERGY, 

Appellant, 

v. 

THE BOEING COMPANY, 

(SUCCESSOR-IN-INTEREST OF ROCKWELL 

INTERNATIONAL CORPORATION), 

Appellee. 

------------------------------------------------- 

THE BOEING COMPANY, 

(Successor-in-Interest of Rockwell International Corporation), 

Appellant, 

v. 

Steven Chu, SECRETARY OF ENERGY, 

Appellee. 

__________________________ 

2011-1304, -1317 

__________________________ 

Appeal from the Civilian Board of Contract Appeals in 

Nos. 337, 338, 339, and 978, Administrative Judge R. 

Anthony McCann. 

__________________________ 
ENERGY v. BOEING CO 2

BRYSON, Circuit Judge, concurring in part and dissenting 

in part. 

I agree with the court that the costs relating to fraud 

claims on which the government was successful are 

unallowable. And I agree that the so-called “common 

costs” are not subject to apportionment. To that extent I 

concur in the court’s judgment. However, I do not agree 

with the Board or the court that Boeing is entitled to 

recover the costs that were incurred in the fraud action 

but that related to claims on which the government did 

not prevail. On that issue I respectfully dissent. 

This case turns principally on the meaning of the provision referred to clause (e)(32) in the 1986 and 1989 

contracts between the Department of Energy and Rockwell International Corporation, the predecessor of the 

Boeing Company. The government argues that the clause 

bars the contractor from recovering costs associated with 

any proceeding in which the contractor or its agents or 

employees are found guilty of or liable for charges of fraud 

or the like. Boeing argues that the clause is narrower and 

bars recovery only of those costs associated with the 

particular charges on which a finding of guilt or liability 

was entered. 

A 

Clause (e)(32) uses confusing language. It makes unallowable 

[c]osts incurred in defense of any civil or criminal 

fraud proceeding or similar proceeding (including 

filing of any false certification) brought by the 

Government where the Contractor, its agents or 

employees, is found liable or has pleaded nolo con-
3 ENERGY v. BOEING CO

tendere to a charge of fraud or similar proceeding 

(including filing of a false certification). 

The problem is with the word “proceeding.” The ordinary 

meaning of that term is a suit, action, or matter that may 

comprise multiple counts or charges; it is not limited to a 

single count or charge in such an action. See Rumsfeld v. 

Gen. Dynamics Corp., 365 F.3d 1380, 1386 (Fed. Cir. 

2004), quoting Black’s Law Dictionary. Under that ordinary meaning, however, the last portion of the clause is 

clumsy, to say the least. If a “proceeding” means at least 

the entire action, which may comprise multiple counts or 

charges, the phrase “a charge of fraud or similar proceeding” is difficult to parse. In addition, the phrase “including filing of a false certification” does not fit comfortably 

in conjunction with the term “proceeding,” because filing a 

false certification is not a kind of “proceeding” in the 

normal sense of that word. On the other hand, defining 

the term “proceeding” to mean a count or charge not only 

is contrary to the ordinary meaning of the term, but also 

fails to accord the word a meaning different from that of 

the term “charge,” with which it is juxtaposed, leading to 

a clumsy redundancy. In short, the language of the clause 

is ambiguous; it presents the kind of interpretation problem as to which we must look to extraneous sources for 

guidance. Fortunately, such guidance is available. 

The language found in clause (e)(32) is drawn directly 

from a 1985 Act of Congress. Because the contract language was taken almost verbatim from the statute, we 

can look to evidence of the meaning of the statute in 

seeking to determine the meaning of the corresponding 

contract clause. See Gen. Dynamics Corp., 365 F.3d at 

1385-90; Roedler v. Dep’t of Energy, 255 F.3d 1347, 1352 

(Fed. Cir. 2001); Santa Fe Eng’rs, Inc. v. United States, 

801 F.2d 379, 381-82 (Fed. Cir. 1986). When we examine 
ENERGY v. BOEING CO 4

the legislative history, background, and regulatory interpretation of the 1985 statute, we find that they provide 

substantial support for the government’s construction of 

the contract language. 

