Court Opinion

ID: 9486750
Source: CourtListenerOpinion
Date Created: 2023-08-05 11:58:53.189094+00
Date Added: 2024-06-11T17:51:54.827639
License: Public Domain

WALD, Circuit Judge,
dissenting in part:
I agree with my colleagues that the doctrine of collateral estoppel does not prevent the United States from pressing its claim that TDC failed to divulge its own financial stake in program operations. Moreover, I agree that the proper standard of liability under the pre-1986 False Claims Act reaches deliberate ignorance and reckless disregard, as well as actual knowledge. But I also believe that the Board’s findings do not collaterally estop the United States from asserting that TDC’s monthly progress reports falsely or fraudulently misrepresented then-actual progress. The Board’s conclusion that TDC made substantial progress on its contract does not, to my mind, “actually and necessarily” establish that TDC’s numerous progress reports were entirely accurate. Yamaha Corp. v. United States, 961 F.2d 245, 254 (D.C.Cir.1992).
After finding that the contract imposed only a “best efforts” requirement on TDC, the Board concluded that “TDC had made substantial progress towards producing an operational Program which, while it contained variations from the Demonstration Bonding Program produced under the earlier Contract, was not such a gross departure as to vitiate all TDC’s efforts.” This conclusion, essentially that TDC had substantially performed its obligations under the contract (or had not, in any event, committed a “gross departure”), is not inconsistent with a finding that TDC may have misrepresented its progress in reports to UMTA. The “flexible requirement of substantial performance stands in sharp contrast to the requirement of strict compliance.” E. AllaN FaRnswoRth, Contracts § 8.12, at 415 (1990). Almost defini-tionally, substantial performance implies somewhat less than complete compliance. While I agree that the Board’s finding that TDC made substantial progress towards creating a program necessarily subsumes a finding that much of the information in the progress reports was accurate, it certainly cannot be read to validate the progress reports’ total accuracy.1
Moreover, to the extent that the Board did make implicit findings as to the reports’ veracity, it can fairly be said to have done so only with respect to statements summarizing *299TDC’s efforts. Because TDC’s obligation was to exercise its best efforts, “UMTA’s breach of contract claim turned on whether TDC made a good faith effort to produce an operational program, not on whether those efforts proved successful.” Majority opinion at 296. There is a qualitative difference between statements describing TDC’s efforts and statements reporting the success of those efforts (which in turn tend to predict the conduct of third parties). Most of the statements challenged by the United States in its False Claims Act suit fall into this second category. Thus, for example, the United States contests the veracity of TDC’s statements that it anticipated that Equitable Life would shortly reach a decision on whether or not to participate as an investor in the bonding program, see Plaintiffs Complaint at 6 (¶ 21); that a representative of Equitable Life had indicated the proposal would shortly go to the investment committee for approval, see id. at 7 (¶ 24); and that New York Life and Equitable Life would likely sign a contract within thirty days, see id. at 9-10 (¶¶ 31-32). The underlying accuracy of these statements seems to me irrelevant — or at the very least, not “essential to the judgment” of a Board charged with assessing TDC’s best efforts. Restatement (Seoond) of Judgments § 27 (1982) (“[w]hen an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties”) (emphasis added).
At bottom, this case presents confusion born of a statutory scheme that requires related claims to be tried in different fora. The jurisdiction of the Board, established by the Contract Disputes Act of 1978, 41 U.S.C. § 601 et seq., does not extend to claims involving fraud. Nonetheless, as in this ease, litigants frequently have a fraud claim in their quiver of defenses to a contract dispute. Certainly, the Board must occasionally find facts or draw conclusions on issues within its statutory domain that affect subsequent fraud suits. That some issue preclusion may be inevitable, however, does not mean we should presume it lightly. In this case, all the parties proceeded from the outset aware of the possibility that their actions could have consequences in subsequent proceedings. Absent some stronger showing that the Board, cognizant of the potential for issue preclusion, actually considered or decided issues pertaining to the False Claims complaint adversely to the United States, I cannot see any reason to blur the lines unnecessarily between the Board’s and our jurisdiction. Accordingly, I respectfully dissent.

. Indeed, the Board affirmatively concluded that TDC had misrepresented its own financial stake in the progress reports but did not find this fatal to TDC's cause. Obviously, then, the Board's legal conclusions did not rest on the reports' absolute accuracy.