2014 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

11-25-2014

William Thomas v. Siemens AG

Precedential or Non-Precedential: Non-Precedential

Docket No. 14-1358

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Recommended Citation

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NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 14-1358

_____________

UNITED STATES OF AMERICA ex rel. WILLIAM A. THOMAS,

Appellant

v.

SIEMENS AG, SIEMENS MEDICAL SOLUTIONS, INC., 

SIEMENS CORPORATION

 

_______________

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. No. 2-09-cv-04414)

District Judge: Honorable Timothy J. Savage

_______________

Submitted Under Third Circuit LAR 34.1(a)

November 18, 2014

Before: RENDELL, JORDAN, NYGAARD, Circuit Judges.

(Filed: November 25, 2014)

_______________

OPINION*

_______________

 

* This disposition is not an opinion of the full court and, pursuant to I.O.P 5.7, does not constitute binding precedent.
2

JORDAN, Circuit Judge.

In this qui tam action, the relator, William A. Thomas, appeals the grant of 

summary judgment by the United States District Court for the Eastern District of 

Pennsylvania in favor of his former employer Siemens Medical Solutions USA, Inc.

(“SMS”), a subsidiary of Siemens AG, for claims under the False Claims Act, 31 U.S.C. 

§ 3729 et seq. (“FCA”). He also appeals the District Court’s denial of his fourth motion 

to amend the complaint.1 For the reasons that follow, we will affirm. 

I. Background

Thomas worked for SMS, a manufacturer and seller of capital medical 

equipment,

2

and before that for Acuson Corporation, a manufacturer and seller of one 

kind of such equipment, ultrasound systems. Siemens AG acquired Acuson in 2000 and 

merged it into SMS in 2002. Thomas worked in sales and marketing and as an account 

manager. Though his employers had business with the federal government, he never had

any involvement with those contracts. 

 

1

In his notice of appeal, Thomas further states that he is appealing “the order 

entered April 26, 2010 (doc. 69) granting defendant Siemens AG’s motion to dismiss the 

Second Amended Complaint.” (Doc. No. 1.) He has not, however, provided any 

argument on that point and his appeal of it is therefore abandoned. Nagle v. Alspach, 8 

F.3d 141, 143 (3d Cir. 1993) (“When an issue is either not set forth in the statement of 

issues presented or not pursued in the argument section of the brief, the appellant has 

abandoned and waived that issue on appeal.”).

 

2 Capital medical equipment includes ultrasound systems, computed-tomography 

(CT) scanners, magnetic resonance imaging (MRI) scanners, and nuclear medical 

equipment. 
3

At issue here are three contracts between Acuson/SMS and the Department of 

Veterans Affairs (the “VA”): (1) a 2001 contract for ultrasound equipment; (2) a 2002 

contract for CT/MRI equipment; and (3) a 2002 contract for nuclear medicine equipment. 

United States ex rel. Thomas v. Siemens AG, 991 F. Supp. 2d 540, 546-48 (E.D. Pa. 

2014). Two of the contracts – the ultrasound contract and the CT/MRI contract – were 

fully audited by the VA Inspector General pursuant to a policy of conducting pre–award 

audits for any contract proposal with an expected value exceeding $9 million. Id. 

A. The Ultrasound Contract

The ultrasound contract was the result of extensive negotiations. Acuson 

responded to a VA solicitation for ultrasound equipment in 2000 with a bid that included, 

inter alia, a form setting forth required “Discount and Pricing Information.”