1. In 1982, the Defense Acquisition Regulation 

(“DAR”), the predecessor to the Federal Acquisition 

Regulation (“FAR”), was amended to include a “Defense of 

Fraud Proceedings” provision, which rendered costs 

incurred in connection with fraud proceedings unallowable. The provision stated: 

Costs incurred in connection with defense of any 

(i) criminal or civil investigation, grand jury proceeding or prosecution, (ii) civil litigation, or (iii) 

suspension, debarment or other administrative 

proceedings, or any combination of the foregoing, 

brought by the Government against a contractor, 

its agent or employee, are unallowable when the 

charges, which are the subject of the investigation, proceedings, or prosecution, involve fraud on 

the part of the contractor, its agent or employee, 

as defined in (b) below, and result in conviction 

(including conviction entered on a plea of nolo 

contendere), judgment against the contractor, its 

agent or employees, or decision to debar or suspend, or are resolved by consent or compromise. 

32 C.F.R. § 15-205.52(a) (1983). The regulation defined 

the term “costs” to include all expenses “incurred prior to 

the commencement of the formal judicial or administrative proceedings which bear a direct relationship to the 

proceedings.” Id. § 15-205.52(c). The notice accompanying that provision explained that it was intended to 

disallow reimbursement of costs “incurred by a contractor 

in the defense of criminal or civil fraud proceedings . . . 
5 ENERGY v. BOEING CO

when the action, brought by the Government, results in a 

conviction or judgment against the contractor . . . .” 48 

Fed. Reg. 3457 (Jan. 25, 1983). The following year, the 

language from the DAR was adopted as part of the FAR. 

48 C.F.R. § 31.205-47 (1983). 

From the plain language of the 1983 FAR provision, 

which disallowed all costs incurred in connection with the 

defense of any criminal, civil, or administrative proceeding brought against the contractor if the charges that 

were the subject of the proceeding involved fraud and 

resulted in a conviction of the contractor or its agents or 

employees, it is clear that the provision barred recovery of 

all costs incurred in the entire criminal or civil proceeding 

or action, not just those costs that were associated with or 

could be attributed to a particular charge or count on 

which a fraud-based judgment was entered. This court 

stated as much in Brownlee v. Dyncorp, 349 F.3d 1343, 

1349 (Fed. Cir. 2003), where the court wrote, “At least 

since 1983, the FAR has barred the recovery of legal fees 

as a cost under government contracts if those fees were 

incurred in defense of a fraud proceeding that resulted in 

a conviction.”1

2. In 1985, Congress adopted legislation that had the 

effect of modifying the FAR’s “Defense of Fraud Proceedings” provision. As originally introduced, the Defense of 

Fraud Proceedings clause in the 1985 Act disallowed costs 

incurred in “[d]efense of any fraud proceeding brought by 

the United States, unless the contractor is found not to be 

liable in any way for the alleged fraud.” H.R. 2397, 99th 

 1 The FAR applies to DOE contracts, as supplemented by the Department of Energy Acquisition Regulation (“DEAR”). 

 
ENERGY v. BOEING CO 6

Cong., 1st Sess. (1985). In committee, that language was 

modified as a matter of form to read “[c]osts incurred in 

defense of any fraud proceeding brought by the United 

States where the contractor is found liable for fraud or 

has pleaded nolo contendere to a charge of fraud.” Full 

Committee Consideration of H.R. 2419 et al.: Hearings 

before the H. Comm. on Armed Services, 99th Cong., 73-74 

(1985); 131 Cong. Rec. 17,104-05 (1985). Both the original 

and amended forms of that proposed legislation were 

unambiguous regarding the meaning of the term “proceeding”; it was clear in both versions that the provision 

would disallow all costs for any investigation or litigation 

that led to a finding of liability for fraud or a plea of nolo 

contendere to a charge of fraud. 

During the House debate on the 1985 Act, an amendment was offered to the Defense of Fraud Proceedings 

provisions. The sponsor of the amendment described it as 

intended to “strengthen [the provisions] considerably” and 

to “strictly proscribe those instances in which defense 

contractors are able to charge the American public for 

their legal fees.” 131 Cong. Rec. 17108-09 (1985). That 

amendment contained what ultimately became the final 

text of the provisions. It made unallowable 

[c]osts incurred in defense of any civil or criminal 

fraud proceeding or similar proceeding (including 

filing of any false certification) brought by the 

United States where the contractor is found liable 

for fraud or has pleaded nolo contendere to a 

charge of fraud or similar proceeding (including 

filing of false certification). 

That language, with only minor changes, was enacted. 

