Opinion ID: 221854
Heading Depth: 2
Heading Rank: 1

Heading: The Modification Five Claim

Text: Yannacopoulos' first claim against Lockheed concerns Amendment H0005 to Contract 5/86 (Modification Five), executed on March 17, 1993. In February 1987, Greece had exercised its option under Article 35 of Contract 5/86 to participate in a co-production program with General Dynamics. Under that program, General Dynamics was to provide technical support and materials to Hellenic Aerospace Industry. The price of the co-production program was based on a projection regarding the amount of support work the Hellenic Aerospace Industry would require over the course of the program. Each year after the first four years of that program, Greece and General Dynamics were to review the level of coproduction support to be provided to the Hellenic Aerospace Industry. The contract provided that, if Hellenic Aerospace Industry's actual performance was such that the level of [General Dynamics'] support [could] be reduced, the support will be reduced and the coproduction price ... will be reduced accordingly. The parties agreed to work out the details for the implementation of [this article] during the fourth year after the signature of [the] Contract. The agreed price for the co-production program was $53,693,555. Because Hellenic Aerospace Industry produced fewer F-16 components than originally anticipated, however, less support was required to produce those components than was initially anticipated. By late September or October 1990, General Dynamics had collected $47,693,487 for its co-production work, though Greece had authorized only about $24 million worth of co-production work by that time. In March 1993, Greece and Lockheed executed Modification Five to Contract 5/86, which maintained the price of the coproduction program line item at $53,693,555. Lockheed made no refund to the United States until 1996, when it made a refund of $7,042,940 related to the coproduction charges. Under the False Claims Act, a reverse false claim is a false statement used not to obtain payments from the government, but to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government. 31 U.S.C. § 3729(a)(7) (2006); see United States ex rel. Bahrani v. Conagra, Inc., 465 F.3d 1189, 1194-95 (10th Cir.2006). [16] Yannacopoulos contends that Modification Five was a reverse false claim because it concealed and avoided [Lockheed's] contractual obligation to make a coproduction-related refund by maintaining the price of the coproduction line item unchanged at $53,693,555. In trying to prove this, Yannacopoulos argues that, because General Dynamics had been overpaid for its work on the co-production line item, it had an obligation to pay the amount of that overpayment to the United States government, an obligation he says Lockheed concealed when it submitted Modification Five to the government without mentioning that overpayment. Assuming that such an obligation existed, however, and assuming that Modification Five concealed that obligation, Yannacopoulos' claim can succeed only if Modification Five was false. See, e.g., Gross, 415 F.3d at 604; 31 U.S.C. § 3729(a)(7) (2006). Despite this, Yannacopoulos failed to argue the falsity of Modification Five in his opening brief. Only after Lockheed pointed out this omission in its response brief did Yannacopoulos offer an explanation as to how a mere contract modification  an agreement between two parties altering their contractual obligations to one another  could be false. First, he claims that Modification Five's $53,693,555 price tag for the co-production line item was false and inflated. Second, he argues that Modification Five was false because the U.S. Government recoupment line item in that Modification was priced at $29,047,706, when nearly $23 million of that amount had already been repaid to the United States. We address in turn these alleged falsehoods, neither of which is sufficient to give rise to liability under the False Claims Act. [17]
Showing the objective falsity of the price contained in Modification Five's co-production program line item, however, is not as simple a task as establishing the falsity of a statement of historical fact. A statement may be deemed false for purposes of the False Claims Act only if the statement represents an objective falsehood. Wilson, 525 F.3d at 376, citing Lamers, 168 F.3d at 1018. Although a breached contractual term may be considered a falsehood in a looser sense  a false promise  a mere breach of a contractual duty does not satisfy this standard. See United States ex rel. Garst v. Lockheed-Martin Corp., 328 F.3d 374, 378 (7th Cir. 2003) (observing that a mere fail[ure] to keep one's promise is just breach of contract, not fraud); Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 789 (4th Cir.1999) (affirming dismissal where allegations showed only poor and inefficient management of contractual duties). Nor do mere differences in interpretation growing out of a disputed legal question involving the terms of a contract. See Lamers, 168 F.3d at 1018. To establish the objective falsity of the coproduction line item price in Modification Five, Yannacopoulos needed to present evidence showing that Greece did not in fact agree to pay [that amount] for the items and services to be delivered under the coproduction line item. [18] None of the evidence on which Yannacopoulos relies is sufficient to show either the falsity of the coproduction line item price in Modification Five or Lockheed's knowledge of that falsity. Much of that evidence shows, at best, that General Dynamics and Greece reached other agreements regarding the co-production program before Modification Five was executed. But nothing about those agreements prevented Lockheed and Greece from reaching a new agreement when they negotiated the final terms of Modification Five. The parties to the original agreement were not bound to follow that agreement even after both agreed that it was not in their best interests to do so. Yannacopoulos also claims that General Dynamics collected millions of dollars for work on the co-production program that was not yet completed at the time Modification Five was signed, but we fail to see how this goes to show that Greece did not actually agree to pay the price set forth in that modification. The remainder of the evidence on which he relies  the decrease in demand for F-16 parts and General Dynamics' decision to no longer submit invoices in relation to the co-production program  suffer from that same failing. None of it could enable a reasonable jury to conclude that the price of the co-production program line item in Modification Five was objectively false, in the sense that Greece did not actually agree to pay the price set forth in that line item.
In his reply brief, Yannacopoulos takes issue with the fact that a $29,047,706 line item for U.S. Government recoupment was included in the total contract price set forth in Modification Five. [19] This was false, he says, because a later amendment to Contract 5/86 states that most of this money had already been repaid to the United States. Moreover, he claims that Article 8.7 of Contract 5/86 prohibits this line item  accurate or not  from being included in the contract price in the first place. By placing an inaccurate price for the government recoupment line item into the total price of Contract 5/86, Yannacopoulos says, Lockheed inflat[ed] the contract's total price and conceal[ed] the fact that [it had retained] millions of dollars of [loan] funds that defendants had been paid for the value of work they never performed. Yannacopoulos waived this argument for purposes of this appeal. Unlike his argument regarding the coproduction program line item  the falsity of which Yannacopoulos also argued only in his reply brief  Yannacopoulos failed to present any facts or argument regarding the government recoupment line item anywhere in his opening brief's discussion of Modification Five. The argument was waived. E.g., United States v. Diaz, 533 F.3d 574, 577 (7th Cir.2008). [20]