3

 Acuson 

offered the VA a 43% discount and disclosed that other entities were given discounts 

greater than those extended to the government – as high as 48%. The pre-award audit 

also confirmed that the discounts offered to commercial customers exceeded those 

offered to the government – specifically that Acuson had provided discounts of 59% and 

 

3 The Discount and Pricing Information form is used as part of the award process 

to evaluate the vendors’ pricing. The form asks vendors to specify the basis of the list 

pricing the vendor is offering the VA and the discount percentage offered for the capital 

medical equipment. The form also requests information on discounts given to other 

customers. It contains neither completion instructions, nor definitions of terms. For 

example, the form does not specify whether to disclose contract-level or transaction-level 

discounts. The undisputed evidence establishes that the VA accepted such forms 

completed in materially different ways, namely forms containing either transaction-level 

or contract-level discounts, and forms containing either comparable or noncomparable 

discounts. (App. at 1698) (former chief operating officer of the VA stated that the VA 

understood the “significant ambiguities, limitations, and differing interpretations of the 

[Discount and Pricing Information] form.”). 
4

56% on ultrasound products. Based on the audit, the VA asked Acuson to increase its 

discounts to 48% and 50% respectively for two different products. Acuson then 

resubmitted its Discount and Pricing Information to the VA and increased its discount 

offer to 48% with additional multiple-system discounts. The VA accepted the 

resubmitted information and awarded Acuson the contract. 

B. The CT/MRI Contract

The VA solicited bids for CT/MRI equipment and SMS submitted a response in 

April 2002. SMS submitted separate Discount and Pricing Information forms for the CT 

and MRI equipment in which it – unlike Acuson – identified the discounts offered only to 

customers with contracts comparable to the VA contract. SMS thus disclosed maximum 

discounts of 32% for CT equipment and 35% for MRI equipment, stating that it offered 

further discounts if certain minimum orders were satisfied. SMS then went on to offer 

those same discounts to the VA. Before SMS submitted the Discount and Pricing 

Information forms, the VA notified it that SMS would be subject to an Inspector General

audit. The audit revealed that SMS was offering larger discounts to commercial 

customers than it had offered to the VA.4 Based on that information, the VA negotiated 

further upgrades to the equipment, but ultimately accepted the discounts of 32% and 35% 

respectively, even though it knew that SMS offered greater discounts to other customers. 

 

4 The District Court concluded that the pricing offered to commercial customers 

was distinguishable from that offered to the VA because those contracts were part of a 

group purchase and were structured differently than the government contracts or referred 

to items which were not offered as part of the CME needed by the VA. Siemens AG, 991 

F. Supp. 2d at 585-88. 
5

C. The Nuclear Medicine Contract

In October 2002, SMS submitted a response to the VA’s solicitation for nuclear 

medicine equipment. In the Discount and Pricing Information submitted with its 

response, SMS offered the VA a discount of 60% off of its list pricing and disclosed that 

it had multiple-quantity unit pricing plans that “result[ed] in lower net prices than those 

offered the [g]overnment in this offer.” (App. at 2518.) SMS stated that it offered regular 

discounts of 52% to 56% and quantity discounts of 54% to 58%. The undisputed 

evidence establishes that the 60% discount SMS offered to the government was the 

highest discount it offered at that time, with one exception that the parties agree is not 

pertinent.

5

 After several months of negotiation, the VA awarded the nuclear medicine 

contract to SMS. 

D. Procedural History6

Relying on Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure, SMS 

moved to dismiss Thomas’s claims. While that motion was pending, Thomas moved to 

 

5 As the District Court noted, Thomas, during his deposition, conceded that those 

exceptional discounts given to one company are distinguishable from the contracts at 

issue here. Id. at 586; (App. at 1521-23, 1191-92; Supp. App. at 79).

6 Thomas filed this action in the District Court for the Virgin Islands in September 

2004 – within a few months of beginning work at SMS. The initial complaint made no 

reference to the Discount and Pricing Information forms because, at the time, Thomas

erroneously believed the VA was obligated to receive SMS’s best price on all capital 

medical equipment. In 2006, Thomas amended his complaint to remove the state law 

claims he had asserted. In 2008, the government formally declined to intervene and the 

District Court ordered the case unsealed. Thomas then amended the complaint a second 

time before eventually serving it in January 2009. The case was thereafter transferred to 

the United States District Court for the Eastern District of Pennsylvania. 
6

amend his complaint, which he had already amended twice before. The District Court 

denied the motion to amend and granted in part the motion to dismiss. The Court left 

intact Thomas’s claims regarding the three contracts described above. 