The provision that applied to the Department of Defense 

was codified at 10 U.S.C. § 2324(e)(1)(C) (Supp. V 1987), 
7 ENERGY v. BOEING CO

and the identical provision that applied to the Department of Energy was codified at 42 U.S.C. § 7256a (Supp. 

V 1987). 

It was the floor amendment that added the confusing 

language that ultimately made its way into the contracts 

at issue in this case. It is clear from the context in which 

that language was added to the 1985 Act, however, that 

the amendment was not intended to modify the original 

language of the Defense of Fraud Proceedings provisions 

in a way that would increase the scope of allowable contractor costs in fraud cases. Instead, the purpose of the 

amendment was the opposite: It was designed to extend 

the prohibition against recovery, which had been limited 

to cases of fraud, to include cases involving conduct 

similar to fraud, including filing a false certification. The 

legislative history supports that interpretation of the 

statute, and later events would provide further evidence 

for that view. 

3. The 1985 Act authorized the Secretary of Defense 

and the Secretary of Energy to promulgate regulations 

implementing the Defense of Fraud Proceedings provisions of that Act. 99 Stat. 683, 775, codified at 10 U.S.C. § 

2324(e)(2)(A) (Supp. V 1987) and 42 U.S.C. § 7256a(b) 

(Supp. V 1987) (now found at 50 U.S.C. § 2781(a)(3)). In 

accordance with that authorization, the pertinent FAR 

provision was modified in 1986 in response to the new 

statute. Only one change of substance was made in the 

regulation, and that change tracked the purpose of the 

floor amendment to the 1985 Act by extending the prohibition on the allowance of costs incurred in proceedings 

involving fraud to cover proceedings involving offenses 

similar to fraud, including filing a false certification. 

Thus, the pre-1985 version of the regulation referred to 

proceedings “when the charges, which are the subject of 
ENERGY v. BOEING CO 8

the investigation, proceedings, or prosecution involve 

fraud on the part of the contractor.” 32 C.F.R. § 15-

205.52(a) (1983) (emphasis added). The post-1985 version 

referred to proceedings “when the charges, which are the 

subject of the investigation, proceedings, or prosecution 

involve fraud or similar offenses (including filing of a 

false certification) on the part of the contractor.” 48 C.F.R. 

§ 31.205–47 (1986) (emphasis added). From that text, it 

is clear that the revised regulation continued to use the 

term “proceedings” broadly, to refer to the entire case in 

which fraud charges were brought, not simply the fraud 

charges themselves. 

In Brownlee v. Dyncorp, 349 F.3d 1343 (Fed. Cir. 

2003), this court agreed with that characterization of the 

1986 FAR provision and held that the term “proceeding” 

in that provision should be read broadly to render unallowable all costs of the litigation, not just those attributable to the count on which a conviction was entered. The 

court stated: “Furthermore, contrary to the contractor’s 

contention, the regulation does not simply disallow the 

costs of defending the employee (which the contractor 

excluded from its claim); it disallows all costs of the 

proceeding, including the costs of defending the contractor, even though the contractor itself was not convicted.” 

Id. at 1352. 

The language of the 1986 amendment to the FAR is 

highly significant. It is the regulatory interpretation of 

the statutory language in the 1985 Act. It demonstrates 

that the regulatory body responsible for administering the 

statute interpreted the statutory language not to have 

broadened the allowability of costs in fraud proceedings, 

but to have simply extended the prohibition on allowability from cases involving fraud to cases involving fraud and 

offenses similar to fraud, including filing a false certifica-
9 ENERGY v. BOEING CO

tion. The Department of Energy proposed an identical 

regulation, which was subsequently incorporated in the 

DEAR. See 48 C.F.R. § 970.3102-20 (1987). 

This court has recognized that FAR provisions interpreting congressional enactments are entitled to deference under the principles of Chevron U.S.A. Inc. v. 

Natural Resources Defense Council, Inc., 467 U.S. 837 

(1984). See Dyncorp, 349 F.3d at 1354 (“The FAR regulations are the very type of regulations that the Supreme 

Court in Chevron and later cases has held should be 

afforded deference.”). If a statute is ambiguous, as is 

plainly true of the 1985 Act, Chevron dictates that the 

interpretation of the statute by the agency charged with 

its administration must be respected unless that interpretation is unreasonable. The regulatory interpretation of 

the statute, as reflected in the 1986 provision of the FAR 

and the identical provision of the DEAR, are consistent 

with the pre-1985 regulation and the legislative history of 

the 1985 Act and cannot fairly be deemed unreasonable. 

