Opinion ID: 655938
Heading Depth: 2
Heading Rank: 1

Heading: Basis in Law

Text: 16 The government relied on two simple methods to prove its allegations of fraud. It first sought to prove that Hardrives knowingly submitted false and inflated claims. Such direct proof obviously would establish actionable fraud. Second, it asserted that the gross discrepancy between claimed costs submitted for adjustment and actual costs of work performed (which it sought to prove through the audit and other evidence) would give rise to an inference of fraud. At the time the government presented the argument, Eleventh Circuit precedent held that such indirect proof of fraud was adequate. United States v. White, 765 F.2d 1469, 1481-82 (11th Cir.1985). 17 In its only explanation for awarding attorneys' fees the court noted: 18 [T]his Court has already stated that the action should not have been brought in this Court without the government first having completed the administrative process. This Court has also stated at the conclusion of the [government's] case, that it was a waist [sic] of taxpayer dollars to have initiated this action in this forum without first having obtained a final decision in the administrative process. 19 District Court opinion at 3. It is not clear whether the district court believed that it lacked jurisdiction to make factual determinations as to the extent Hardrives overstated its claims because IBCA possessed such jurisdiction or whether it believed that the government could not establish fraud in its district court case without those findings first having been made by the IBCA. Either way the district court erred. If it believed itself without jurisdiction, the district court simply was wrong: it had jurisdiction to make all the findings of fact necessary to a legal determination as to fraud. If it believed the government's case unravelled without the benefit of IBCA findings, the district court failed in its duty to make findings and decide the existence of and extent of any overstated claims. Presumably both contract and fraud claims require a thorough examination of a project's accounting and actual costs. That the factual predicate for either claim is similar does not alter the court's duty to adjudicate the fraud claims and make the necessary factual findings. See United States v. General Dynamics Corp., 828 F.2d 1356, 1358, 1362-64 (9th Cir.1987) (despite Armed Service Board of Contract Appeals' expertise in interpreting military contract, deferral to the Board on criminal fraud prosecution was an impermissible delegation of an article III judge's decision-making function and an unwarranted interference with prosecutorial discretion). 10 Although in deciding the case, the district court had the obligation to determine the validity of the claims, the extent of any overstatements, and whether they were the result of fraud, the government need not prove fraud to avoid liability for attorneys' fees. It need only demonstrate that its litigation position had a reasonable basis in fact and law. We conclude the government rooted its case in sound legal theories. 11 It clearly met the first prong of the test for substantial justification.