Thomas chose not to take any discovery of the VA or Inspector General or to 

pursue any third-party evidence or expert testimony regarding relevant practices of the 

VA or Inspector General. Siemens AG, 991 F. Supp. 2d at 575, 595. Thomas also 

declined to depose the SMS employees who had negotiated and signed the contracts at 

issue. At the close of expert and fact discovery, SMS moved for summary judgment. 

The government then submitted a statement of interest, in which it said that it had the 

complete contractually required information to make a price reasonableness 

determination and to negotiate a fair and reasonable price for the ultrasound and CT/MRI

contracts. (App. at 391-92.) The government included a sworn declaration from

Maureen Regan, Counselor to the Inspector General for the VA, in which she affirmed 

that the VA understood that both companies offered commercial customers discounts 

greater than those offered to the VA. (App. at 397-98.) 

While dispositive motions were pending, Thomas again moved to amend his 

complaint – his fourth such motion. He sought to add claims related to contracts

involved in earlier claims that the District Court had already dismissed from the case. He 

also sought to assert a new theory of liability as to the three contracts at issue. (App. at 

765-80.) 
7

The District Court granted summary judgment in favor of SMS on all of Thomas’s

claims and denied Thomas’s motion to amend his complaint. Thomas now appeals only

those two orders.

II. Discussion7

Thomas argues that the District Court erred in concluding that he failed to produce 

evidence sufficient for a jury to find that SMS and Acuson fraudulently induced the VA 

to enter into the contracts at issue. He also argues that the District Court abused its 

discretion in refusing to grant his fourth motion to amend his complaint. Neither position 

is persuasive. 

A. Summary Judgment on Fraudulent Inducement Claims 

The False Claims Act makes it unlawful for any person to “knowingly present[], 

or cause[] to be presented, ... a false or fraudulent claim for payment or approval” to the 

government or “knowingly make[], use[], or cause[] to be made or used, a false record or 

statement to get a false or fraudulent claim paid or approved by the [g]overnment.” 31 

U.S.C. § 3729(a)(1)-(2) (1986). The primary purpose of the False Claims Act “is to 

 

7 The District Court had subject matter jurisdiction under 28 U.S.C. § 1331 and 31 

U.S.C. § 3732(a). We have jurisdiction pursuant to 28 U.S.C. § 1291. We review the 

grant of summary judgment de novo, applying the same standard as the district court. 

Lichtenstein v. Univ. of Pittsburgh Med. Ctr., 691 F.3d 294, 300 (3d Cir. 2012). 

“Summary judgment should only be granted if ‘there is no genuine dispute as to any 

material fact.’” Id. (quoting Fed. R. Civ. P. 56(a)). “In considering the record, we must 

draw all reasonable inferences in favor of the non-moving party ... .” Id. We review the 

denial of a motion to amend a pleading for an abuse of discretion. United States ex rel. 

Wilkins v. United Health Grp., Inc., 659 F.3d 295, 302 (3d Cir. 2011).
8

indemnify the government – through its restitutionary penalty provisions – against losses 

caused by a defendant’s fraud.” United States ex rel. Wilkins v. United Health Grp., Inc., 

659 F.3d 295, 304-05 (3d Cir. 2011) (citations omitted). A private individual, otherwise 

known as a relator, may bring a civil action in the name of the United States to enforce 

this provision of the False Claims Act and may share a percentage of any recovery 

resulting from the suit. 31 U.S.C. § 3730(b) & (d).