Thus, deference is owed to the agencies’ interpretation of 

the ambiguous language of the 1985 Act. Applying that 

interpretation to the corresponding contract language 

requires that clause (e)(32) be construed to disallow the 

costs of the entire proceeding that leads to fraud convictions or findings of liability, not just the costs that are 

allocable to the particular counts on which the contractor 

was found guilty or liable. 

4. In 1988, Congress made two more pertinent 

changes to the statutes governing the allowability of costs 

relating to proceedings involving fraud and other criminal 

conduct. First, in the National Defense Authorization 

Act, Fiscal Year 1989, Pub. L. 100-456, 102 Stat. 1918 

(1988) (“NDAA”), Congress added a provision to section 

2324(e) of Title 10 that disallowed “costs incurred in 
ENERGY v. BOEING CO 10

connection with any civil, criminal, or administrative 

action” resulting “in a determination that a contractor has 

violated or failed to comply with any Federal law or 

regulation” if the action resulted in a conviction (in the 

case of a criminal action) or a monetary penalty and a 

determination that the violation was knowing or willful 

(in the case of a civil or administrative action), or a decision to debar or suspend the contractor or to terminate 

the contract if the decision was based on a determination 

that the violation was knowing or willful. 102 Stat. 2023-

24. 

Second, Congress enacted the Major Fraud Act, Pub. 

L. 100-700, 102 Stat. 4631 (1988), a part of which embodied the same prohibition that had been adopted earlier 

that year in Public Law 100-456. The new statutory 

language, which was codified at 10 U.S.C. § 2324(k), 

largely tracked the NDAA, except that it used the term 

“proceeding” in place of the term “action” throughout. 

Thus, as amended, the statute rendered unallowable 

those “costs incurred by a contractor in connection with 

any criminal, civil, or administrative proceeding” if the 

proceeding related to a violation of federal law and resulted, “[i]n the case of a criminal proceeding[,]” in “a 

conviction (including a conviction pursuant to a plea of 

nolo contendere).” Congress’s intent to use the term 

“proceeding” broadly was clear, not only from the language of the operative provisions, but from the definitional section of the statute, which stated that the term 

“proceeding” “includes an investigation.” 10 U.S.C. § 

2324(k)(6)(A). This court so ruled in Rumsfeld v. General 

Dynamics Corp., 365 F.3d 1380, 1386 (Fed. Cir. 2004). 

The court in that case held that the term “proceeding” in 

section 2324(k) “includes all claims or causes of action 

within a particular case,” not just a single count or claim 

on which a finding of fraud has been made. Rejecting an 
11 ENERGY v. BOEING CO

argument similar to the argument made by Boeing in this 

case, the court stated simply: “Congress could have 

drafted section 2324(k) such that legal costs of a proceeding are unallowable on a claim-by-claim basis; it did not.” 

Id.

There is no indication that, when Congress accorded 

the term “proceeding” a broad meaning in the Major 

Fraud Act, it intended for the term to have a different 

meaning from the one it had in the 1985 Act at issue here. 

In fact, Congress placed the two provisions together in the 

same section of title 10 of the U.S. Code. Thus, the term 

“proceeding” was (and still is) found in both subsections 

(e) and (k) of section 2324, with subsection (e) carrying 

forward the language of the 1985 Act and subsection (k) 

embodying the language of the 1988 Act. It is well established that identical words used in different parts of the 

same statute are presumed to have the same meaning. 

Taniguchi v. Kan Pacific Saipan, Ltd., 132 S. Ct. 1997, 

2004-05 (2012); Desert Palace, Inc. v. Costa, 539 U.S. 90, 

101 (2003); Richard v. United States, 677 F.3d 1141, 1147 

(Fed. Cir. 2012). Boeing’s interpretation of the term 

“proceeding” in the contracts, which is taken from the 

identically worded language of 10 U.S.C. § 2324(e), would 

require the court to construe the term “proceeding” narrowly in section 2324(e) and broadly in subsection 

2324(k), contrary to that presumption. 

Where all this leads is the following: The language of 

the 1985 Act (and therefore the contract language that 

was taken from that Act) is ambiguous. Other evidence 

as to the meaning of the Act, however, all points in the 

direction urged by the government: that the term “proceeding” refers to the entire matter or case at issue, not 

simply to those claims or counts on which liability is 

based. The FAR provisions that predated the 1985 Act 
ENERGY v. BOEING CO 12

used the term “proceeding” broadly. The legislative 

history of the 1985 Act indicates that the amendment that 

added the problematic language was intended to broaden 

the scope of the unallowability provision, not to narrow it. 