Although the focus of the False Claims Act is on false “claims,” courts have 

employed a fraudulent inducement theory to establish liability under the Act for each 

claim submitted to the government under a contract which was procured by fraud, even in 

the absence of evidence that the claims were fraudulent in themselves. See generally 

United States ex rel. Marcus v. Hess, 317 U.S. 537, 542-44 (1943) (superseded by 

statute) (recognizing fraudulent inducement theory); United States v. Veneziale, 268 F.2d 

504, 505 (3d Cir. 1959) (“[I]t has long since been settled that a fraudulently induced 

contract may create liability under the False Claims Act when that contract later results in 

payment thereunder by the government... .”). 

To prevail on a fraudulent inducement claim under the False Claims Act, a 

plaintiff must show that (1) there was a knowingly false or fraudulent statement; (2) that 

the statement was material; and (3) that it caused the government to pay out money or to 

forfeit moneys due (i.e., a “claim”). United States ex rel. Schmidt v. Zimmer, Inc., 386 

F.3d 235, 242 (3d Cir. 2004); Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176, 182 

(3d Cir. 2001); Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 785 (4th 

Cir. 1999). Here, the District Court correctly concluded that Thomas could show none of 
9

the required elements. It suffices for us to note that Thomas produced no evidence that 

false statements were knowingly made. 

The False Claims Act says statements are made “knowingly” when they are made 

with “actual knowledge,” “deliberate ignorance,” or “reckless disregard of the truth or 

falsity of the information.” 31 U.S.C. § 3729(b)(1)(A). A statement is “false” when it is 

objectively untrue. Cf. United States ex rel. K & R Ltd. P’ship v. Mass. Hous. Fin. 

Agency, 530 F.3d 980, 984 (D.C. Cir. 2008) (noting that where relator and defendant 

simply disagree about how to interpret ambiguous contract language there is no genuine 

issue as to whether the defendant knowingly presented false claims). The unrebutted 

evidence in this case demonstrates that the VA forms were ambiguous and that the VA 

itself accepted different interpretations of how they should be completed, including what 

kinds of discounts needed to be disclosed. See supra, note 3. Acuson disclosed 

comparable transaction discounts while SMS disclosed comparable contract discounts for 

the CT/MRI contract and all contract discounts for the nuclear medicine contract. 

Because Thomas chose not to take any discovery of the government or to depose SMS 

witnesses, the only evidence in the record establishes that the form was ambiguous, that it 

was not uncommon for it to be completed incorrectly, that the VA accepted the forms, 

and that, despite the manner in which the forms were completed, the VA was fully aware 

before it entered into the contracts at issue that SMS and Acuson offered commercial 

customers higher discounts than were offered the VA. Based on the record before us, no 

reasonable juror could conclude that SMS or Acuson made knowingly false statements to 

the VA.
10

B. Thomas’s Fourth Motion to Amend the Complaint 

A motion to amend a complaint is committed to the sound discretion of the district 

court. Cureton v. Nat’l Collegiate Athletic Ass’n, 252 F.3d 267, 272 (3d Cir. 2001). 

Among the grounds that could justify a denial of leave to amend are “undue delay, bad 

faith, dilatory motive, prejudice, and futility.” In re Burlington Coat Factory Sec. Litig., 

114 F.3d 1410, 1434 (3d Cir. 1997) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)). 

Here, Thomas’s argument that the District Court should have granted his motion to 

amend the complaint is without merit. 

The proposed amendment sought to revive claims relating to other contracts that 

previously had been dismissed under Rule 9(b). Further, the amendment was predicated 

on a legal theory – that other SMS and Acuson contracts were “merged” with the 

contracts at issue – which the District Court had rejected in its ruling on summary 

judgment. Accordingly, granting leave to amend would have been pointless. In any 

event, even if the proposed amendment were not both futile and improper, it would still 

have been highly prejudicial to the Appellees to allow new theories of liability four 

months after summary judgment motions were filed and well after the close of discovery. 

Given that the proposed amendment was untimely, futile, and unduly prejudicial, the 

District Court did not abuse its discretion in refusing to allow it. 

III. Conclusion

For the forgoing reasons, we will affirm the District Court’s grant of summary 

judgment and its denial of Thomas’s fourth motion to amend his complaint.