The post-1985 regulations implementing the 1985 Act 

employed a broad meaning of the term “proceeding” as 

part of the agency’s official interpretation of the statutory 

language; under Chevron, that interpretation is binding 

unless it is unreasonable, which it clearly is not. And in 

the 1988 Major Fraud Act, Congress gave the term “proceeding” a broad definition, one that presumptively applies to the same term that is used in the portion of the 

same statutory section that is at issue in this case. In 

light of all these considerations, I am satisfied that the 

term “proceeding,” as used in the 1985 Act and the contracts at issue in this case, should be given the broad 

definition urged by the government, not the narrow 

definition urged by Boeing. 

B 

The court bases its interpretation of clause (e)(32) in 

part on its conclusion that a broad interpretation of that 

clause would conflict with the Environmental Costs 

Clause of the contracts, clause 54(d)(16). But the Board 

provided a complete and convincing answer to that argument. Clause 54(c) of the contracts specifically provides 

that allowable costs “shall not include the cost of any item 

described as unallowable in paragraph (e) [including 

clause (e)(32)].” Therefore, as the Board explained, clause 

(e)(32), where it applies, “is a specific exception to the 

allowability of ‘all costs’ covered by clause 54(d)(16).” 

Importantly, clause (e)(32) bars the allowance of costs 

only where the proceeding involves a charge or fraud and 

results in liability or conviction on a charge of fraud. The 
13 ENERGY v. BOEING CO

realm of potential conflict between clause (e)(32) and the 

Environmental Costs Clause is therefore quite limited; 

outside the context of fraud-based proceedings, clause 

(e)(32) does not in any way conflict with the scope of the 

Environmental Costs Clause. For that reason, the analysis in this court’s decision in Abraham v. Rockwell Int’l 

Corp., 326 F.3d 1242 (Fed. Cir. 2003), is not applicable 

here. In that case, the court rejected the government’s 

argument for the unallowability of certain costs, as the 

government’s argument would have effectively limited the 

Environmental Costs Clause to make it “entirely inapplicable to all proceedings brought under the federal environmental laws, an area that the clause was explicitly 

drafted to cover.” Id. at 1253. In this case, clause (e)(32) 

would have no such sweeping effect. Instead, it would 

have the far more limited effect of making the Environmental Costs Clause inapplicable to actions based on 

contractor fraud and resulting in the contractor’s liability 

for fraud. That narrower role for clause (e)(32) is significant; as the court in Abraham pointed out, the government’s argument for restricting the scope of the 

Environmental Costs Clause “would make sense if the 

result were to partially limit the coverage of the Environmental Costs Clause.” Id. 

Beyond that, the “conflict” rationale proves too much, 

as the same conflict argument would apply to costs incurred on individual fraud counts on which a contractor is 

found liable. After all, if the Environmental Costs Clause 

covers all costs of litigating fraud claims relating to the 

environment on which the contractor prevails, the clause 

should extend equally to claims on which the contractor is 

found liable. Thus, there is potential conflict between the 

two clauses even under the narrow interpretation of the 

term “proceeding” that the court endorses. For that 

reason, the “conflict” argument does not provide useful 
ENERGY v. BOEING CO 14

guidance as to how the term “proceeding” in clause (e)(32) 

should be interpreted. Because the statutory and regulatory history bears directly on that question and supports 

the government’s interpretation of clause (e)(32), I would 

accord the term “proceeding” that broader interpretation 

and remand this case to the Board for reconsideration of 

the allowability issue in light of that interpretation. I 

therefore respectfully dissent.2

 2 The Board allowed Rockwell to recover all of its 

costs that pre-dated the government’s intervention in the 

Stone litigation on the ground that Rockwell was not 

found liable on any of the claims that were asserted prior 

to the filing of the amended complaint. Based on my 

interpretation of clause (e)(32), I would not uphold the 

Board’s ruling on that ground but would direct the Board 

on remand to determine whether the portion of the Stone

litigation that pre-dated the government’s intervention 

should be treated as a separate proceeding for purposes of 

clause (e)(32) or as part of a single ongoing proceeding.